UC Targets Pension Benefits

By Laurel Rosenhall

Confronting a $24 billion unfunded liability in its retirement plan, leaders of the University of California are poised to make significant changes to pension and health care benefits for the system’s retirees.

The first step comes Thursday, when UC’s governing board of regents is scheduled to vote on a proposal to increase the amount current employees and the university contribute to the retirement plan. The payments would go up over the next two years, so that by July 2012, employees would pay 5 percent of their salaries to the retirement plan and UC would pay 10 percent.

That’s up from the 2 percent employees pay now and 4 percent paid by the university.

The next steps will come in the months ahead, as UC President Mark Yudof considers a series of recommendations on overhauling retirement benefits for employees who join UC after 2013.

Under the proposals, new employees would have to wait longer to retire and would receive smaller pensions than current employees receive. Yudof also is considering changing eligibility requirements for retiree health benefits so that those who retire earlier or have worked fewer years at the university would have to pay more for their care.

Regents are expected to vote on those changes by the end of the year.

“Whatever the regents do, it will not affect accrued benefits of current employees,” said Daniel Simmons, a UC Davis law professor who serves as vice chairman of the statewide Academic Senate.

“To keep those benefits, employees may have to pay a higher price in increased employee contributions, but benefits accrued and vested today are guaranteed.”

Still, Simmons said, “It’s a pay hit for everybody,” with newer employees bearing the brunt of the burden.

UC’s lowest-paid employees had a different interpretation of the proposals. The union that represents custodians, groundskeepers and cafeteria workers sent an e-mail to the media Friday characterizing the proposed changes as a scheme to “steal from the poor and give to the rich.”

A worker who makes $26,000 a year now and retires at age 65 after 20 years of service can expect a $12,202 annual pension under the current UC plan, according to the American Federation of State, County and Municipal Employees union. Under the proposed changes, that worker would receive a pension between $7,800 and $10,400.

On the other end of the income spectrum, UC employees who now make $360,000 a year – and retire at 65 after 20 years of service – earn a pension of $121,702, the union said. Under the proposed changes, their pensions would go up to $180,000.

UC executives said the proposals would not hurt low-wage workers more than other employees. Under the proposals, all UC employees would receive retirement income equal to more than 80 percent of their salary, said Nathan Brostrom, executive vice president of business operations. One recommendation calls for eliminating a deferred compensation benefit enjoyed only by UC’s senior managers.

“It’s a very progressive approach,” Brostrom said.

The proposed plans increase the potential pensions of UC’s highest-paid employees to alleviate inequities in that group, said Gary Schlimgen, director of pension and retirement programs.

But the claim that employees would receive more than 80 percent of their salaries during retirement includes income from both UC’s pension and Social Security.

Julian Posadas, a UC Santa Cruz food service worker who is vice president of the AFSCME union, said laborers don’t like the idea of banking their retirement income on Social Security.

“There is a fear that we won’t even have that benefit in the future,” he said.

[ Source: The Sacramento Bee ]