For the rising generation of retirees, the prospect of spending decades — not years — in retirement means savings have to last longer. It becomes even more complicated as greater numbers of employees in the US come to rely on retirement income primarily from DC sources.This construct shifts the responsibilities of saving enough, investing wisely, and strategically drawing down funds to participants. While the UC continues to offer a defined-benefit (DB) plan, with the vast majority of participants having access to it, the university recently introduced another layer of choice. In 2016, the UC began offering new hires the option of a pure DC plan, called Savings Choice, as their primary retirement benefit. In supporting this model, the UC is committed to equipping participants with the tools to successfully plan for their retirement.
To begin, the UC mandates new hires that have opted for Savings Choice to save at a healthy rate. Currently, employees must contribute 7% and also receive an 8% contribution from the university. With an average voluntary contribution rate of 10%, UC employees could be saving up 25%, nearly 3 times DC saving averages.3
The UC has a dedicated effort to deliver encouraging, easy-to-understand, and ongoing employee communications in order to create a culture of savings. This messaging helps to educate participants on the full breadth of their investment options, which the UC has curated to help enable meaningful wealth accumulation. From default target date funds (TDFs), to a core lineup of 12 active and passive funds, to a brokerage window, the UC not only gives participants access to a variety of investment approaches, it also offers an extremely competitive average management fee, 0.07%, for the core fund lineup, enabling participants to pay less in fees and gain more in their portfolios.