October 18, 2011
Current faculty and staff, and the University of California will pay more into the UC Retirement Plan (UCRP) in 2013 under a proposal that the Board of Regents will consider at its November meeting.
UC will ask Regents to raise employee contributions to 6.5 percent of covered salary, effective July 1, 2013. UC would contribute 12 percent. Faculty and staff currently pay 3.5 percent while UC pays 7 percent. Beginning in July 2012, employees will pay 5 percent and UC will pay 10 percent. Employee rates apply to active members of the retirement plan and are subject to collective bargaining for represented employees.
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.
It will also set the combined UC and employee contribution rate at a level that will, for the first time in many years, cover the annual cost of the plan. Every year, the plan incurs additional liabilities that are equivalent to almost 18 percent of annual pay, on average.
“While the proposed 2013 rates are still less than most state employees and employers are paying today, 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. “It’s critical to capture sufficient contributions to support the additional liability that UCRP is absorbing each year.”
In the past three years, the Regents have approved the restart and ramp-up of UC and employee contributions to UCRP, endorsed the use of new financing methods that have improved the funded status of the plan, and approved a modified pension tier for new faculty and staff hired on or after July 1, 2013.
The proposed 6.5 percent 2013 contribution rate for current employees will be slightly lower than the 7 percent being paid by those new employees who join UC on or after July 2013. The proposed University rate of 12% will apply to both the current and new tier in July 2013.
UC and its employees resumed contributions in May 2010, after a 20-year contribution holiday. UC continues to urge key State leaders to provide state support for UCRP on the same basis that is provided for Cal State and community college defined benefit plans.