Center raises retirement contribution rate

Center News

Significant increase in employer contribution to retirement plan helps increase savings, keeps Center competitive

As of July 1, the employer contribution to the Center's employee retirement savings plan increased by an additional 2 percent of pay.

Center retirement contributions begin after one year of service and the completion of 1,000 hours of service for eligible employees. Employer retirement contributions have been 5 percent of pay since the plan was started in the early days of the Center. This month, the contribution increased to 7 percent.

It is not necessary to complete any paperwork to receive the increased contribution, which will be reflected on pay stubs later this month.

This change was made after surveying other cancer centers and similar academic research organizations. The new contribution rate brings the Center into better alignment with peer institutions, but positions us ahead of the average plan in the broader marketplace, said Jonathan Sheppard, compensation and benefits manager for Human Resources.

"The Center is committed to a competitive benefits package, and we try to do the right thing to maintain that position," he said. "We appreciate all that our employees do to support the Center's mission, and we are delighted to be able to offer this enhancement to our benefits program."

For someone earning $50,000 per year, the additional 2 percent retirement contribution equals $1,000 (tax-deferred) per year. While this is a significant additional contribution, its true value is seen at retirement. The Center makes no promises related to the performance of any investment, but for the purpose of illustration, if someone invests $1,000 per year annually for 30 years and earned a 7 percent annual rate of return, the ending balance would be over $100,000. For each additional 10 years, the amount would more than double.

Does the change mean employees can start saving less of their own money toward retirement? No, said Sheppard, since most employees are not saving enough.

"Because average life expectancy and health-care costs continue to rise, more savings are required so retirees do not outlive their income," he said. "There are a lot of very good tools available to create personalized plans for retirement savings. Everyone should know how much they will need to accumulate for retirement and have a realistic plan for saving an appropriate amount. To wait and catch up later becomes more and more difficult, then suddenly, impossible."

Contribution limits

The amount of salary reduction contributions employees can make to the retirement plan is subject to a calendar-year limit set by the Internal Revenue Service. For 2007, up to $15,500 can be contributed for those under 50 and $20,500 for employees 50 or older.

"It's great to be able to offer a benefits program that competes with its peers in the higher-end research and academic marketplace," Sheppard said. "While ours is a premium benefit plan when compared to the average package in the marketplace, it is consistent with the type of employer we are."

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Retiring questions about savings

Want to better understand how much to save for retirement? Get answers at "The Basics of Saving for Your Retirement" workshop Thursday, July 12, noon-1 p.m. in the Arnold Building, M1-A307. Jonathan Sheppard, compensation and benefits manager, and Patty Kuntz, a senior individual consultant with TIAA-CREF, will present.

A similar workshop will be presented by Jonathan Sheppard and Holly Lynch, a Fidelity Investments retirement counselor, July 18, 12-1 p.m. in Sze West.

For additional information, visit centernet.fhcrc.org/CN/depts/hr/ben/retire.

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