UC Retirement Plans May Be Next Victims of Budget Crisis

Like many long-term UC employees, Mary Higgins feels lucky for the benefits her stable employment provides her, especially the pension she will receive once she retires.

Every payday for the past 38 years of her university employment, Higgins, an administrative assistant at UCSF Medical Center, has contributed part of her check to pay for her retirement through various university plans.

But now with the financial crisis and stock market tumble, public pension plans and 401(k)s-like those the University of California offers employees-have been struck by the downturn, reportedly losing up to $2 trillion in the last 15 months, according to the Congressional Budget Office.

"A lot of people are really freaking out," said Higgins, who serves as chief steward for the Coalition of University Employees, which represents roughly 17,000 UC clerical employees.

But officials have assured workers that the University of California Retirement Plan will remain stable, even if the plan has been affected by the decline in the stock market. The university's endowment and retirement plan is obligated to pay $155 million monthly in retirement benefits, said UC spokesperson Paul Schwartz.

Though firm numbers will not be released until the November regents meeting, officials said the crisis has already begun to affect the university's pension plan and other investments.

"We do know it is already hitting our pension and endowment funds hard ... but we won't know all the impacts of the crisis for a while," Schwartz said.

Although workers will retain their benefits, there is concern over how the financial crisis may be affecting the university's investments, he added.

"While the pension plan is strong and people shouldn't be worried about losing their benefits, we are concerned about the impact of the national financial crisis," Schwartz said.

Despite the university's statement about the strength of its retirement plans, concern remains among some employees over the stability of their funds.

"Workers are very worried," said the coalition's chief negotiator, Amatullah Alaji-Sabrie. "The length of time a person has been here directly relates to how concerned they are about how their retirement is being affected."

Due to the structure of the university's retirement plans, longer-term employees and higher-paid workers have become increasingly concerned for a number of reasons, said Alaji-Sabrie, who is also a legal assistant at Boalt Hall School of Law.

To become eligible for pension benefits, an employee must work for the university for a minimum of five years, making long-term employees significantly more vested in the pension than others, she said.

In addition to the pension plan, the university provides a defined contribution plan, towards which all employees contribute a minimum of 2 percent of their monthly salary, Higgins said.

According to Alaji-Sabrie, the basic defined contribution plan goes into savings accounts, which are generally stable and low risk.

However, long-term or higher-paid employees often elect to diversify this portfolio, diverting funds from savings into other optional plans, such as the 403(b) and 457(b), that can be invested in stocks and bonds, among others.

For these employees, an adverse effect is definitely to be expected as stocks have fallen greatly in value, said Haas assistant professor Thomas Davidoff.

"If you're close to retirement, you're a little bit screwed," Davidoff said. "A lot of people have chosen to invest in stocks ... and they've done very poorly."

Tags: UC RETIREMENT PLAN