Task force submits recommendations on new retirement benefits for future UC employees

The final decision is expected from UC Regents in March following input from UC community

After months of discussion and analysis, the task force President Napolitano convened last summer to recommend options for retirement benefits for future UC employees has concluded its work and presented her with its recommendations. President Napolitano will next invite feedback on the task force recommendations from faculty, staff and others over the coming weeks to help inform the proposal she is expected to bring to the UC Board of Regents in March.

Once final, the new retirement benefits will apply only to UC employees hired on or after July 1, 2016 — retirement benefits for current employees and retirees will not be affected. Retirement benefit changes for union-represented employees will be effective upon completion of the collective bargaining process.

UC is developing new retirement benefits options as a result of the 2015 budget agreement between UC and state leaders. Under the agreement, Gov. Brown and the Legislature will provide UC $436 million over several years to help pay down UC’s unfunded pension liability in exchange for UC implementing a cap on the defined benefit (pension) portion of UC’s retirement benefits, mirroring the cap on pension benefits for state employees under the 2013 California Public Employees’ Pension Reform Act (PEPRA). This approach will help ensure the long-term financial stability of UC and its retirement program.

Key priorities for UC in designing a new set of retirement benefits include:

  • Ensuring UC’s long-term financial stability that, among other things, maintains the financial stability of the UC Retirement Plan (UCRP) for current and future employees and allows for regular salary/merit increases for faculty and staff;
  • Maintaining the competitiveness of overall compensation for UC faculty and staff;
  • Facilitating shared responsibility between UC and employees for individual retirement readiness, and providing programs and other support that help employees prepare for retirement.

As part of their charge, task force members were asked to explore a range of options that applied the PEPRA pension cap. President Napolitano also asked task force members to discuss possible options with colleagues and constituent groups throughout the university, and to use feedback from those discussions to inform their deliberations.

The task force has recommended that future UC employees be offered a choice between two retirement benefit options:

Option A — Hybrid Approach: A new UC Retirement Plan defined benefit (DB) plan capped at the PEPRA salary limit (currently $117,020) plus a new supplemental defined contribution benefit (“DC Supplement Plan”) with eligible employee pay up to the Internal Revenue Code limit ($265,000);

Option B — Pure Defined Contribution Approach: A new stand-alone defined contribution (DC) plan with benefits-eligible employee pay up to the Internal Revenue Code limit, currently $265,000.

A summary of the recommended features of the two task force options is provided below. President Napolitano will now ask the UC community for feedback on the recommendations, which she will use to help inform the proposal she is expected to bring to the UC Board of Regents in March.

Ensuring UCRP stability
Ensuring the long-term stability of the UC Retirement Plan for current and future employees is a key priority for UC, especially at a time when the health of many public pensions across the country has been called into question. Should a stand-alone defined contribution (DC) plan be among the options proposed by the president and adopted by the regents, UC’s independent actuary has confirmed that, as long as UC continues to make contributions to the UCRP unfunded liability, allowing future employees to elect a defined contribution plan as an alternative to the UCRP would not jeopardize UCRP’s ability to pay pension benefits.

Community input on the recommendations
With the task force’s work complete, President Napolitano will now ask the UC community for feedback on the recommendations. As part of UC’s principles of shared governance, the Academic Senate will formally review the recommendations and provide feedback to the president. In addition, two online webinars with senior UC officials will be held in February to discuss the recommendations and solicit questions and/or comments from interested employees. Faculty and staff also are invited to submit comments through a dedicated website. All comments received will be reviewed and considered.

President Napolitano will use the input from the university community to help inform the proposal she is expected to bring to the regents in March.

Task force members included faculty, staff, administrators, and representatives from the Academic Senate, the Staff Advisors to the Regents, the Council of UC Staff Assemblies (CUCSA) and UC labor unions. Executive vice president and chief operating officer Rachael Nava chaired the task force. The task force has been meeting regularly, by teleconference and in person, since its first meeting on August 7. Summaries of the meetings are available here.

What’s next

  • Jan. 15 – Feb. 15: Academic Senate reviews and submits comments on the recommendations.
  • Jan. 15 – Feb. 15: Faculty, staff and others submit feedback via dedicated website.
  • Feb. 1 and 10: Webinar discussions with UC community about the recommendations.
  • Mar. 23–24: President Napolitano expected to bring a proposal to the regents.
  • July 1: The new benefits options take effect.