August 27, 2010
In September, the University of California Board of Regents is expected to vote on increasing the employer and employee contribution rates to the UC Retirement Plan (UCRP). Under recommendations proposed by the Post-Employment Benefits Task Force, UC employees would begin contributing 3.5 percent of earnings to the UCRP in July 2011. The rate would rise to 5 percent in July 2012. UC also would contribute more, with contributions of 7 percent in 2011 and 10 percent in 2012.
“Our retirement benefits are an important component in our recruitment and retention efforts, and we want to keep that edge, but we must make some rational adjustments in order to sustain them,” said Dwaine Duckett, vice president for UC Human Resources.
UC is not alone in confronting the issue of how to pay for employee retirement benefits. In California and across the country, public and private employers are looking at ways to make retirement benefits financially sustainable.
Yet even with the proposed changes, UC faculty and staff will be paying less than many other workers for retirement benefits. And the university’s benefits often are more generous than those provided by other employers.
Here are some facts about how UC’s retirement benefits stack up, together with a chart detailing the proposed changes to UCRP contributions:
- Faculty and staff at comparable colleges and universities with pension plans similar to UC’s contribute between 3 and 8 percent of pay for retirement benefits; employers contribute roughly 6 to 10 percent of pay for pension benefits. Currently, UC employees pay roughly 2 percent and the university pays 4 percent.
- Faculty and staff at comparable institutions with matching defined contribution plans (similar to UC’s 403(b) and 457(b) plans) contribute 1 to 5 percent of pay, which most employers match 1-to-1.
- Employees in CalPERS, the state retirement plan, currently contribute 5 to 8 percent of pay for their pension while employers pay 17.4 to 29.2 percent of pay.
- Gov. Arnold Schwarzenegger has proposed increasing the employee contribution rate to CalPERS by 5 percent; six state worker unions tentatively have agreed to this proposal.
- 75 cities, counties and public agencies are considering changes to employee pensions, according to CalPERS.
- About 45 percent of Fortune 100 companies offer traditional or hybrid pensions to their new hires, according to a 2009 study by consulting firm Watson Wyatt, down from 49 percent in 2008 and 90 percent in 1998.