A UC task force submitted its recommendations to UC President Janet Napolitano on Friday regarding new retirement benefit options for future UC employees.
The 13-member task force of UC faculty, staff and administrators, organized by Napolitano last summer, was responsible for creating options for compensations limits that would “ensure the continued financial stability of the UC’s retirement program,” according to an email from UC spokesperson Dianne Klein.
Option A is a “Hybrid Approach” that consists of a defined benefit plan capped at California’s Public Employees’ Pension Reform Act salary limit of $117,020 and a defined contribution supplement plan capped at the Internal Revenue Code salary limit of $265,000.
A defined benefit plan uses a formula to determine how much money an employee will get upon retirement, “like Social Security,” according to UC Berkeley School of Law professor Stephen Sugarman.
Option B is a stand-alone “pure defined contribution approach” that applies to benefits-eligible employee pay up to the Internal Revenue Code limit of $265,000. Option B is similar to retirement plans at competing schools, Sugarman said.
With a defined contribution plan, an employer promises to contribute money that can be invested into an employee’s retirement fund, Sugarman said.
According to Klein, Option B is “portable” should one decide to leave the UC system as an employee.
If finalized, the new benefit plans would apply only to future UC employees hired on or after July 1, 2016. If future UC employees do not make a choice within an initial enrollment period, they will be enrolled in Option A by default.
Employees who initially decide upon Option B would have a single chance to switch to Option A after five years, with IRS approval.
According to Sugarman, these potential retirement benefit options are less generous than the university’s and competitors’ current plans, which he described as being “really great.”
Sugarman added that the university’s prevailing idea is “ ‘we may not pay you as much as competitor schools, but we give you a better pension.’ ”
The task force and its recommendations are results of the 2015 budget agreement between the university and California leaders.
Under the budget agreement, Gov. Jerry Brown and the California Legislature will provide the UC system with $436 million in state funds for the university’s pension plan over the course of three years, Klein noted in an email.
In exchange for these funds, the university must abide by the pensionable compensation limit of $117,020 that arose from the PEPRA.
Napolitano will be accepting feedback from the UC community to create a proposal to be submitted to the UC Board of Regents in March.
The new benefit options from this proposal will go into effect July 1.