Voluntary Retirement Incentive Option – Policy
The Voluntary Retirement Incentive (VRI) enrollment window is now closed. All completed VRI contracts for the 2016-17 academic year were due on or before February 28, 2017.
It is not known at this time if there will be a future VRI offering.
Voluntary Retirement Incentive (VRI) Option: An Alternative to Five-Year Partial Reemployment for Tenured Faculty Members
The Voluntary Retirement Incentive (VRI) option is an alternative retirement benefit available to eligible tenured faculty members, whereby they elect to forego their vested right to partial (40%) reemployment in exchange for a tax-free health reimbursement account. The faculty retiree and eligible dependents can use the fund for reimbursement of medical expenses after retirement. It is operated in accordance with rules established in the Internal Revenue Code (IRC).
On an annual basis, the Provost will determine whether to offer the Voluntary Retirement Incentive (VRI) option to eligible tenured faculty members. When the availability of the VRI is announced it will include an open election period for a specified retirement period. The open election period is the only time a pre-retiree may elect to participate in the VRI for the announced retirement period. The applications of all eligible pre-retirees will be approved. If approved and upon election, the tenured faculty member will be required to enter into a written contract, which will be irrevocable after a seven-day revocation period.
Tenured faculty members, with full or partial tenure, who are eligible to retire under their retirement plan, qualify for partial (40%) reemployment, and have reached age 62 or greater within the VRI retirement window are considered eligible for the VRI option.
The VEBA account will receive a one-time lump-sum contribution. The contribution will be based on the faculty member’s nine or twelve month tenure-backed position. The contribution will amount to 25% of the five-year value of 40% reemployment. The following contribution limits will apply to 100% tenured faculty members: $25,000 is the minimum and $100,000 is the maximum. Proportional contribution limits will apply to faculty members with partial tenure (e.g., 50% tenured faculty members will have a minimum contribution of $12,500 and a maximum contribution of $50,000).
Nine-month tenured faculty member, regardless of history of summer funding:
- Base annual salary: $90,000 ($10,000 per month)
- Annual 40% reemployment: $36,000 ($90,000 x .40 = $36,000)
- 5 year value of 40% reemployment: $180,000 ($36,000 x 5 = $180,000)
- 25% of five year value: $45,000 ($180,000 x.25 = $45,000)
- One-time lump sum contribution to VEBA: $45,000
Twelve-month 50% tenured faculty member:
- Base annual salary: $120,000 ($10,000 per month)
- 50% tenure-backed salary: $60,000
- Annual 40% reemployment: $24,000 ($60,000 x .40 = $24,000)
- 5 year value of 40% reemployment: $120,000 ($24,000 x 5 = $120,000)
- 25% of five year value: $30,000 ($120,000 x .25 = $30,000)
- One-time lump sum contribution to VEBA: $30,000
VRI Option Approval
The Board of Regents approved the adoption of a Voluntary Retirement Incentive option for tenured faculty members.
Information on the VEBA (Voluntary Employee’s Beneficiary Association)
Please note that information on the VEBA is maintained by UW Benefits. The most recent information can be found at:
The dependents that are eligible for medical expense payments from the plan include:
- The retiree’s spouse
- The retiree’s dependent children
- The retiree’s other dependents as defined by the IRS
If you have IRS Dependents:
VEBA can be left to your legal spouse or IRS dependents, tax-free. They can use it as a VEBA for their eligible healthcare expenses, tax-free.
If you have no legal spouse or IRS dependents:
Funds are now available to provide medical reimbursement benefits, on a taxable basis, to a deceased participant’s non-dependent heir(s) or beneficiaries.
Eligible Medical Expenses
IRS-approved uses for the VEBA currently are quite broadly defined and provide access to funds for a variety of insurance premiums as well as expenses not covered by PEBB or other insurances.
Using these tax exempt monies, a VEBA could reimburse some out-of-pocket health-related expenses. Examples include medical insurance premiums, drugs (prescriptions) and medical supplies, and eyeglasses & exams.
Contact email@example.com for VRI questions.
Contact firstname.lastname@example.org for VEBA questions.