USC cuts sneaky perk for top execs as layoffs mount

When USC’s president announced an imminent end to the school’s layoffs Monday, one line baffled readers.

Starting next year, USC is “ending a discretionary payroll practice benefitting many of the highest compensated members of our community, resulting in additional savings for the university,” wrote interim President Beong-Soo Kim.

That line was important. USC’s rank-and-file employees have called for the school’s highest-paid executives to shoulder part of a budget deficit that has spurred nearly 1,000 layoffs. There are few reported instances of that happening.

Kim’s Monday announcement was one of those instances, but its wording was vague and it wasn’t immediately clear what it referred to.

We called financial officials and USC spokespeople about that line. Here’s a plain-English translation.

When employees put part of their paychecks into their retirement plans, USC chips in too — in 2024, the school contributed an amount worth 10% of employees’ paychecks if they contributed 5% themselves. These are known as employer match contributions.

But some employees make more money than others. Like, a lot more.

These high earners have a problem. The IRS caps how much of your salary can count toward employer match contributions. This year, that number is $350,000.

That means that when USC calculates its pre-defined contribution to your account — say, 10% — it can only apply that percentage to the first $350,000 of your paycheck.

So all else equal, somebody making $1 million would benefit from the same employer match as a colleague making $350,000.

Historically, USC made high-earners whole by giving them cash to replace the money they lost because of IRS limits. There are other factors at play — like the IRS’s cap on total contributions to your account in a given year — but the ultimate result is simple:

USC used to give high-earners extra cash using the IRS’s regulations as justification. That’s not going to happen anymore.

A USC spokesperson didn’t answer questions about how much money the school expects to save. Tax filings show that in the 2024 fiscal year, at least 25 employees made over $670,000. That’s well above the threshold to cash in on the benefit.

Phil Turner — an associate director at USC who also serves as president of the Staff Assembly — said the benefit’s existence in the first place was news to him. He had choice words for Kim’s email.

“I would equate it to going to your spouse and telling them the following: ‘I want you to know that you should be really proud of me, because I’ve decided to stop cheating on you sometime next year,’” Turner said.

Tomo Chien can be reached at [email protected].