Retirement plan rate increase to show on your bottom line
May 26, 2011
By Dave Jones
Election under way
to fill 2 staff seats
on pension board
Voting is under way among staff throughout the UC system to fill two seats on the UC Retirement System Advisory Board. The board meets three times each year to discuss issues pertaining to UC's retirement plans and shares ideas with the university president.
The election works like this: Voters with UC e-mail addresses receive e-mails with a "Voting Link for UCRS Advisory Board." Voters without UC e-mail addresses receive notification via regular mail, and have the option casting their ballots online or by mail.
Voting began May 23 and is scheduled to close June 17.
The ballot lists seven candidates from the Berkeley, Irvine, Los Angeles and San Diego campuses, plus the UCLA AIDS Institute and the UCLA Medical Center. The candidates are vying for four-year terms.
The electorate comprises all active, eligible UC Retirement Plan members who are not part of the Academic Senate.
For employees, the restart of contributions to the UC Retirement Plan has been relatively painless. That changes July 1 when the contribution rate goes up.
Most staff and faculty have been paying 2 percent since contributions resumed in April 2010 — but this deduction had no effect on take-home pay. Instead, the university took the roughly 2 percent that the employees were already paying into the defined contribution plan, and redirected the money to the retirement plan. (The money you previously put into the DCP is still yours, to invest as you like — and this money is yours when you leave UC employment; the retirement plan invests your money for you.)
The former DCP deduction will no longer be enough when the UCRP contribution rate climbs to 3.5 percent — therefore, take-home pay will go down to make up the difference. (The new contribution rate affects only active members of the UCRP and is subject to collective bargaining for represented employees.)
The university will be paying more, too: 7 percent, up from 4 percent.
Staff and faculty will see their increased contributions reflected in their regular paychecks for July earnings, which will be available from July 20 to Aug. 6, depending on whether employees are paid biweekly, monthly or on another cycle. All employee contributions are pretax.
In July 2012, the rates will go up again, to 5 percent for employees and 10 percent for UC.
The Board of Regents voted last September to approve both sets of rate increases — effective July 2011 and July 2012 — as part of a plan to address the UCRP’s unfunded liability.
The unfunded liability grew out of a contribution “holiday” that lasted nearly 20 years. When it began in 1990, the UCRP boasted a surplus — and, in fact, the plan reported a surplus as recently as 2007.
Then came market losses and changing demographics. And, with no contributions coming in, the UCRP found itself with an unfunded liability — which today stands at $14 billion.
This amount will continue to grow (adding pressure to UC’s operating budget) until UC and UCRP members together begin contributing in excess of 17 percent of pay — enough to cover the plan’s annual increase in cost for active members.
Regents’ actions in the last year to address the pension shortfall include establishing a new tier of benefits for employees hired beginning July 1, 2013, and approving internal borrowing options to better fund the pension plan.
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