Post-Employment Benefits Task Force
To help the University develop a comprehensive, long-term approach to post-employment benefits, President Mark Yudof established a task force to study and recommend funding, policy and benefits design alternatives that reflect the university's commitment to provide competitive pay and benefits programs to attract and retain excellent faculty and staff while ensuring that post-employment benefits for current and future retirees are sustainable.
In support of their mission the Task Force has been charged to:
- Consider the impact of issues such as, but not limited to, market competitiveness, talent management, workforce development and renewal, workforce behavior, affordability and sustainability;
- Include in its recommendations an analysis based on a number of financial criteria, including cost, long-term funding options, cash flow, as well as an assessment of the impact on the long-term financial integrity of the University
- Complete its work within a timeframe sufficient to adequately analyze a range of pension and retiree health options, while seeking to prudently resolve the issues contained in its charge.
- Make recommendations that enhance the ability of the Regents to meet their educational obligations to attract and retain outstanding faculty and staff, as well as their fiduciary obligations for all current and future UC Retirement System plans.
- Engage in a robust consultation and communication process with all key stakeholders of the University. This includes taking appropriate action to observe all requirements for notice, consultation, and meeting and conferring under the Higher Education Employer-Employee Relations Act (HEERA).
The Task Force consists of a Steering Committee and a Work Group. Members participate on one of three Work Teams on finance, pension and retiree health.
THE ISSUES
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. Each year the Plan accrues an additional $1.3 billion in liability for active employee members earning additional benefits. While the Plan is currently 95% funded, it is projected to continue to decline to 61% funded by 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 increase at a rate of about $37 million per year to $373 million by 2013, and to $610 million by 2018.
Additionally, 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 employers to include this liability in their financial statements, which means the liability 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.