By Vic Cox

Projecting that the UC Retirement Plan (UCRP) surplus has continued to slip over the last fiscal year, a top systemwide employee benefits executive argued this month that restarting contributions to UCRP by next July was in the best interests of all parties.

Meeting at Merced on Sept. 8 with editors of UC internal publications, Randolph R. Scott, executive director of policy and program design for UC human resources and benefits, said that despite pension asset growth of just over 7 percent the surplus, as of last June 30, is estimated at about 107 percent, down from 110 percent the previous year. More definite figures are expected in November when actuarial consultants deliver a UCRP update to the Regents.

Scott said that to keep pension assets within the 95 to 110 percent range of funding, the goal the Regents adopted last March, contributions by both employees and the University should resume no later than July 1, 2007. Delaying resumption will cause, he said, a ”projected deficit of over $1-billion over time.” A graph of this estimated deficit <www.universityofcalifornia.edu/news/ucrpfuture/welcome.html> shows a widening gap between start dates only one year apart that could amount to $1.6-billion by 2015. A so-called “soft landing” is central to the Regents’ stabilization strategy.

However, some of the basic assumptions—prepared for the Regents by the Segal Company—justifying the restart of payroll deductions after 15 or 16 years have been called into question by a coalition of five unions representing more than 70,000 UC employees. To check the assumptions, they hired the actuarial and benefits consulting firm of Venuti & Associates, which released a critique <www.cueunion.org/cue_home.php> late last June that concluded more study was needed before a resumption could be justified.

Since several unions have contracts beyond 2007, UC has demanded they re-open negotiations over the pension contributions. Scott confirmed that letters had been sent out seeking to bargain new terms “as soon as possible.”

The union response, as suggested by University Professional and Technical Employees Secretary Rodney Orr, is that “UPTE and the other unions are concerned that…changes to UCRP and the retiree health benefits are premature.” He cites doubts over the need for such a quick and profound change, the adequacy of the actuarial projections, and the fact that UC has “made no commitment to resume employer contributions to help keep UCRP well funded.”

Orr adds, “It is unfair to negotiate one issue only and not consider a comprehensive contract which would include wage increases…”

The Regents, as part of their pension planning, have said that initially employees “will see no loss in take-home pay” when contributions begin again, according to an unsigned statement on the UC Human Resources and Benefits Web site <http://atyourservice.ucop.edu/index.html>.

By that, the statement went on, the Regents intend that employee contributions in 2007 would “be only the amount employees are now putting into the Defined Contribution Plan—about 2 percent of (gross) pay for most employees.” This amount would be diverted from the DCP to the UCRP. Nothing is mentioned about the following year’s contribution.

Other statement points: Past employee DCP contributions will remain in their accounts, which will still be controlled by the employee; UC would also contribute to UCRP an as-yet undefined amount in 2007, but it will be “at least equal to what employees are contributing;” and UC “is not (original emphasis) planning to cut salaries to pay” for the UCRP contributions when both parties begin again.

Faculty have also raised several concerns. Central to all of them is that UC offer competitive compensation to retain and recruit faculty.

While supporting the Regents’ March decision to reinstate UCRP contributions, John Oakley, chair of the systemwide Assembly of the Academic Senate, has placed UCOP on notice that “it is essential that total contributions going into the plan be the same percentage of covered compensation for each employee.” If represented employees negotiated reduced contributions but received the same UCRP benefits, this would create an “unacceptable” subsidy burden on non-represented employees, he wrote to Academic Senate members.

All UC statements on the UCRP contributions plan conclude with the warning that the amount of an employee’s pension contribution “is subject to the availability of funding, the budget process, and collective bargaining for represented employees.”