November 28, 2011
The University of California Board of Regents today (Nov. 28) approved an increase in retirement plan contribution rates for both UC and its employees effective July 2013.
Faculty and staff will contribute 6.5 percent of their pay and UC will contribute 12 percent to the UC Retirement Plan (UCRP) beginning July 1, 2013. Employees currently pay 3.5 percent and UC pays 7 percent. Those rates will increase to 5 and 10 percent respectively on July 1, 2012. Rates for represented employees are subject to collective bargaining.
Today’s decision is the latest in a series of actions intended to shore up the funded status of the plan and ensure its long-term viability.
The 2013 combined employee and UC contribution rate will, for the first time in more than 20 years, cover the annual cost of the plan. Every year, the plan absorbs liabilities that are equivalent to roughly 18 percent of UC’s covered payroll.
While the 2013 contributions will cover the annual “normal cost,” the combined rates are still below the level of the regents funding policy, which is the full annual cost, plus a portion of the unfunded liability.
UC continues to urge key state leaders to provide support for UCRP on the same basis that is provided for Cal State and community college defined benefit plans.
On a market value basis, the funded status of UCRP has improved from the prior year, due to contributions, internal borrowing, and an investment return of 22 percent. The overall market value of assets increased by $7.3 billion to $41.9 billion, putting the plan’s funded status at 81 percent.
As a result, UCRP’s unfunded actuarial accrued liability stands at roughly $10 billion as of July 2011. With the completely separate Retiree Health Benefit Program having an unfunded actuarial accrued liability of $14.6 billion, the total unfunded liabilities of UC’s post-employment benefits are more than $24 billion.
To read the annual UCRP valuation report, see http://www.universityofcalifornia.edu/regents/regmeet/nov11/f2.pdf
The Retiree Health Program valuation report is available at: http://www.universityofcalifornia.edu/regents/regmeet/nov11/f3.pdf