Faculty Income Allowance Plan: Frequently Asked Questions

Click here to view a summary of the Faculty Income Allowance Program (FIAP).

The Faculty Early Retirement Income Allowance Program (FIAP) provides an opportunity for senior faculty members to retire from active service at the University. FIAP is a “severance plan” and is subject to the Employee Retirement Income Security Act (ERISA).

This summary describes FIAP as it applies to senior faculty members who terminate employment on or after January 1, 2004.

The terms of FIAP are described in more detail below, but you should 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 for FIAP Benefits

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.

5. Q: What types of terminations qualify for FIAP benefits?
   A: Senior faculty members who voluntarily resign or 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).

6. Q: Are there other eligibility requirements for FIAP benefits?
   A: Yes. In order to receive FIAP benefits, a senior faculty member must sign a comprehensive “release” of claims that contains a waiver and release of claims (for example, employment-related discrimination, etc.) that the faculty member may have against the University and certain other terms and conditions. This release generally must be executed 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.

Applying for FIAP Benefits

7. 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 anytime before signing the formal agreement by notifying the chair and dean of their department.

Benefits Provided Under FIAP

8. 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).

9. 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.

10. 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.

    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 any other "extra" salary components (e.g., bonuses, incentive pay, expense reimbursements, etc.).

11. 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.

12. 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.

13. 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 as follows:

    • Medical insurance coverage will be provided to a faculty member and his/her dependents through the University of Pennsylvania Retiree Health Plan (the “Retiree Plan”). Under the current terms of the Retiree Plan, eligible faculty members who are under age 65 may elect any of the medical coverage options available to active employees of the University. Eligible faculty members who are 65 or older must enroll in Medicare Part B and may choose from the Medicare-eligible plans. Eligible faculty members who elect to receive medical coverage through FIAP and the Retiree Plan must share in the costs of the coverage. This cost-sharing amount changes from year to year and will be communicated to a faculty member at the time that he/she elects to participate in FIAP.
    • Dental coverage is provided to a faculty member and his/her dependents at no cost for the two-year period that cash benefits are being paid under FIAP.
    • Vision coverage is provided to a faculty member and his/her dependents at no cost for the two-year period that cash benefits are being paid under FIAP.
    • Group term life insurance coverage is provided at no cost to a faculty member in an amount equal to one times his/her “benefits base” (as determined under the University’s life insurance program) up to a maximum of $300,000 of coverage during the two-year period that cash benefits are being paid under the FIAP, and at a flat amount of $5,000 after the two-year period ends. Faculty members can also elect to retain the supplemental insurance in effect at the beginning of the FIAP contract up to a maximum of $1 million or to reduce coverage to $50,000 to avoid the imputed income (and the related taxes) that results from receiving employer-provided life insurance coverage that exceeds $50,000.
    • Tuition benefits (as in effect when the faculty member starts receiving FIAP benefits) are provided to a faculty member and his/her eligible dependents during the faculty member’s lifetime under the same terms as generally in effect for active employees of the University.
    
    For more detailed information about non-cash benefits provided under FIAP, click here.

    Please note that this schedule describes FIAP non-cash benefits as of January 1, 2004. While the University currently intends to keep these benefits in place indefinitely, the University reserves the right to change these benefits and/or the costs charged for these benefits at any time and for any reason.

Miscellaneous Questions

14. 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.

15. Q: Can I 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.

16. 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.