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Spotlight: Task force presents Post-Employment Benefit options

Pension and medical retirement benefits for UC faculty and staff will be much the same as those currently offered, but employees may have to pay more and work longer to get them, if options presented by the Post-Employment Benefits Task Force are implemented.

Members of the task force laid out the options under consideration at a March 31 forum for Office of the President employees.  It was the first of 30 forums the task force will be holding at all UC locations.  The forums will run through May 3.

The task force has been charged with developing options for balancing the long-term costs of post-employment benefits with the need to provide competitive compensation to faculty and staff. The task force will present its recommendations to UC President Yudof in June.  Yudof will determine which recommendations to present to the Regents.

“Task force surveys conducted in February confirm that faculty and staff have made a conscious choice to work at UC because of the retirement benefits, and they place a high value on those benefits,” said Dwaine Duckett, vice president of UC Human Resources. “Our retirement benefits stand out among our competitors, and we want to keep that edge, but we must make some rational adjustments in order to sustain them.”

While many of the changes being discussed will affect employees hired in the future, current faculty and staff could see a faster ramp up of contributions to the UC Retirement Plan and higher premiums for retiree health insurance, especially for those who retire before they are eligible for Medicare at age 65.

Overall, the range of options the Task Force is considering is consistent with feedback from faculty and staff, Duckett said.

Options for pension benefits

Gary Schlimgen, director of pension and retirement programs, said the task force will be recommending levels of employer and employee contributions to the UC Retirement Plan (UCRP) for fiscal year 2011-12 and beyond, with a possible target of 5 percent or more for employees. The task force will also make a recommendation about how quickly employee contributions should rise to that 5 percent level, he said.

UCRP members and UC will begin making contributions to UCRP of roughly 2 percent and 4 percent, respectively, beginning next month.

Future UC employees could see changes to the minimum retirement age and the maximum retirement benefit.  “Should we consider Social Security benefits when we look at the maximum UCRP benefit?  Should we try to encourage faculty and staff to retire later?  These are among the questions the task force is discussing as it studies options for recommendations,” Schlimgen said.

The medical centers have also asked the task force to consider offering a defined contribution plan with an employer match, which is more commonly available at competing institutions.  If the task force recommends that option, it will also consider whether or not to make that same choice available to current faculty and staff.

Retiree health insurance

UC pays a larger percentage of retiree health benefit costs than many other California employers.  Given the rising cost of health insurance and severe budget pressures, UC cannot continue with such high contribution levels.

The task force is discussing options such as phasing in a reduced employer contribution to retiree health premiums. Currently UC contributes, on average, 89% of the premium cost for retiree medical insurance.

Recent studies show UC’s retiree health benefits are 200 to 300% higher than those for comparator institutions and markets.

“When we are that much above market, it makes sense to reallocate some of the resources to other areas, such as salaries where we may be behind,” Duckett says.

The presenters assured faculty and staff that any recommendations would include provisions to mitigate the impact on those long-term employees who chose not to coordinate with Social Security and, therefore, are not eligible for Medicare.

The task force is also considering an Academic Senate proposal to issue pension obligation bonds as a way to finance a portion of the pension contribution shortfall, said Peter Taylor, executive vice president and chief financial officer. Pension obligation bonds have pluses and minuses, which the finance work team of the task force is studying, he said.

For represented employees, any of the proposed options are subject to collective bargaining.

More information about the work of the task force is available on the Future of UC Retirement Benefits website. The forum presentation and a report on the results of the task force survey on post employment benefits will be available on the website in May.

In February, the Post-Employment Benefits Task Force sponsored two surveys of faculty and staff about retirement benefits preferences. Among the results:
•    UC’s pension and retiree health benefits are one of top reasons why faculty and staff come to UC and why they stay
•    80% expressed high satisfaction with retirement benefits
•    73% plan to retire with 20 or more years of service
•    Many place  a higher value on retirement benefits (69%) than on cash compensation (13%)

A complete report of survey results will be posted on the Future on UC Retirement Benefits website in May.

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