|Home < News Archive < President Yudof Names Post-Employment Benefits Task Force|
[June 12, 2009]
The pension and health benefits that UC offers retirees and their beneficiaries play a critical role in the University's recruitment and retention efforts and in recognizing the many contributions of its employees in serving the needs of the public. However, as UC pension and retiree health benefit costs continue to substantially increase, sustaining these retirement benefits is increasingly difficult with each passing year. To help the University develop a comprehensive, long-term approach to post-employment benefits, UC President Yudof has established a task force to study and recommend funding, policy and benefits design alternatives.
The rising financial challenges of providing good retirement benefits
UC Retirement Plan: Currently, UC pays out approximately $1.5 billion annually in pension benefits, including continuing monthly pensions and one-time lump sum cashouts. The Plan each year accrues an additional $1.3 billion in liability for all active members earning additional benefits. Overall, the funded status of the UC Retirement Plan has been declining and is expected to continue to decline from its current funded status of 95% to 61% in 2013, even with contributions scheduled to resume in April, 2010.
Retiree health insurance: UC currently pays, out of operating revenue, approximately $225 million each year to provide health insurance to retired employees. These cash costs are projected to continue to increase at a rate of about $37 million per year to $373 million by 2013, and to $610 million by 2018. These costs are accounted for on a "pay as you go" basis with each location paying an annual assessment based on their payroll salary costs.
Additionally, the unfunded liability for retiree health insurance--the projected total cost for retiree health insurance for the life of current and future retirees--will increase from $13 billion today to $18 billion by 2013 and to nearly $26 billion by 2018. Governmental accounting regulations now require that employers include this liability in their financial statements, which means it must be reported annually on UC's financial statements. Such a significant liability could affect UC's credit rating when seeking funding for campus buildings, hospitals and other bond-funded programs.
New task force to research options for sustainable retirement benefits
With the support of the Board of Regents, UC President Mark Yudof has created a Task Force to develop a comprehensive, long-term approach to UC obligations for post-employment benefits. The Task Force will study and make recommendations regarding the long-term funding, benefits policy, and benefits design alternatives for retirement benefits for UC faculty, staff and retirees. In its deliberations, the Task Force is expected to consider the issues of market competitiveness, workforce behavior and development, affordability, and sustainability. President Yudof has asked the Task Force to balance the perspectives of the long-term costs of UC post employment benefits and the need to maintain competitive post-employment benefits in order to recruit and retain quality faculty and staff for the University. As the Task Force considers benefit alternatives and makes recommendations to the President, they will take appropriate action to observe all requirements for notice, consultation, and meeting and conferring under the Higher Education Employer-Employee Relations Act (HEERA).
President Yudof has appointed a Task Force that consists of two components: Steering Committee and Work Group. Representatives from a cross section of UC stakeholders including the Academic Senate; campus and medical center leadership, as well as staff and retiree representatives are serving on the Task Force. Members of the Steering Committee and Work Group will be asked to participate on one of three Work Teams on Finance, Pension and Retiree Health.
Task Force Steering Committee members include:
Task Force Work Group members are:
The Task Force plans to hold a number of listening sessions at UC locations in the fall to give faculty, staff and retirees the opportunity to ask questions and share perspectives.