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"Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed

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Re: "Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed


@atom wrote:

This is an interesting account of cuts in faculty retirement plans at several large private institutions.  Alan

 

https://www.insidehighered.com/news/2020/05/21/more-institutions-are-suspending-or-cutting-retiremen...


 

   "While cutting retirement is “painful,” he said, it affects only deferred income for a year. Approximately 300 university employees who earn more than the federal 403(b) contribution threshold of $285,000 also will have their salaries reduced by 10 percent of the amount above the threshold."

300 employees making more than $285,000 per year........holy cow!

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Re: "Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed

That announcement was from the president of Duke University, so it probably includes a significant number of physicians who are medical school faculty members.  

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Re: "Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed

Reference to 403b in the linked article is probably incorrect. Most 403b are optional plans with employee contributions only.

In higher education, there are now traditional pension plans and alternate self-managed plans [SMP] that get both employee & employer contributions. The former contributions are mandatory & will continue but the latter to both may be suspended. Private U may be thinking if State U can get away with this, why not they? But this is how pension underfunding develops. There is no ERISA like for corporations.

YBB
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Re: "Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed


@yogibearbull wrote:

Reference to 403b in the linked article is probably incorrect. Most 403b are optional plans with employee contributions only.

Are you sure about this, Yogi?  I have never heard of a university or college where the 403(b) plan had only employee contributions.  I'm sure that there are some, but I find it hard to believe that most are like that.

John

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Re: "Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed


@Mountaineer1 wrote:

That announcement was from the president of Duke University, so it probably includes a significant number of physicians who are medical school faculty members.  


 Also coaches and athletic director.

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Re: "Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed


@yogibearbull wrote:

Reference to 403b in the linked article is probably incorrect. Most 403b are optional plans with employee contributions only.

In higher education, there are now traditional pension plans and alternate self-managed plans [SMP] that get both employee & employer contributions. The former contributions are mandatory & will continue but the latter to both may be suspended. Private U may be thinking if State U can get away with this, why not they? But this is how pension underfunding develops. There is no ERISA like for corporations.


That is not correct. I can't comment about all of higher education, but I am at a private research university (of the Emory, Rice, Johns Hopkins, Northwestern group). Our retirement plan is a 403(b), managed by TIAA but with investment options with both TIAA, Vanguard, and a couple of other specific funds. We are required to contribute 5% (either pre-tax or Roth) and the university contributes a sliding scale based on age, from 7% to 11%. It is the university portion that some of these schools are now deciding to postpone. I know from many years of recruiting senior faculty to our department and from colleagues at these peer institutions that there are differences in the details and the contribution rates, but the general system is standard. Many of the research-intensive state universities have an option for participating in this kind of 403(b) plan or a state pension plan.

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Re: "Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed


@jjustice wrote:

@yogibearbull wrote:

Reference to 403b in the linked article is probably incorrect. Most 403b are optional plans with employee contributions only.

Are you sure about this, Yogi?  I have never heard of a university or college where the 403(b) plan had only employee contributions.  I'm sure that there are some, but I find it hard to believe that most are like that.

John


My understanding is that most colleges maintain a 403b plan where employer contributes and employees make mandatory matching contributions and There is a separate 403b plan for voluntary employee contributions known as an SRA plan. There are some colleges, mostly public ones that have a defined benefit plan with a 403b SRA for voluntary employee contributions. Some of the Public colleges with DB plans (E.g., NY) offer an optional retirement plan where employees can opt out of the DB retirement plan and elect to have the employer contribute to a 403b plan with mandatory employee contributions in addition to the 403b SRA For voluntary employee contributions. 

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Re: "Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed


@jjustice wrote:

@yogibearbull wrote:

Reference to 403b in the linked article is probably incorrect. Most 403b are optional plans with employee contributions only.

Are you sure about this, Yogi?  I have never heard of a university or college where the 403(b) plan had only employee contributions.  I'm sure that there are some, but I find it hard to believe that most are like that.

John


I am in a large public university system.  We have pension.  There is also a voluntary 403(b) SRA plan.  Nobody contributes to it other than employees.  It seems to me that intruder's post gives a detailed and correct summary of the general situation.  There is a lot of variation from one institution to another.

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Re: "Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed

"I have never heard of a university or college where the 403(b) plan had only employee contributions"

In my experience, employer match to a 403(b) elective salary deferral for government workers (primarily teachers) is extremely rare, but is much more common with non-profit employers. Except for tax treatment and contribution maximums, 403(b) plans are regulated by the state and so these are not subject to non-discrimination testing, with the exception being employer matching with non-profit organizations which will then fall under ERISA rules for non-discrimination.

In my past experience with clients from government plans, I've seen several with money purchase style plans where employees had a mandatory annual contribution to which the government employer would make a percent-of-salary contribution, but this can vary widely between state plans and most of the employees didn't really understand the difference between these and 403(b) plans, so much opportunity for confusion.

BruceM

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Re: "Colleges Lower the Boom on Retirement Plans" from Inside Higher Ed

All comments about 403b plans are likely correct (even though they conflict) but you need to take into account when the plans were established. I am am long,long retired but I still have money in a TIAA 403b plan (dating to 1959, inactive from 1960 through 1974 and re-activated in 1975) with both employee and employer contributions. About 1986 it was replaced by a 401a plan and later by a different 401a plan. I was and am still fully vested in all three. More recently yet my former employer started a (SRA) 403b plan with only employee contributions, that does not replace the current 401a plan. The current HR office staff did not know of the prior 403b and were claiming that employers did not contribute to 403b plans. I made some inquiries about possibly merging the three contracts I have but it is not clear how that could be done nor whether there might be dis-advantages to doing so. Since I have been steadily (since Jan 2012) rolling over non-TIAA Traditional balances to an external IRA the question of a merger will be moot for me at some point.

I think that my having  a 403b and two 401a's is related to several historical events; initially the 403b was not "qualified" so my contributions were "after tax", there was also the lawsuit about the difference between benefits for males and for females, maybe the lawsuit about the non-profit status of TIAA. Also at some point the contracts between employer and TIAA changed "employer" meaning the University where I was employed to "employer" meaning the AZ Board of Regents which was and still is the supervisory body for all three state universities.I have no details to back up this interpretation and at least the last change took place after I retired in 1998. With respect to 403b plans "local knowledge" is essential

 

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