July 20, 2012
Office of Governor Edmund G. Brown Jr.
State Capitol , Suite 1173
Sacramento, CA 95814
Fax: (916) 558-3160
Re: University of California pension reform: already completed
Dear Governor Brown,
I write to convey the position of the Council of UC Faculty Associations that the University of California has already completed exemplary, responsible, and realistic pension reform and should therefore be free from additional State imposed changes.
In 2010, following a lengthy and comprehensive deliberation, the University of California adopted numerous reforms to the University of California Retirement Plan (UCRP). The savings are reflected in a decrease in the normal cost resulting from many changes including an increase in the age at which the highest benefit rate is earned and an increase in the earliest retirement age. Future contribution holidays are effectively prohibited. In addition, UCRP has never allowed “spiking” or “air time.”
Although the University seriously considered a defined contribution plan, in the end, the existing defined benefit structure was affirmed with extremely strong support from employees. The defined benefit structure encourages the career service, dedication, and quality in employees upon which the University depends for its success. In addition, it has been established that defined benefit plans are overall less costly for a given benefit level (see: A Better Bang for the Buck: The Economic Efficiencies of Pensions).
Additional State imposed changes to UCRP which would decrease the value or the plan to employees would have to be compensated by salary increases in order to maintain competitive total compensation to attract the quality of employees who make UC a great institution.
For about twenty years preceding the recently adopted 2012-13 budget, the State made no contributions to UCRP. During that time and until the effects of the recent economic downturn were reflected in UCRP valuation, the plan was funded at a level above 100%. Employee and employer contributions resumed two years ago. The University and it employees are on track to return UCRP to full funding. The University is very well positioned to meet all of its future pension obligations.
In closing, I reiterate that the University and its employees have already adopted comprehensive and responsible pension reform and should thus be excluded additional mandated changes that would undermine these accomplishments.
Vice President for External Relations Council of UC Faculty Associations and
Professor of Physics, UC Davis