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Staff Assembly receives update on pension plan

By Dave Jones on June 23, 2006 in University

Take a good look now at your UC Retirement Plan, for it is likely to change soon.

The UC Board of Regents decided earlier this year to reinstate member contributions to the $42 billion UC retirement program. About 100 employees crowded into the June 8 Staff Assembly meeting to listen to campus finance leaders discuss how the regents may decide the contribution rates for members and UC, and how these rates may be phased in. These questions are on the agenda for the regents' next meeting, set for July 19-20.

Since the 1990s, retirement plan members have enjoyed a "contribution holiday" — which means they did not put anything into the plan. As recently as 2004-05 the pension was "overfunded" at 148 percent. However, a lagging stock market has eaten away at that surplus, and the fund is within a few years of falling below a fully funded status of 100 percent. To prevent this, the regents in March agreed that contributions — from employees and the university — will restart in 2007.

"The party's over," said Liz Hansen, benefits and insurance contracting manager with UC Davis Human Resources. "This was never promised to be permanent. No other pension fund in the United States has had a 15-year contribution holiday."

She added that UC's fund has been "very well managed," even through national economic downturns.

Hansen sought to dispel "rumors" about pay cuts, handing out one flier that included the statement, "UC has no plans to implement pay cuts."

The regents in May delayed deciding on contribution rates to examine the issue in greater depth. And since then, UC has sent numerous e-mails and other messages to employees to clarify aspects of the plan to reinstitute contributions.

Redirection a plausible scenario

In one plausible scenario, Hansen said, the regents might redirect the money that employees are now required to put into defined contribution plans. These contributions, for most employees, amount to 2 percent of salary minus $19. How much each employee gets from a DCP depends on how much he or she put in, and the account's gains and losses over the years, according to the online research site

The UC retirement plan, where this money could be redirected, is a defined benefit plan that promises specific monthly benefits at retirement.

What happens beyond this redirected contribution and in the years ahead is significant — employee contributions could go higher. According to the regents' plan, UC eventually needs to collect 16 percent of wages to maintain the targeted funding level. The flashpoint is the split between UC and its employees.

One favorable trend, Hansen said, is that annual salary increases will continue for UC employees under the budget compact with Gov. Schwarzenegger.

Rob Scharf, a financial analyst in the College of Agricultural and Environmental Sciences, is not surprised the retirement fund needs some help in light of the stock market. But the 23-year campus veteran is not looking forward to contributing once again to the plan.

"I think we are all concerned about how this will affect our bottom-line, take-home check," said Scharf, who expects the regents to delay their decision until after the fall election. "If we get a 3 percent raise and they ask us to contribute 2 percent, then our take-home (pay) is only 1 percent better. The bottom line is no matter how the money is distributed, if we are expected to contribute to the retirement plan, it will affect us in the short term or the long term."

As for employee unions, UC will negotiate with them on how much the contributions would be and when they would start.

Hansen said there are no plans to offer early retirement incentives or two-tier retirement plans, though it is possible that one day the regents might make other investment choices available to employees.

Budget exec sees continued improvement

The Staff Assembly also heard from Kelly Ratliff, assistant vice chancellor of budget resource management. She said the campus budget situation is continuing to improve under the budget compact — an average 4 percent raise is earmarked for faculty and salary along with a 4 percent general fund increase for the campus. The campus allocation includes money to "buy out" approved increases in systemwide student fees, but not increases in campus fees.

More information on the retirement plan and budget is available online: and

Media contact(s)

Dave Jones, Dateline, 530-752-6556,