University of California Human Resources and Benefits

Home < Human Resources and Benefits Briefing < January 2006

While news stories last year told of ailing pension plans and a growing number of large companies across the country freezing or terminating retirement benefits, an annual checkup found the UC Retirement Plan (UCRP) financially fit but in need of preventive care to ensure a healthy future.

Thanks to the careful management and strong market performance of UCRP's investments for many years, the pension fund accrued a surplus, which has supported the ongoing costs of the plan. Thus, UC and its employees have not had to contribute to the plan since the early1990s. Because there have been no contributions for some 15 years, the surplus has declined steadily over the years and the current break in contributions cannot be sustained.

Current funding status
Every fall, the Regents review a report by a University-hired independent actuarial firm that assesses UCRP's financial status and compares the amount of money in the fund to the amount of its retirement obligations. The November 2005 report to the Regents indicated a 110 percent funded ratio ($41.9 billion in assets compared to $37.3 billion in obligations) as of June 30, 2005.

While any ratio of over 100 percent indicates a surplus, the UCRP ratio has dropped from 154 percent in 2000 to 126 percent in 2003 and 118 percent in 2004.

Projections show that if contributions are not reinstated, the UCRP funded status will drop below 100 percent within the next several years. While the report suggests that no UC or employee contributions are required for the 2006 calendar year, it is clear that contributions will be eventually necessary. Although no final recommendations or decisions have been made, it is expected that contributions by employees and UC will be reinstated in the next couple of years, but not earlier than July 2007. Delaying reinstatement beyond then could mean much higher contributions at a later date to address any growing shortfall.

"UC is committed to providing competitive total remuneration to all employees, and UC's retirement benefits are an important component in attracting and retaining high-quality faculty, management and staff employees," said Randy Scott, Executive Director for UC Systemwide Human Resources and Benefits Policy and Program Design. "Maintaining a stable and financially healthy retirement plan is a critical component of total remuneration and requires careful planning and management."

Subject to Collective Bargaining
For represented employees, the changes being contemplated will be subject to collective bargaining with their respective union.

Next steps
In coming months, the Regents will be exploring the best way to begin reinstatement of contributions to the UCRP. The Regents are expected to consider changes, hear recommendations and take action this year. The UC Office of the President has launched a website, The Future of the UC Retirement Plan, to keep employees and retirees informed about any changes planned for UC retirement benefits.