University of California administrators will present the UC regents next month with a proposal based on a form of deferred compensation that would give eligible employees additional personal funds in a special retirement account.

Because UC received significantly reduced state funding for 2001-02 salary plans, administrators said they hope to mitigate some of the effects of this year's salary shortfall.

"All our employees work very hard to help make UC a premier educational institution, and they deserve to be recognized appropriately," said Joseph Mullinix, senior vice president for business and finance. "Given this year's unfortunate constraints on salary increases, we are very happy to have found a way that could give employees some additional funds."

The special account, called a Capital Accumulation Provision (CAP) accrual credit, would be available to all eligible UC employees who are members of the University of California Retirement Plan (UCRP). The CAP accrual credit being proposed would be calculated at 3% of the employee's eligible "covered compensation" (used for the purpose of determining benefits under UCRP) for a specified 12-month period. This amount would be put into a special account in UCRP, where it would earn interest until the employee retires or leaves the university.

For example, an employee who receives $35,000 in covered compensation during the specified 12 months would receive a CAP accrual credit of $1,050. This credit would then be held in a separate CAP account for that employee under UCRP. It would earn interest annually based on the interest rate used to value liabilities under UCRP (currently 7.5%).

To be eligible to receive the CAP accrual credit, employees must be active UCRP members on the date specified, which could be as late as June 30, 2002. Eligibility dates have not been finalized. While UCRP members on sabbatical or approved leave of absence would be included, those members who are disabled, retired, and inactive would not.

Administrators estimate it would take six to eight months to set up the program if it is approved by the regents. CAP accrual credit would be expected to be in place by summer 2002.

Eligible UCRP members previously received CAP accrual credits in the early 1990s, another period when the state's budget was under severe pressure.