Dear Colleagues,
I want to share with you some of the comments made to the Regents on July 20 by Judy Boyette, Associate Vice President-Human Resources and Benefits. AVP Boyette's remarks reflect the current thinking of the university on several key elements related to the restart of contributions to the UCRP.
Intended restart of contributions on July 1, 2007
Subject to availability of funding, the budget process and collective bargaining, it is critical to start contributions early in order to minimize the initial contribution level. If we postpone the restart, initial as well as subsequent contributions will have to be higher. We want to minimize the financial effect on employees and the university, and we also want to avoid becoming a financial burden on California taxpayers by not being able to self-fund our pension benefit obligations.
No intent to start employee contributions at 8%
While it is true that the total cost of the plan is about 16% of university payroll, employees will not be asked to contribute a high amount to start. The intent is to ramp up contributions, shared by employees and UC, gradually over several years-again, in an effort to minimize the financial impact of restarting contributions.
Contributions to start with a redirect from the DC Plan
Since the suspension of contributions to the UCRP in the early 1990s, a percentage of employee pay has been redirected to the Defined Contribution Plan. For most employees, this consists of about 2% of pay contributed on a pretax basis (an additional 4% of pay applies to salaries above the Social Security wage base). Starting contributions with the "redirect only" means that most employees would see no change in their take-home pay due to the restart of contributions, as the amount they are currently contributing to the DC plan would simply go into the UCRP.
No intent to cut pay for UCRP contributions
In fact, the Regents' final budget for 2006-07 includes an additional 1% funding for salaries and benefits beyond the budget compact with the governor.
The Regents are committed to prudent management of the UCRP
Despite assertions to the contrary in a recent report commissioned by UC unions from Venuti & Associates, the Regents are in fact fulfilling their fiduciary duty to the plan by targeting full funding and relying on accepted industry analytical standards. This approach requires a timely restart of contributions to the plan. Further, the Regents cannot rely on the report's overly optimistic assumptions of future investment performance.
A full response to the Venuti report
We have asked our actuary, The Segal Company, to prepare a thorough and timely response to the allegations contained in the report. We expect this response shortly, and intend to share it with university stakeholders.
As part of our efforts to educate the university community about issues related to the UCRP, we are attaching a multilingual flyer that addresses several key points. We ask you to make sure that this flyer receives prompt and wide distribution, such as by posting on bulletin boards in break rooms and other areas.
We also encourage you to continue to refer employees to the "Future of the UC Retirement Plan" web site. We will continue to update the site with additional Qs&As and announcements, and we are committed to providing the information you need to communicate locally with your constituents about these important issues. In addition, we would like to hear back from you about how effective these communications have been. Please feel free to contact me directly with this feedback.
Sincerely,
Randy Scott
Executive Director
HR/Benefits Policy and Program Design
University of California Office of the President
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