Faculty Income Allowance Plan (FIAP): Frequently Asked Questions

The following FAQs describe FIAP as it applies to senior faculty members who terminate employment on or after January 1, 2004. Keep in mind that this summary is only intended to give you a general description of the benefits provided under the Plan. Your rights to FIAP benefits are determined solely by the provisions of the official FIAP plan document.

» Eligibility
» Applying
» Benefits
» Miscellaneous

Eligibility

1. Q: Who is eligible to participate in FIAP?
   A: "Senior faculty members" are eligible to participate in FIAP. Senior faculty members include tenured members of the Standing Faculty and senior members (Associate Professor or Professor) of the Standing Faculty-Clinician Educator.

2. Q: What are the eligibility requirements for receiving FIAP benefits?
   A: Senior faculty members who fit within one of the following age and service categories when they terminate employment will be eligible to receive FIAP benefits:

   • Ages 60-69: Senior faculty members who have 10 or more years of full-time continuous service (as standing faculty members) and who terminate on or after age 60 but before June 30 of the academic year in which they reach age 69 are eligible to receive FIAP benefits if they satisfy a "rule of 75" requirement (that is, the combined age and years of full-time service of the faculty member equals or exceeds 75).
     

   • Age 69 or later: Senior faculty members who satisfy the 10 years of full-time continuous service and "rule of 75" requirements on or after age 69 may also receive FIAP benefits. Such senior faculty members generally must terminate employment as of the academic year-end (June 30) immediately following the satisfaction of the eligibility requirements.

3. Q: Is there any "grandfathering" of the prior FIAP terms?
   A: Yes. Senior faculty members who were hired before January 1, 2004 and who were 54 or older at their hire date may elect to terminate employment and receive benefits in accordance with the prior FIAP terms. Under these prior FIAP terms, a faculty member could terminate employment and receive FIAP benefits as of the academic year-end (June 30) following the completion of 15 years of full-time service.

4. Q: What type of service qualifies as full-time service?
   A: Full-time service is full-time service as a faculty member and does not include other service with the University in a non-faculty position. Any service accrued by a faculty member participating in the University's phased retirement program is counted as full-time service for FIAP eligibility. Service must be continuous. If a faculty member works for the University, leaves, and is later rehired, only the faculty member's most recent period of service after the rehire date is counted for purposes of determining FIAP eligibility.

5. Q: What types of terminations qualify for FIAP benefits?
   A: Senior faculty members who elect retirement or who terminate employment (including faculty members who are terminated as part of a "reduction in faculty") are eligible for FIAP benefits. Other types of terminations (for example, a termination for disability, death or "just cause") are not covered by the FIAP. The italicized terms are defined in the Handbook for Faculty and Academic Administrators (or, if applicable, a successor publication).

   For purposes of FIAP, the terms "retirement" and "termination of employment" have a special meaning as follows:

   • The faculty member must relinquish his/her full-time tenured appointment as an active member of the standing faculty

   AND

   • At the time of the termination or retirement, the faculty member and the University must reasonably anticipate that the faculty member will stop performing all services for the University or that any services performed for the University will permanently decrease to a level of no more than 20% of the level of services performed before the termination or retirement. The determination of the level of services performed before and after a termination or retirement is based upon all of the available facts and circumstances. (Note: This aspect of the termination/retirement definition stems, in part, from the new deferred compensation rules that recently took effect. More information about these rules is set forth in the Miscellaneous Questions section.)

6. Q: Does this mean that I can't continue to work for the University or later come back to work for the University in the future?
   A: Not necessarily. As noted above, you can retire or terminate employment with the University, receive FIAP benefits, and still perform a small amount of services for the University (20% or less than what you were performing before your retirement or termination of employment). Also, there may be cases in which you come back to perform a larger amount of services for the University, but only if this was not reasonably anticipated at the time of your original retirement or termination of employment (e.g., there is a change in circumstances leading to a decision to bring you back to perform a larger amount of services). Finally, all retiring faculty members, including those retiring under FIAP, may continue to participate in University life as a member of the emeritus faculty.

7. Q: Are there other eligibility requirements for FIAP benefits?
   A: Yes. In order to receive FIAP benefits, a senior faculty member must acknowledge in writing that he or she is participating in FIAP and relinquishing his or her full-time faculty position. This agreement may be between the faculty member and his or her dean, or it may be evidenced by signing and returning a letter from the Office of the Provost. In general, the agreement must be completed at least six months before a faculty member's termination of employment, unless a participant and the University agree to a shorter period of time. Depending upon the circumstances, the agreement may include a "release" that the faculty member is releasing and waiving any claims that the faculty member might have against the University.

Applying

8. Q: How do I apply for FIAP benefits?
   A: Faculty members who wish to retire under the terms of FIAP must provide written notice to the dean of their school at least one year prior to the date of their intended retirement, unless the faculty member and the University agree to a shorter notice period. Normally, such retirements will occur at the end of the academic semester, but faculty members may be permitted to retire at other times when approved by the chair and dean of their department. A faculty member may rescind his/her notice up until the point at which he or she signs an agreement with the dean or confirms retirement with the Office of the Provost.

Benefits

9. Q: What types of benefits are provided under FIAP?
   A: FIAP benefits include a cash benefit and certain non-cash benefits (namely, the continuance of certain health/fringe benefits).

