Union: Cap UC pensions for top earners

The demand comes from a labor union locked in a contract standoff with the University of California; a possible strike is pending.

By SCOTT MARTINDALE / ORANGE COUNTY REGISTER

A hospital labor union embroiled in stalled contract negotiations with the University of California is calling on UC’s highest paid employees to accept a dramatic reduction in their pensions that would bring the retirement payouts into line with recently enacted state reforms.

Under the proposal from the UC chapter of the American Federation of State, County and Municipal Employees, the UC pension cap would be more than halved, to $113,700 from $250,000, meaning that retiring employees would earn a pension based on no more than $113,700 of their annual pay.

A University of California labor union representing about 15,000 hospital workers is demanding that the highest-paid UC employees accept dramatic cuts to their future pension payouts. The union, which represents many workers at UCI Medical Center in Orange, is in a stalement over contract negotiations with UC and has threatened a strike.

The move, proposed Friday, would affect about 2,400 UC employees who earn $250,000 or more – everyone from senior managers and executives to researchers, coaches and physicians. AFCSME 3299, which represents about 15,000 UC patient-care technical workers including nursing aides, licensed vocational nurses and hospitality workers, said the change could save UC up to $35 million annually.

“The University of California has this huge unfunded liability in their pension fund that they want their low-wage workers to fill,” AFCSME 3299 spokesman Todd Stenhouse said. “You can do an exponentially better job by capping executive pensions at the level where the state has executive pensions capped. Leadership starts at the top.”

AFCSME 3299 is in a stalemate with UC officials over labor-contract negotiations for patient-care technical workers that began in summer 2012.
The union is demanding that its workers be allowed to continue paying 5 percent toward their pensions; UC is insisting that all employees pay 6.5 percent beginning in July and new hires pay 7 percent.

“One of the big issues has been AFSCME not wanting its members to pay the 6.5 percent that everyone else is going to pay,” UC spokesman Steve Montiel said. “What they’re calling a proposal really is, understandably, a tactic to counter UC’s emphasis on conforming to the pension changes.”

Montiel said UC’s pension fund was on track to close its projected deficit by implementing a series of reforms approved in 2010, including the hike to employee pension contributions. The 2010 changes “make sense” for a system as complex as UC, Montiel said.

“We already did our pension reform, two years before the state,” Montiel said. “There was a whole process, a task force that drew on input from all of our stakeholders.”

CALPERS VS. UC PENSION

Known as the UC Retirement Plan, UC’s pension fund has an estimated $24 billion unfunded liability. UC officials say they need all employees to help backfill the projected deficit by increasing pension contributions.

In September, Gov. Jerry Brown led an overhaul of the state’s largest pension fund, known as the California Public Employees Retirement System. But reforms such as CalPERS’ $113,700 pension cap for new employees (originally set at $110,100 before inflation) do not affect UC’s independently managed pension fund.

While CalPERS’ new $113,700 pension cap applies to new hires only, AFCSME’s proposal goes much further, demanding all UC employees making more than $250,000 have their pension caps halved.

For a UC employee making $400,000 a year who retires at age 60 after 30 years of service, the base pension is $187,500.

Without any cap, that base pension would rise to $300,000; with AFCSME’s proposed cap, the base pension would fall to $85,275.

On Tuesday, four days after calling for the lower pension cap, AFCSME 3299 announced it was prepared to go on strike with 10 days’ notice.

About 97 percent of its patient-care technical workers authorized the strike during voting last week, the union said.

The strike would affect UC’s five medical centers, including UCI Medical Center in Orange.

PAST UC EXECUTIVE DEMANDS

In recent public statements, AFCSME officials have attempted to paint UC’s top-paid employees as greedy executives who can afford to live on much smaller pensions.

AFCSME cited an example from three years ago, when UC executives demanded that the UC pension cap be lifted entirely, which would have allowed top-paid employees to earn far larger pensions upon retirement.

Threatening a lawsuit, the 36 executives – including UCI Medical Center CEO Terry Belmont – told UC in a 2010 letter that it was obligated to honor “commitments” made more than a decade earlier to remove the pension cap. Although UC Regents pursued the possibility of removing the pension cap in 1999, they were unable to do so at the time because of federal restrictions, UC said.

In their letter, the UC executives said a failure to lift the cap would put UC “at a critical disadvantage in recruitment.”

In early 2011, UC announced it would not be lifting the cap, citing “fiscal prudence in a changing economy.” Montiel said the 36 executives never took further legal action, and the cap remains at $250,000.

AFCSME has alleged that UC has long demonstrated preferential treatment for its highest-paid workers, a charge UC denies.

Prior to 1994, UC’s pension cap stood at $375,000; all UC employees who were hired prior to 1994 will be able to retire under the $375,000 cap.
Included in this group, AFCSME said, is UC San Francisco Medical Center CEO Mark Laret, who earned $1.2 million in 2011; he was among the 36 UC executives who signed the 2010 letter demanding that the pension cap be lifted.

Last week, a group of AFCSME union leaders ambushed Laret as he was giving a talk during an Oakland health care event, calling on him to “think differently” and return part of his “bloated compensation” back to the system.

“You don’t know what I think,” Laret responded during the heated exchange, which was captured on video by AFCSME.

“I’m all for attracting the best qualified candidates,” Stenhouse said, “but you cannot tell me that someone making a seven-figure salary should retire with a six-figure pension.”