The morning after President Mark Yudof unveiled his proposed changes to the UC pension plan, officials from Berkeley and the Office of the President held the first of two campus town-hall meetings to shed further light on what the UCOP website calls “The Future of UC Retirement Benefits.”
As outlined in an open letter from Yudof on Tuesday — and at separate forums for Berkeley staff and faculty Wednesday and Thursday — the most sweeping changes would affect only employees hired after July 2013, for whom the minimum retirement age would rise from 50 to 55. While current employees are eligible to receive maximum pension benefits at 60, staff and faculty hired after July 2013 would have to be 65.
If the recommendations are approved by the Board of Regents, active employees would see gradual reductions in UC’s contribution to their retiree health premiums beginning July 2013, as well as a revised formula for UC contributions based upon an employee’s years of service and age at retirement.
Under the proposal, faculty and staff could be “grandfathered” in under current eligibility rules if, by July 2013, they have accumulated five years of UC Retirement Plan service credit, and if the sum of their age and years of credit is 50 or more.
Chancellor Robert Birgeneau, who hosted the campus forums, kicked off Wednesday’s session by reminding an audience of 400 or so staff that UCRP is “severely underfunded,” and that merely increasing contributions to the pension fund fails to address its capacity to ensure retirement benefits for employees over the long term.
“The seriousness of the situation,” he added, “cannot be overstated.”
Gary Schlimgen, UC’s director of pension and retirement programs, stressed the need “to achieve fiscal balance between our current expenses and our long-term obligations,” explaining that even the “modified ramp-up” of contributions to UCRP — which are set to rise to 5 percent for employees and 10 percent for UC by July 2012 — won’t be enough to pay down the system’s growing unfunded liabilities to future retirees.
“We’re coming off a 20-year contribution holiday,” he said, “and the increasing contributions to the pension plan, and the rising active and retiree health costs impact us all,” from take-home pay for current employees to benefits for retirees.
He stressed, however, that neither the Post-Employment Benefits Task Force — made up of representatives from the Academic Senate, campus and medical- center leadership, staff and retirees — nor Yudof is proposing to change the pension formula for current faculty and staff. Regents have yet to decide the levels of contributions to UCRP for July 2013 and beyond.
Berkeley Vice Chancellor Frank Yeary said that without renewed contributions to UCRP — a “defined benefit” plan whose members include 115,000 active UC employees and 54,000 retirees — the system’s unfunded liability would grow from roughly $13 billion today to $18 billion by 2015.
Besides a profusion of bar charts, line graphs and PowerPoint slides, Wednesday’s 90-minute forum at International House gave staff the opportunity to raise questions and concerns about various aspects of the pending changes. Objections came from both union members and nonrepresented staff, and ranged from the pension fund’s reliance on outside managers to the division of staff into separate retirement-plan tiers, according to when they were hired.
A woman who identified herself as a campus gardener and union member, citing the difficulty of performing physically demanding work as employees get older, called the proposals for higher age requirements “a massive hardship on people like me.” For lower-income staff, she added, the increased contributions are “hard to swallow.”
Nathan Brostrom, the former Berkeley vice chancellor who now serves as systemwide executive vice president for business operations, noted the proposals would be subject to collective bargaining with campus unions.
“We do recognize that for certain groups, the age factor may be an issue,” he acknowledged. The bargaining process, he said, could produce “a tier that offers earlier retirement.”
Yudof is expected to make his recommendations to the regents at their November meeting, with a vote likely in December.