State Assembly withholds funding to UC because of new retirement plan

By Christian Conable

The State Assembly Subcommittee on Education voted Tuesday to delay funding to the UC system because of concerns with the UC Retirement Plan, proposed by UC President Janet Napolitano in March, which would cause the university to incur significant costs.

The delay was announced after an actuarial report was released earlier that day by Pension Trustees Advisors, or PTA, which showed that the retirement plan would cost the university $500 million in savings, or $34 million a year, over the next 15 years.

“This new proposal not only reduces savings but could potentially hurt the current pension system and (asks) taxpayers to subsidize the enrichment of UC’s growing executive class,” said California Assemblymember and subcommittee chair Kevin McCarty in an email.

The retirement plan, approved unanimously by the UC Board of Regents, affects UC employees hired on or after July 1 and offers them a choice between two pension plans — both of which limit pensionable earnings. Employees are eligible for the state-required defined benefit plan after five years of working in the university, whereas employees are eligible for the 401(k)-style plan, or defined contribution plan — proposed by Napolitano — after one year.

According to AFSCME Local 3299 spokesperson Todd Stenhouse, the defined contribution plan would require the university to contribute eight percent of the first $265,000 in salary for the employees benefit — more than double the pension cap required by the state. This option would provide employees earning more than $265,000 annually with $7,400 more in annual contributions than employees choosing the defined benefit plan.

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[Source]: Daily Californian