UC subcommittee debates streamlining pension program

The UC board of regents approved different retirement benefit options in March. A state legislature wants the UC to get rid of one of those options to receive funding to pay off its $7 billion pension debt. (Daily Bruin file photo)

By Ryan Leou

A state assembly subcommittee voted Tuesday to withhold $176 million from the University of California unless the UC eliminates one of its proposed retirement benefit plans.

With the $176 million, the UC planned to pay of some of its pension debt, which is currently more than $7 billion. Last May, the state agreed to provide the funding if the UC limited the income eligible for pension contributions and restructured its retirement benefit plans.

The UC approved two retirement benefits options at its March regents meeting: a hybrid defined benefit plan, which includes a supplemental defined contribution plan, and a pure defined contribution plan.

Assembly member Kevin McCarty, the chair of the subcommittee, said he proposed the hold on funding because he thinks the UC wanted to avoid the limit on pensionable income, which was set in the 2015 Bipartisan Budget Act.

In a defined benefit pension plan, an employer or sponsor promises a specified monthly amount based on earning history, service and age. In a defined contribution plan, the employer, employee or both regularly make contributions to the retirement fund.

In the UC version of a defined contribution plan, the UC would contribute an amount equal to 14 percent of employees’ income to the retirement fund. The contribution would be limited to the IRS’s cap of $265,000.

In the UC version of a hybrid plan, the UC would contribute 14 percent of employees’ income up to $117,020, the cap set by the California Public Employees’ Pension Reform Act. The UC would also contribute an amount equal to 10 percent of income up to the IRS limit of $265,000.

In both plans, employees contribute 7 percent of their earnings to their retirement funds, but the defined contribution plan has a higher income cap for UC contributions.

The American Federation for State, County and Municipal Employees Local 3299, the union representing UC service workers, hired an actuary who reported the defined contribution plan would save the UC about $9 million, according a press release from the union. However, the actuary estimated the UC would save about $34 million a year if it eliminated the defined contribution plan.

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[Source]: Daily Bruin