Nov. 5, 2009
A temporary reduction in the university's contribution to employees' TIAA-CREF and VALIC retirement accounts is one university-wide strategy approved Oct. 29 by the state Board of Regents to help meet a $24.5 million state funding reversion. Other strategies include a temporary layoff/furlough plan and partial closing of the university during the Dec. 24-Jan. 3 window. The board approved a second retirement incentive option program, for which most of the savings will be seen in FY11. Lastly, the board will take final action on a proposed spring semester tuition surcharge when it meets Dec. 10 in Ames.
Eight-month reduction implemented for some retirement accounts
by Anne Krapfl
More info
Iowa State will reduce its contribution to participants' TIAA-CREF or VALIC retirement accounts by one-fifth for the November 2009 through June 2010 payrolls as one strategy to address a mid-year state funding cut. For most employees, the change means the university will contribute 8 percent of their monthly salary to their retirement account, not the usual 10 percent. The change will generate approximately $2.6 million in savings for the university.
At this time, the plan is to restore the university contributions to pre-Nov. 1 levels on July 1, 2010.
This change does not affect employees participating in the IPERS program. The Iowa Legislature, not the university, sets contribution rates for IPERS.
How much is that?
The actual size of the reduction depends on how long an employee has worked at the university -- more or less than five years -- and follows this schedule:
University contribution to TIAA-CREF or VALIC accounts
| Annual salary | Normal | Effective Nov. 1 |
|---|---|---|
| 1-5 years of service | ||
| On the first $4,800 | 6 2/3% | 5 1/3% |
| Above $4,800 | 10% | 8% |
| More than 5 years of service | 10% | 8% |
For example, for a six-year employee with an annual salary of $65,000, the university will contribute about $433 each month for eight months to the employee's basic retirement account instead of $542 per month, for a total reduction of $872 over the eight months.
Making up the difference
The required contributions employees make to their own basic retirement accounts will stay the same during the next eight months. Associate director of human resource services Mike Otis said employees can't increase those amounts to make up the loss in the university contribution -- at least not to their basic retirement accounts.
However, they may start, or increase their current contribution to an existing Supplemental Retirement Account (SRA or GSRA). More information on those tax-deferred options is online.
For those who already contribute to an SRA, the deadline each month to change your payroll contribution is the 15th day for that end-of-month payroll.
