Facing a possible $40 billion budget deficit, the University of California Board of Regents unanimously voted to increase UC contributions to its retirement fund.
Dozens of UC employees picketed outside the meeting room at the UCSF Mission Bay campus Sept. 16. Workers said this is the first vote in a series of decisions that could hurt their pensions while benefiting higher-paid employees.
UC officials said action is necessary to ensure the university’s financial longevity.
“It is impossible to just let everything go along as it is without jeopardizing the long-term security of the people who are working here,” UC President Mark Yudof said at the meeting.
In May, UC employees began contributing 2 percent of their salaries toward retirement while the university contributed 4 percent. Starting in July 2011, employees must contribute 3.5 percent and the university will contribute 7 percent. In July 2012, the percentages go up to 5 and 10 percent, respectively.
Under the current retirement plan, the unfunded liability is $21 billion – roughly the size of the university’s annual budget. UC analysts say the unfunded pension could soar to $40 billion in less than five years if no action is taken.
The shortfall exists in part because before May UC hadn’t added to the retirement fund in two decades. Yudof formed a Post-Employment Benefits Task Force in March to search for ways to fill in the gap. The increased contributions were one of several recommendations the task force released in a report last month.
In addition to employee contributions, the proposals reduce the pensions themselves. For employees earning up to $60,000, their pensions would decrease from 75 percent of their salary to 45 or 60 percent.
“Some of the lowest-paid yet hardest-working employees at UC are actually eligible for public assistance,” said Wendi Felson, a retired UCSF employee and union leader, during a public comment period. “And yet this is the pension you’re proposing. That is just plain stealing from the poor.”
The proposals maintain that Social Security would give these lower-wage workers close to their full salary regardless.
Employees earning over $120,000 would still get 75 percent of their salary but would also have to contribute more.
The 250 highest paid employees would receive a percentage of $360,000 as their pensions, instead of the federal limit of $245,000, due to a waiver from the Internal Revenue Service.
The task force made several additional recommendations, such as raising the minimum retirement age from 50 to 55 and requiring employees to work until age 65 instead of 60 in order to receive maximum pension benefits.
Regents will study the proposals this fall and discuss them in their meeting in November, ultimately voting on the proposals in December.
Daniel Simmons, chair of the Academic Senate, said he and other faculty members agreed with the regents’ decision.
“As painful as it is, the Academic Senate does support the increase in contributions called for in this item,” he said. “But make no mistake, it is a pay cut for all faculty and staff.”
UC officials said they were lobbying lawmakers in Sacramento to contribute to the retirement fund, since the state does so for the California State University and California Community Colleges systems.
“The state is not contributing at all to our employees,” Yudof said. “That’s a gross inequity.”
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