Surveys ask employees, retirees about possible changes in post-employment benefits

by Clifton B. Parker
February 05, 2010

The UC Office of the President has posted online surveys for employees and retirees, asking them about possible changes in retirement benefits.

The short surveys are from the Post-Employment Benefits Task Force, which held campus forums around the UC system last fall and is planning a second round of forums to gather additional feedback as the task force considers its recommendations.

"Your responses will help the President’s Task Force on Post-Employment Benefits better understand employee preferences about financially sustainable options for future retirement benefits," states an online message from the UC Office of the President.

UC officials said either survey should take less than 10 minutes to complete, and all answers are confidential.

For now, the employee survey excludes represented employees.

"UC and the unions are currently discussing how represented employees might participate in the survey," the online message states. "In the meantime, represented faculty and staff should direct their comments and opinions to their union leadership."

Besides asking retirees and nonrepresented employees to complete the online surveys, the task force intends to ask a sampling of faculty and policy-covered staff, selected at random, to complete a more in-depth survey. The longer questionnaire will be aimed at gathering information about workforce behavior and preferences, and to identify education and communication needs regarding retirement benefits.

Officials said the task force is considering a wide range of funding, policy and plan design change recommendations, and is scheduled to present those recommendations to President Mark G. Yudof by early summer.

Yudof established the task force last year, directing the members to consider how to preserve the UC system’s competitive benefits while ensuring that pension and retiree medical plans become financially sustainable, for people who have already retired and for those who have yet to retire.

At last fall’s forums — more than two dozen in number — task force representatives presented information on UC’s growing liabilities related to pensions and retiree health care benefits, and heard from faculty, staff and retirees. The forums drew a total audience of more than 6,000, and countless more who listened and-or watched via webcasts.

One question came up frequently: Can strong investment returns resolve the UC Retirement Plan’s funding gap? Definitely not, came the answer.

“We can’t invest our way out of this,” said Gary Schlimgen, director of pension and retirement programs.

Which is why, after more than two decades, a contribution “holiday” is coming to an end. UC, as the employer, will resume its contributions, and so will employees — at a level of 2 percent for most employees. This deduction will have no effect on net pay, however, because the 2 percent will be redirected from each employee’s defined contribution plan, or DCP.

These 2 percent DCP contributions are mandatory; all money that employees put into their DCPs is theirs to keep and invest as they please, within the many offerings from Fidelity Retirement Services. Also, employees keep their DCP contributions upon leaving UC employment. (The retirement plan differs in that the university invests all the money together, with the university and its financial adviser making the decisions.)

As of April 1, mandatory DCP contributions will stop and mandatory retirement plan contributions will begin.

The university intends to keep the employee contribution rate at 2 percent through the end of this fiscal year, June 30, and all next year, 2010-11. After that, the contribution rate is expected to go up, perhaps 1 percentage point a year — at which time, employees’ net pay will go down.

UC plans to contribute 4 percent to start with. The same amount will be taken from medical center payroll, and from the payroll portion of contracts and grants, and other nonstate sources.

Retiree health benefits

Unlike the university’s pension plan, retiree health insurance is not a guaranteed benefit, officials said, correcting a common misperception.

Still, the university acknowledges that the retiree health program is an important component in attracting and retaining faculty and staff, Schlimgen said. He cautioned, however: The existing program is unsustainable.

He explained that the program has no assets — that UC meets its obligations each year with money from operating revenue. These pay-as-you-go costs are projected to increase from $255 million per year in 2010 to $447 million per year by 2014 if no changes are made.

In addition, the university’s obligations associated with the overall retiree health liability, if left unchecked, could eventually affect UC’s good credit rating and impact its operating budgets and ability to borrow, Schlimgen said. As a result, UC must look at alternative program designs, and retirees are likely to pay higher premiums.

Next step

At the new round of campus forums, expected this spring, the task force plans to present its survey results and discuss the potential changes to post-employment benefits that the task force may be considering. Schlimgen said UC will meet all collective bargaining obligations for those employees who are exclusively represented.