UC Pension Plan Funding up for Review


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The current strategy to reinstate employer and employee contributions to the UC pension plan could put the fund in deeper financial trouble, according to a presentation slated to be brought before the UC Board of Regents in November.

Under the University of California Retirement Plan, which covers about 229,000 active and retired UC employees, the university will contribute 4 percent of employees' compensation to the fund while employees will contribute 2 percent.

The contributions were approved Feb. 5 to make up for the declining state of the retirement fund.

The plan calls for the university's contribution rate to increase by 2 percent per year until there are enough projected funds to support the pension. The employees' contribution rate will increase 1 percent per year until it reaches 5 percent.

But the presentation put together by the UC Academic Senate said the "slow ramp-up" process will dig the hole deeper for the pension fund. Deferred contributions will not receive investment return, and for each dollar contribution from state-funded employees that are deferred, $2 of non-state-funded contributions will be lost.

The presentation said contributions at their projected pace will eventually require a 50 percent combined contribution rate by 2022 if it is to support employees covered under the plan.

The task force recommended instead for the regents to start immediately with a combined contribution rate of more than 20 percent in 2010-11, which the regents approved in September 2008.

"The senate has been arguing that we need to move rapidly to significantly larger employer contribution and employee contribution," said Robert Anderson, chair of the senate Faculty Welfare Committee's Task Force on Investment and Retirement. "Otherwise the shortfall of the plan will get worse and worse."

The contributions stopped in 1990 because of the surplus in the retirement fund. But the plunge in the U.S. and foreign stock market and the employees' mounting service credit have gradually depleted the fund, which is now below the amount needed to support employees covered by the plan. This is in contrast to 2001 when the fund had a surplus of 49 percent.

"We incur an additional liability every year of about $1.3 billion dollars for active members, and we pay our retirees $1.5 billion every year," said Gary Schlimgen, director of retirement programs and policy for the UC Office of the President. "We've enjoyed a long holiday, but it's over."

Union officials are demanding more transparency in investment details, and that the university contribute five times more than what employees contribute to the pension fund, said Tanya Smith, president of the local chapter of the University Professional and Technical Employees union.

"First we want to find out what's going on, then we want the kind of ratio that has been applied historically between employee/employer contributions," Smith said.

While current retirees will not be affected, pensions for current employees could be reduced in the future, though the presentation said such action "would certainly result in litigation."

The task force has held forums about the plan at UC campuses. A forum will be held at UC Berkeley Nov. 11.


Contact Paul Edison at [email protected]

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