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By Professor Shane White, Chair, Faculty Welfare Committee
Maintenance of the UC
Retirement Plan (UCRP) is critically important to the UC Faculty, Staff, and to
the University itself. Unlike many peer institutions, UC provides a defined
benefit plan. This retirement plan rewards employees for long service, allows
them to retire with relative security at an appropriate age, and is relatively
tax-efficient. This plan also assists the university in attracting outstanding
new employees, retaining employees during their most productive years, and in
facilitating appropriate retirement and renewal.
Until 1991,
contributions were made by both the university and the individual employee. In
1991 the plan had accumulated substantially more assets than liabilities and
payments to the plan were temporarily suspended. This situation was created by a
strong long bull market and by employee demographics. However, current actuarial
projections indicate that plan liabilities will soon begin to approach and
exceed the plan assets. Therefore, plan contributions will have to be
re-initiated.
Consequently, the
UC Regents recently voted that both UC and its employees will begin making
regular contributions to the UC Retirement Plan in July 2007, conditional upon
funding, the budgetary process, and collective bargaining agreements. Throughout
this ongoing planning process the UC faculty has been represented by the UC
Academic Senate, primarily by the University Committee on Faculty Welfare (UCFW)
and by the UCFW’s Task Force on Investment and Retirement (TFIR), at the
University of California Office of the President (UCOP).
The actuarial cost
of retirement benefits that UC employees accrue for every year of service is
estimated to be 16% of their covered compensation. Until 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. Since 1991, employee
contributions have been redirected to individual Direct Contribution (DC) plans.
It is expected that
in July 2007 these existing contributions will no longer be redirected to the DC
plan, but will be returned to UCRP, and will be matched by an equal contribution
by UC. Employee take-home pay will not be reduced, but the total value of
fringe benefits 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 benefit accrual.
Although UC faculty
pay lags behind that of peer institutions, the outstanding UC benefit package
makes up most of the difference in total remuneration. Therefore, the Academic
Senate has strenuously advocated that if benefits are to be reduced, or if
additional employee contributions are to be required, then equivalent additional
cash compensation must be provided. Furthermore, additional salary increases
will be needed to maintain parity with peer institutions. Recognizing the salary
lag, the Regents in 2005 committed themselves to the goal of raising UC salaries
to levels paid by our peer institutions over the next ten years. During this
period, while contributions to UCRP will be rising, the Regents hope to have a
series of catch-up pay increases.
The Academic Senate
will continue to engage the UCOP on the eventual balance of UCRP cost-sharing
with employees and the provision of a competitive total remuneration package.
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