UC administrators have proposed that the employee pension contribution rate be raised to 6.5 percent in 2013, causing faculty representatives to fear that the rate will increase again in 2014 without a corresponding increase in employees’ salaries.
At its November meeting, the UC Board of Regents will vote on the proposed increase in employees’ pension contributions for the 2013 fiscal year as well as an increase in employer contributions to 12 percent. Currently, employees pay 3.5 percent into the pension plan and will pay 5 percent next fiscal year.
“The 2013 contribution proposal is the latest in a series of UC actions aimed at addressing the retirement plan’s unfunded liability and ensuring its long-term viability,” said UC spokesperson Leslie Sepuka in an email.
However, according to a memo from the systemwide Academic Senate University Committee on Faculty Welfare, which reports to the senate on matters concerning the economic welfare of the faculty, the proposed increase to 6.5 percent in 2013 would be unacceptable unless it also came with either offsetting salary increases or a promise not to raise the contribution amount higher than 7 percent in the future.
The current pension plan was adopted by the regents in September 2009, setting the amount that employees and the university are contributing to the UC Retirement Plan during the 2011 fiscal year as 3.5 percent and 7 percent respectively, with the amounts set to increase to 5 percent and 10 percent next fiscal year.
A salary increase would be necessary because raising the employee contribution percentage decreases the cash compensation employees actually receive, according to the memo. The maximum contribution the senate finds acceptable without increased cash compensation is 7 percent.
“The problem that we have is that almost all UC employees’ salaries are well behind what competing institutions are paying,” said Robert Anderson, chair of the systemwide Academic Senate. “The move from 5 to 6.5 (percent) strongly suggests an intent to move to 8 (percent in 2014), and we’re not doing well enough with cash compensation to make that feasible.”
According to Anderson, the UC faculty’s average salaries last year were 13 percent behind the average salary at competing institutions. Despite the fact that faculty received a 3 percent salary increase on Oct. 1, the gap is not closing because competing institutions have also raised their salaries, he said.
Another issue that could keep the UC from recruiting talented new faculty members is that a new salary tier created for employees hired after July 2013 offers reduced benefits compared to those for employees hired prior.
“People hired after July 2013 will not be eligible to draw full benefits until age 65 as opposed to age 60, and the pension contribution amount is set at 7 percent for that tier,” Anderson said.
“(The Academic Senate) supported the design of the new tier as the least damaging way to reduce the cost of providing the pension benefits.”
UC administrators have stressed the need to address the retirement fund’s unfunded liability and make it viable going forward.
“The proposed 2013 UCRP contribution rates effectively stops the bleeding by not increasing our unfunded liability each year,” said
Gary Schlimgen, director of pension & retirement programs, in a statement on the university website. “It’s critical to capture sufficient contributions to support the additional liability that UCRP is absorbing each year.”
Between 1990 and April 2010, neither the UC nor employees contributed to the retirement fund because the regents saw that the fund had had a surplus. As a result of nearly 20 years without funding, the retirement plan currently has a deficit.