The University of California system is introducing a new phased-in retirement plan to encourage older university staffers to retire over a maximum three-year period. This program is likely to become a retirement-planning trend.
The state of California has sharply curtailed funding of its university systems, explains spokeswoman Dianne Klein. The cutbacks came at a time when many older employees were deciding to work longer. "People are afraid to get out too quickly," Klein says.
To reduce costs and make room for younger workers, the university system has come up with an incentive plan to encourage workers nearing or past retirement age to commit to a maximum of three years and out in exchange for an immediate cutback in hours and a cash incentive. Workers -- the plan isn't available to senior management or faculty -- can reduce hours by at least 10 percent for a minimum of 120 days to a maximum of three years in exchange for a reduction in salary and a bonus of 50 percent pay for the hours they won't be working. For example, if someone earned $1,000 a week working 40 hours and chose to cut back 25 percent to 30 hours, under this plan he would earn $875 per week instead of $750 for the period that he designated. At the end of the period, he would retire.
To get the bonus, the worker must commit to a time frame for the cutback and follow through. He can't change his mind until the end of the commitment period, and if he quits in the middle, he doesn't get any of the bonus. Payment of the bonus is at the end of the time commitment, and a worker can only get one bonus.
"We don't know how many employees will take advantage of this," Klein says. "Nobody is putting a gun to anybody's head. We're just saying, 'Let's work it out and see how it goes.'"