Expert Challenges UC on Retirement Changes

Report released as UC workers protest on each campus

OAKLAND – In a report to be released June 29, an independent expert finds that the University of California (UC) acted prematurely and without appropriate studies when it decided to make significant changes to its retirement plan earlier this year.

A report released by Venuti & Associates, an actuarial consulting firm, finds that the UC did not have “the benefit of projections and analyses that would constitute best practices for making this type of decision” when the Regents voted to restart employee contributions to the UC retirement plan (UCRP) in March.

On June 29, UC nurses, researchers, custodians, librarians, faculty and other employees on each UC campus will protest UC’s plan to cut employee pay by up to 8% to fund the pension when the university has not even performed the necessary due diligence.

Investment returns have kept the UC pension plan much more than 100% funded since November 1990 without employee or employer contributions. Regents voted in March 2006 to reinstate contributions because UC said they were needed effective July 2007 to keep the plan fully funded in the future.

The report finds that UC and the Regents acted prematurely. “UC has not justified the need to restart contributions at this time,” concludes the report’s executive summary.

“In our opinion, the Regents have not had the benefit of projections and analyses that we would consider best practices under accepted actuarial guidelines. It is surprising to us that those responsible for guiding a $42 billion pension fund have not had the benefit of the best analysis tools, modeling and projection methodologies that are readily available and routinely provided by the actuarial profession.”

“Finally, due to the present overfunded status of the UCRP and the lack of an impending crisis that requires contributions to restart in July 2007, there is ample time to do additional studies and update the actuarial assumptions before moving forward with major plan policy changes such as restarting contributions.”

The report also found that if the UCRP investment returns were to average in the 10% to 11% range over the long-term, the funded status of the plan would not decline. The plan was 110% funded as of June 30, 2005. UCRP average annual return for the 20 years ending June 30, 2005, was 12.3%.

The analysis performed by Venuti & Associates was requested by the UC Union Coalition. The Coalition requested the report in the wake of the UC executive pay scandal, because the trust level of most UC employees in management decisions is at an all time low.

Venuti reviewed publicly available documents and information supplied by UC in response to information requests. Venuti also met with UC management and its plan actuary, the Segal Company.

UC employees say that any pay cuts and erosion of health and retirement benefits will hurt recruitment and retention of dedicated UC employees, which in turn hurts UC students and medical center patients.

“UC management is taking UC in the wrong direction with executive pay scandals, student fee hikes, short staffing and an attack on employee wages and benefits,” said Manny Punzalan, a registered nurse at the UCLA Medical Center, “We are fighting to change UC’s misplaced priorities and to keep UC a great public university that puts students and patients first.”

Before employee and employer contributions became unnecessary in 1990, UC employees paid 2% or 3% of their salaries into the pension and UC paid the rest. UC contributions ranged from 4% to 16% of payroll.

Venuti & Associates is an actuarial and benefits consulting firm located on the San Francisco peninsula. The UC Union Coalition that requested the report includes CNA, UPTE-CWA Local 9119, UC-AFT and AFSCME 3299.

Union Spokespeople:

California Nurses Association (CNA) – Beth Kean, UC Division Director, 510-273-2235
University Professional and Technical Employees (UPTE-CWA Local 9119) – Cliff Fried, Executive Vice President, 310-443-5484 or 310-210-2603 (cell)
· American Federation of Teachers (UC-AFT) – Mike Rotkin, VP, 831-345-8469 (cell)

American Federation of State, County and Municipal Employees (AFSCME Local 3299) – LaKesha Harrison, President, 310-877-6878 (cell)
Coalition of University Employees (CUE) – Margy Wilkinson, 510-387-1670