10. Q: What are the cash benefits provided under FIAP?
    A: FIAP provides a cash benefit that is equal to the greater of (1) 165% of a faculty member's "academic base salary", which is the faculty member's academic base salary as in effect at his termination of employment, or (2) 165% of the "average academic base salary" for full professors in a faculty member's school during the academic year preceding retirement. Cash benefits are paid in 24 equal installments following a faculty member's termination of employment.

11. Q: What is the academic base salary?
    A: For a faculty member who terminates employment as of the June 30 end of an academic year, his/her academic base salary is the base salary that was in effect as of the preceding July 1. For a faculty member who terminates employment as of some other date, his/her academic base salary is the "weighted average" of his/her academic base salaries during the 12 months preceding his/her termination. An example of this weighted average calculation is as follows:

    Example:
    

    • Assume that a faculty member elects to terminate employment as of January 1, 2005.
    • The faculty member's base salary as of July 1, 2003 is $120,000.
    • The faculty member's base salary as of July 1, 2004 is $150,000.
    • The faculty member's weighted average academic base salary for the last 12 months is $135,000, determined as follows:

      $60,000 (six months of salary at an annual rate of $120,000) plus $75,000 (six months of salary at an annual rate of $150,000) equals a weighted average academic base salary of $135,000.

    A faculty member's academic base salary does not include salary earned through a non-academic position (for example, salary earned through the Clinical Practice of the University of Pennsylvania), administrative stipends or other "extra" salary components (e.g., bonuses, incentive pay, expense reimbursements, etc.),or any salary earned from any institution other than the University of Pennsylvania (e.g. the Philadelphia Veterans Affairs Medical Center).

12. Q: What is the "average academic base salary"?
    A: For a faculty member who terminates employment as of the end of the fiscal year, the average academic base salary is the average of all full professors' academic base salaries in the faculty member's school, determined as of the July 1 preceding a faculty member's termination of employment. For a faculty member who terminates employment as of some other date, the average academic base salary will be determined under the same "weighted average" approach described above to take into account the average academic base salaries in effect during the 12 months preceding his/her termination.

13. Q: Are there any limits on the cash benefits provided under FIAP?
    A: Yes. To satisfy requirements imposed by federal law, the cash benefits provided under FIAP may not exceed 200% of your annual compensation for the year preceding the year of your termination of employment. Your annual compensation generally includes all of your pay for the preceding year. If you worked less than a full-time schedule during a particular year, your annual compensation will be increased to reflect what you would have earned had you been working a full-time schedule.

14. Q: What are the non-cash benefits provided under FIAP?
    A: FIAP provides certain non-cash benefits in the form of continued health/fringe benefits. The non-cash benefits currently provided under FIAP are described in detail in the summary of FIAP benefits. Please keep in mind that these non-cash benefits are subject to the specific terms of the particular University plan or program under which the benefits are provided (for example, medical insurance coverage is provided pursuant to the terms of the University's Retiree Health Plan).

15. Q: Can these non-cash benefits be changed?
    A: Yes. While the University currently intends to keep these benefits in place indefinitely, the University reserves the right to change these non-cash benefits and/or the cost charged for such benefits at any time and for any reason.

Miscellaneous

16. Q: What is a faculty member's tax liability under FIAP?
    A: The FIAP's cash benefits are severance payments and are subject to federal, state and local income taxes and to Social Security and Medicare taxes. However, the Social Security Administration should not count the income allowance as earnings that would reduce Social Security retirement income payments. For an estimate of the Social Security Income benefit, faculty members are encouraged to contact their local Social Security Administration Office or call 1-800-772-1213. Documentation, including proofs of age, marriage and earnings may be required. More information about Social Security benefits can be found on their website at www.ssa.gov.

    Also, the compensation provided to you through FIAP is "deferred compensation" for purposes of new tax rules that recently took effect. In relevant part, these new tax rules provide that deferred compensation must be paid in accordance with a fixed schedule and only upon certain events. To satisfy these rules, FIAP provides that benefits can only be paid upon an actual termination of employment or retirement as described above (and not upon a simple change in status or title) and in fixed installments over 24 months. The failure to comply with these new tax rules can result in potentially serious tax consequences for an employee (e.g., full and immediate taxation of the deferred compensation and an excise tax of 20% on the deferred compensation).

    This summary does not constitute tax advice, and faculty members are encouraged to speak with their accountant or attorney to gain a full understanding of the tax consequences of retirement under FIAP.

17. Q: Can a faculty member still participate in the Tax Deferred Retirement Plan (TDR) and/or the Supplemental Retirement Annuity (SRA)?
    A: No. Faculty members who receive FIAP benefits are not eligible to participate in the TDR or SRA Plans with respect to their FIAP cash benefits, but may be eligible to participate in the TDR or SRA Plans if they are otherwise employed and receiving compensation from the University.

18. Q: Can FIAP be amended or terminated?
    A: Yes. While the University currently intends to continue FIAP indefinitely, the University (acting through its Board of Trustees or an authorized delegate, such as the Vice President of Human Resources) reserves the right to amend or terminate FIAP in whole or in part, at any time. While any such amendment or termination generally will not affect the FIAP benefits that a faculty member has already received, the University reserves the right to amend or terminate the benefits (for example, continued medical insurance benefits) that are provided to a faculty member on an on-going basis under FIAP.