UK Introduces Five-year Vesting Rule for Retirement

LEXINGTON, Ky. (Nov. 6, 2009) – On Oct. 27, the University of Kentucky Board of Trustees approved a cost-saving measure that introduces a five-year vesting rule affecting 403(b) retirement savings accounts for new employees hired on or after Jan. 1, 2010.  

Individuals hired on or after that date must work for the University for a period of five years to see the UK-contributed portion of their accounts become vested. This means that new employees (hired on or after 1/1/10) who leave the university before completing five years of service will not keep any portion of those retirement account funds contributed by the university over that time period. Employees hired on or after Jan. 1, 2010, will have full access to the employee-contributed portion of their retirement account(s). 

This change will not affect current employees. For individuals hired prior to Jan. 1, 2010, employer 403(b) contributions remain fully vested regardless of length of service.

Although the university would prefer not to make adjustments in benefit programs, it was necessary as the university adapts in the wake of multi-year state budget cuts and amid prospects of a weak economic recovery. "Naturally, this represents a tradeoff. We are adjusting this benefit for future employees in part to limit the negative impact of cost-saving measures on our current employees and retirees," said Frank Butler, executive vice president of finance and administration.

From a new employee’s standpoint, it’s important to note UK's retirement savings benefit remains generous by any standard: UK will continue to provide an employer contribution equal to 10 percent of salary, a 2-for-1 match for the employee’s 5 percent contribution. (Note: Employee contributions are required for those age 30 and over and are voluntary for those under age 30.)

The university may find that the five-year vesting rule in place for employees hired after Jan. 1, 2010, will encourage and reward retention. At the same time, it is important to acknowledge the university cannot meet its goals on such measures alone. It is hoped that between this and other steps the university has already taken, UK is positioned to make the most of any economic recovery and provide the means to more clearly reward performance and innovation, said Butler.

"There is no doubt employees' dedication is helping the university weather the economic storm. By working together, we will emerge from these difficult times with an even sharper focus on the goals we all share for the Commonwealth, the university, our communities and families.  Any employee hired after January 1, 2010 will receive their full vested benefits if they remain employed with the university for the five-year period," said Butler.

For more information regarding the vesting schedule, contact Employee Benefits at benefits@email.uky.edu.