Understanding UC's retirement plan

By Shane White

A healthy and robust UC Retirement Plan (UCRP) is critically important to faculty, staff and UC itself. UC wisely provides a defined benefit plan. This aids in recruitment, retains faculty through their most productive years, rewards long service, creates stability, allows secure retirement at an appropriate age and facilitates faculty renewal.

Until 1991, contributions were made by both the university and individual employees. In 1991 the plan had accumulated substantially more assets than liabilities, so contributions were temporarily suspended. However, current actuarial projections indicate that plan liabilities will soon begin to approach and exceed assets. Therefore, contributions will have to be reinitiated.

Consequently, the UC regents have voted that both UC and its employees will begin making regular contributions to the plan in July 2007, conditional upon funding, the budgetary process and collective bargaining agreements. Throughout this process the UC faculty has been represented by the UC Academic Senate, primarily by the University Committee on Faculty Welfare and by its Task Force on Investment and Retirement at the University of California Office of the President (UCOP).

The current actuarial cost of retirement benefits that UC employees accrue is approximately 16% of their annual covered compensation. In 1991, UC employees contributed 2% of their pay up to the Social Security wage base and 4% above the Social Security wage base, with UC paying the remainder, then 4%. Historically, UC contributions ranged from 4% to 16%. In 1991, employer contributions were suspended, and employees’ contributions were redirected to their individual Direct Contribution plans.

It is expected that in July 2007 the existing employee contributions will be returned to UCRP, and will be initially matched by an equal contribution by UC. Employee take-home pay will not be reduced, but the total benefit value will be decreased. Over time, it is anticipated that the sum of UC and employee contributions to UCRP will gradually ramp up to cover the full 16% cost of accrual.

Pertinently, California State University academic employees, California Public Employees Retirement System members, currently contribute approximately 5%, matched by a 17% employer contribution.

UC faculty pay lags far behind our peer institutions, but an attractive UC benefit package makes up much of the difference in total remuneration. However, as UCLA faculty will only receive a 2% COLA (Cost of Living Adjustment) this year, exclusive of any earned merit increases or promotions, the salary gap continues to widen. Therefore, the Academic Senate has strenuously advocated that if benefit value is reduced, if additional employee contributions are required and if peer parity is to be attained, then additional cash compensation must be provided. Recognizing the salary gap, the regents in 2005 committed themselves to the goal of raising UC salaries to levels paid by our peer institutions over the next 10 years. However, gains have yet to be made.

The Academic Senate continues to engage the UCOP on the eventual balance of UCRP cost-sharing and on the provision of a competitive faculty remuneration package.

A professor of dentistry, White is chair of the Faculty Welfare Committee.