Key Facts on Pension Changes

Key Facts about Possible Pension Changes

1. If you are already working at UC, the university cannot change most parts of your pension; in fact, most changes they are considering are for people hired after 2013.  However, the university can change the amount we have to contribute to the pension plan, and for librarians and lecturers, this amount is tied to the senate faculty. 
2. We are currently paying 2% of salary into the pension plan (UCRP).  Starting in April 2010, money that had previously gone into a defined contribution plan was redirected into UCRP, so you did not see any change in your take home salary due to the switch. 
3. We expect the employee contribution to go up to at least 3.5% in July 2011.  Most people think that by 2012, we will be paying 5% of salary into UCRP. The Task Force also discusses raising the employee contribution to 7% by 2013; one reason why they want to make this increase in 2013 is that they want to induce people to opt into the new plan (we question the legality of this move).
4. This year, the estimated cost of the pension plan is $1.4 billion, and we have $38 billion in the pension fund.  The main problem is the long-term health of the fund, but it is hard to predict the actual funding because the investment returns fluctuate so wildly.  For instance, in 2007, we had $48 billion, then in 2009, we were down to $29 billion, and now we are back to $37 billion. These shifts in the fund value  affect the long-term liability that the UC has to calculate and account for. 
5. The union coalition has argued that we probably need to increase the employer and employee contributions, but we do not want any major changes to the plan, and we do not want a two-tier system for new hires.
6. The post-retirement benefits Task Force suggested two options, and a third option was supported by the Senate faculty and staff members on the Task Force (but not by the larger committee).  The major changes in all of these proposals are for people hired after 2013.  For people who are hired after 2013, or people who opt into the new plan, the minimum retirement age would move from 50 to 55 and the age for receiving a full pension would increase from 60 to 65.
7. The two options recommended by the Task Force would reduce pensions by the amount of an employee’s social security.  This change would reduce some people’s pension allowance by more than 50%.  The dissenting senate faculty report did not support the use of social security to reduce the pension payout.  
8. Another suggestion is to have a second tier for people where employees could choose to pay a lower contribution rate and receive a lower payout when they retire.   There is also a proposal to allow current employees to opt into the reduced plan.  The Task Force believes some employees would prefer this in order to receive more pay up front and defer less compensation to retirement.
9. The Task Force recommended several ways to increase the retirement earnings of the most highly paid employees. The unions are obviously against this type of compensation system.
10. We should also expect major increase in the amount of money retirees have to pay for their retiree healthcare.  The university wants to reduce its costs in this area by 20%.
11. Finally, after years of negotiating, President Yudof has offered the unions the chance to have one union representative to sit on the investment advisory board.  The unions have decided to forward the name of Bob Samuels to Yudof.