Bargaining Update #7: July 6-7, 2015

The parties met last Monday and Tuesday, July 6 and 7, to discuss pension and retirement issues, pre-continuing appointments, and a host of technical articles.

Monday morning, the Union gave proposals to include in our unit those retired Lecturers who are recalled to teach classes, to improve the data the Union gets about Lecturer appointments, to follow the University’s lead in updating non-discrimination language to accord with State and Federal law, and to change language in no strike/no lockout so that the UC cannot simply withhold someone’s pay on the suspicion that someone participated in a sympathy strike.

In the afternoon on Monday, the UC passed a proposal on Article 7a, which governs Lecturer appointments for the first six years. Although they made an improvement because they will no longer prohibit larger than minimum salary increases to Lecturers during this period, we were disappointed that the UC cannot acknowledge the need for more stable and professional job appointments from the start of a Lecturer’s term of  service. Clearly there is more work to be done here. We are currently writing new versions of our proposals to present to the UC in late July.

Tuesday afternoon, the UC presented its proposals for the grievance and arbitration process. We have some disagreements on time limits for filing grievances and appealing the UC’s decisions, and we have real disagreements on the use of broad language in grievances, but the sides are coming together about the processes involved in getting to arbitration. We still need to limit the UC’s ability to use a pretext of academic judgment to violate the spirit and letter of our contract.

However, the most important part of last week’s meeting concerned pension and retirement.

Tuesday, we spent the morning learning as much as we could about the UC’s proposed new pension tier. The change and the discussion about the change were and are problematic and frustrating. First, this new tier was mandated by Governor Brown and UC President Napolitano as a result of their “committee of two” negotiations. Therefore, although no details have been decided at all, and nothing has been worked out, the new tier, whatever it is, will be approved by the Regents in May 2016 and implemented July 1, 2016. So, we are ‘negotiating’ on vague outlines of a plan that doesn’t exist but will be designed, created, approved, and instituted faster than the UC can usually approve the renumbering of a course offering or a change in a food court vender.

Here is what we ‘know’ at the present time. The UC plans a 2016 Tier that places a cap on the income that can be applied to one’s retirement. I’ll explain with examples. Currently, if you retire at age 65 with 20 years of pension service credit, you get half your income each month, based on the average of your top three years of earning, so if you retire earning $10,000 per month (or $120,000 per year), you’d get $5,000 per month in retirement.

In the new plan, employees can only devote the first $117,500 of income to the pension, so a person on $120,000 would get $4,986 per month in pension because he would be over the annual income limit, and about $200 of his monthly income would be excluded from his pension calculation. Worse, an employee on $144,000 with 20 years of service would get the same amount, $4,986, instead of $6,000. Such an employee would need to devote a substantial amount of her salary to make up for her reduced pension.

This cap will have severe effects on those who earn higher salaries. Now, I can sense many of you not caring at all; however future lecturers will be affected by this. After all, our goal is to get lecturers paid professional wages, and already some of us earn more than $100,000 annually.

Comparison of current and proposed pension schemes for retirement age of 65.

The salary basis used for calculating the pension is the HAPC, the highest 3-year average of annual salary (usually the average of the lecturer's last 3 years salary).

There are some minor differences for those under the pre-2013 plan, the 1976 tier. (Chart by Brian Linard)

In other words, for anyone earning below the cap, the new scheme changes nothing; however, under the new scheme no matter what you earn, your pension will be calculated on a maximum basis salary of $117500 = $9,792 per .

Notice the significant reduction in pension for those on higher salaries who have worked longer for the UC. This proposal will not encourage long-term dedication to our institution. Still, I can still sense your disinterest in the plights of the upper-middle class, and I tend to share that disinterest.

However, the UC wants to add another option for higher earners: a Defined Contribution Plan (DCP). This might push our pension into a “Death Spiral,” as the University loses interest in funding it because the rich and powerful are no longer involved in the pension.

The UC has a plan for an alternative retirement scheme not based on years of service and highest salary averaged over 3 years and retirement age. This plan would be a defined contribution plan, with an employer contribution to the employee’s savings. Basically, this would be 401(k) equivalent. Employees’ retirement funding would be based on their salary throughout their employment, the number of years they invested, the retirement funds they already had before they started working, the amount of the UC’s contribution, and the employees’ luck in their various investments.

With a 401(k) plan, if you retire when the stock market is high, pull your investment funds out of NASDAQ, and put them into safe bonds (not Greece, not Puerto Rico, not Sacramento), you’ll be fine. If the market tanks, however, or if your investment choices don’t work out, or if your investment profits are eaten by brokerage fees, or if you are cheated by any number of unscrupulous advisors or brokers or bankers, then you’ll have to rely on social security alone, and you’ll sell your house (if you own one) and move into a subsidized retirement community somewhere in Arizona.

Still, a DCP may appeal to someone in the upper salary ranks who doesn’t plan to stay committed to the University, especially when only half of his or her salary counts towards pension calculations.

Many, most, or potentially all of the high earners in the system might opt out of the defined benefit pension (our current pension) and opt into a defined contribution plan that allows them to use a percentage of their entire salary for pensions. In other organizations, this process has destabilized the defined benefit pensions, and lead to a general collapse of retirement security for employees. The rich leave the pension and safely invest their very high salaries in the market, and the normal employees’ defined pension plan is underfunded to the point of collapse. This is a death spiral, and it threatens our pension, as well as the retirement of future lecturers.

So, we have two serious concerns about the new pension proposal: 1) how do we protect future employees from getting destroyed by the same market fluctuations that have damaged or ruined countless Americans’ retirements in the past? And 2) how do we protect the defined benefit plan (UCRP) of current and future Lecturers if the higher earners and influential employees of the future are not invested in this plan? What will compel the UC to keep our current pensions solvent in the next 10 to 40 years and beyond?

At the same time, we are aware that most lecturers have no retirement plan at all through the UC, except a forced savings plan named, in the grand Orwellian tradition, “Safe Harbor.” That plan requires that 7% of salary of part-time Lecturers be placed into an account which presumably replaces both Social Security (which these lecturers do not receive) and a pension. The UC contributes nothing (not even Social Security contributions). The negotiating team is looking for ways to provide these lecturers with UC contributions: at least a DCP would have a UC contribution.

We’ll keep you updated throughout the summer and next year.