UCRP Task Force Presents! At UCLA

By Michael Meranze

As a follow-up to Chris' post on the meltdown of UCRP I wanted to give a brief report on some of the highlights of the UCRP Task Force Presentation at UCLA on April 6. Several Members of the Task Force were present and while I can't give a blow by blow account I can point out some of the plans that they are seriously considering. They went out of their way, in good task force fashion, to indicate that they had not finalized any recommendations and that in the end they only would be making proposals to UCOP. For some reason they seemed to think that people are suspicious of their efforts.

1) The Task Force acknowledged that the University has a legal obligation to honor the pension commitments as they have accrued up to this point. Exactly how they construe their obligations going forward is less clear to me. Stressing past obligations could simply be a way of indicating that they are going to be raising our contributions more than is presently planned or it could mean that they are considering changing the benefits ratio for future earnings. They are thinking of changing the eligibility requirements in terms of age and years of service but it was unclear whether this change was for new hires alone. Indeed, they made it clear that they are still discussing where to set any cut-off point for grandfathering of the old eligibility requirements.

2) They are thinking of "offering" new employers a defined contribution plan. The entry wedge here appears to be the Medical Centers. In the case of the Medical centers they claim that a defined contribution plan is a better option for employees. But they are also thinking of making it an option for new employees. They are considering a new tier for new employees in any case: higher age and service, higher contributions, lower payout--indeed for all of the rhetoric about how nothing has been decided I think it is extremely likely that they will propose a different system for new hires. For example they now promise a defined benefit regardless of social security. One thing that they stressed was a proposal to include social security in calculations of benefits and to lower the ratio at which benefits would be calculated from 100% to possibly 80%.

3) They are clearly going to seek changes in the retirement health plans--either through higher benefits, a redistributed ratio in the amount that UC vs. the Retiree pays. Apparently now UC pays something like 89%. They are talking about gradually lowering it to 70%. They are discussing possibilities for structuring the situation so that people chose not to retire until they are covered by medicare.

Again, the Medical Centers are an interesting case because, according to figures presented today, the retirement health benefits to medical center employees are hugely over market averages. They are considering bringing them more in line. Interestingly, although there was also data that suggested that salaries for Senior Managers in the Medical Centers were also above market, there was no discussion of lowering those in order to save money.

4) Shane White was there as the Senate Representative. He spoke quite forcefully against the proposed changes in benefits and indicated that the Senate would oppose them as well.

5) Peter Taylor seems opposed to the UCFW proposal on bonds. As far as I could tell at the heart of his objections apparently is his fear that the UCFW bonds would crowd out other bonds that the University might float. Interestingly, he suggested that should these bonds be offered UC might be forced to draw upon student Ed Fees in order to pay for them. When asked about the relationship between student fees and bond service (the "Meister Controversy) he again insisted that no Ed Fees had been used to cover construction although he did indicate that Reg Fees had been used that way. If I heard him correctly he seemed to want to make a distinction between fees having been "used" and "pledged." He did not deny that Ed Fees were pledged as collateral but wanted to insist that they had never been actually used to pay off debt. Again he suggested that practice might change if the UCFW plan was implemented.

6) They trotted out the LAT opinion piece (written by an aid to Arnold) and the Stanford study (sponsored by Arnold) to point out the difficult political climate. I pointed out that since they seemed to have given up on the state funding UCRP I wasn't sure that this was relevant and suggested they were piling on. In response to that someone from UCOP insisted that they were still in negotiations with the state to get them to resume contributions and that whereas that wasn't going to happen right away they hadn't given up hope.

7) They insisted that they had heard the input from faculty about how central the retirement benefits are to recruitment and retention. So further pressure may do some good there.

There were a couple of points that I think were left very vague and that I did not think to press in the meeting. But they may be worth pursuing as the Task Force visits other campuses.

A) Where does the money go if there is a shift into defined contribution plans? At the present time, all of the money for retirement is centralized. But if UCOP opts for a defined contribution option for new hires then wouldn't the contributions of those individuals need to be removed from the general fund? If so, wouldn't the overall actuarial gap be increased?

B) This seems especially pressing concerning the plan to allow the Medical Centers to shift to a defined contribution scenario. As I understand it, part of the large actuarial problem is that while the Regents have not been contributing to UCRP, neither the clinical enterprises nor outside granting agencies have either. So each dollar that the Regents don't spend means two other dollars not spent. I understand that if the Medical Centers shift to a defined contribution plan the overall liability will decrease somewhat but so will the money being placed into the system. There was no clarity concerning those numbers or considerations.