Fact Sheet on the Proposed UC Retirement Plan Changes

The changes proposed by the President’s Task Force on Post-Employment Benefits will directly affect all current employees and retirees, although differently. The Task Force proposes tripling the percentage of the health insurance premium that all current and future retirees must pay. The Task Force also proposes that UC a) stop offering the current UC Retirement Plan to employees hired after 2013 and b) adopt a new plan that would reduce the University’s compensation to most employees by “integrating” the pension plan with Social Security. With the exception of the highest paid executives, the proposed cuts in pension payments are as high as 57% for those on the lower end of the pay scale and 43% for those in the middle (www.universityofcalifornia.edu/senate/Chalfant_Henry_PEB_Slides.pdf). What follows are more facts, as well as questions that must be addressed. Fact #1: Employees who remain in the current plan after 2013 can expect to pay 10% or more of their salary into the Retirement Plan, as the Task Force report specifies 7%+ but is silent on an employee contribution cap. Fact #2: All current and future retirees’ health care premium contributions would increase 200%, amounting to a significant cut in compensation (p. 34, Executive Summary Report of the President’s Task Force on Post-Employment Benefits, July 2010). For employees under the proposed integrated plan (all hires post-2013 and current employees who opt in): The plan is a cut in compensation for most faculty and staff, and will be highly inequitable: Fact #3: Under the “integrated plan,” the multiplier for determining UC pension amounts decreases when salaries stagnate. For employees to maintain their multiplier and thereby preserve the UC portion of their pension, their salaries must rise faster than inflation, i.e., salaries must rise 30-50% in the next 10 years (UCSC CFW slides 6-7, http://senate.ucsc.edu/ PEB update). Fact #4: Those making less than $170,000/year will, in effect, see a cut in compensation, while those making over $245,000/year will see an increase (p. 24 & 30, Executive Summary). Fact #5: Pensions of the lowest wage employees would be cut by 30-50%, and of the middle income employees (i.e., most faculty) by 20-30% (p.23- 24, Executive Summary). This cut is on top of increased retiree health insurance premiums (p. 34, Executive Summary). Fact #6: Meanwhile, the Task Force recommends an “Excess Benefit Plan” for executives and others at the highest compensation levels (greater than $245,000). The maximum dollar value of their benefits, now capped at $245,000/year, would increase up to $360,000/year (p. 30, Executive Summary). Fact #7: The Task Force recommends reducing survivor pension benefits (p. 20, Executive Summary), which would disproportionately affect single income families and those without outside insurance. Employees will have to work significantly longer to get their benefits: Fact #8: The Task Force proposes increasing the minimum retirement age from 50 to 55 (p. 22, Executive Summary). Fact #9: To get maximum benefits, employees will have to postpone retirement for five years, from 60 to 65 (p. 22, Executive Summary). Result: This not only affects individual lives, but the future of the university as an intellectual community. There will be fewer younger scholars being hired due to fewer open positions, fewer retired senior scholars free to pursue research and writing freed from administrative burdens -- and all in all a less rich and vibrant intellectual community. Projections for the plan are unsubstantiated: Fact #10: Based on analyses from the University Committee on Planning and Budget, the University Committee on Faculty Welfare, the UCSC CFW, and the Task Force’s own report, the proposed changes do not solve the problem of the unfunded liability gap (i.e., at some point in the future, there is projected to be more to pay out than the fund has; Executive summary, page 41). Further, projections do not account for the fate of the current plan if large numbers of employees opt out.

Finally: None of the proposed options solves the problem of the “unfunded liability gap” that triggered the resumption of contributions and the redesign of post-

employment benefits.

Questions
1. Given the UC interest in recruiting and retaining the best faculty, we imagine that Office of the President conducted a study on how these changes are predicted to affect the retention of newly hired and mid-career faculty. What were the results of that study? 2. From your research, how will these changes affect the hiring of new faculty? 3. From your research, what percentage of current employees do you anticipate will choose the proposed plan, if given the choice, and how will this influence the solvency of the current plan? 4. CSU’s retirement plan is not integrated with Social Security. Why would the UC change its own plan to be less secure and predictable than that of CSU? 5. Integrated plans are unusual and untested. Why is the UC willing to gamble with a system that has little if any track record? 6. What happens when the social security retirement age goes up? 7. Current employees may be given a “choice” of whether to opt in to the proposed plan, or stay with the current plan. But if there are no caps to how high employee contributions might rise with the current plan, how could we “choose” to remain with it? What is the basis for making such a choice? 8. Why not call the “age factor” a “class factor,” given that the Task Force’s proposed plans base the “factor” in part on salaries, and lower-salaried employees will have a lower “factor” than higher-salaried employees? 9. How can you propose these changes given that major stakeholder groups (i.e., all non-faculty staff) had no representation on the Task Force and minimal representation (two staff members) in the Working Group? 10. Given how complex and uncertain the proposed plan changes are, how can any employee make an educated and financially sound decision regarding their future? 11. Why does this process have to move so quickly, given that none of these changes would take effect until 2013? 12. Rather than making these proposed changes now, wouldn’t it be prudent to create a long-term financing plan? 13. According to the University Committee on Planning and Budget, the University Committee on Faculty Welfare, the UCSC CFW, and the Task Force’s own report, none of the proposed options address the major issue confronting UC’s current retirement plan— the unfunded liability gap. If you disagree with their analyses, on what basis is your disagreement? If you agree, then why should we adopt any of these proposals?

October 18, 2010 This document was produced by the PEB subgroup of FOG (Faculty Organizing Group) at UCSC. The SCFA is grateful for their efforts on behalf of all UC employees and takes responsibility for helping to distribute the document. Please send comments to scfa.assist@gmail.com

and visit www.ucscfa.org for more and continuing analysis of the PEB issues. Please share this document with any and all UC employees that you care about, and please ask these questions of the U.C. leadership whenever the occasion presents itself.

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