Davis Faculty Association

Archive for April, 2000

DCP Retirement Accounts – Why They Should Be Larger

UC faculty do not receive retirement credit for supplementary work paid out of grants or for summer school teaching. Medical school faculty likewise receive retirement credit for only a portion of their salary. Here is the background on this problem. The UC retirement plan is a Defined Benefit Plan (DBP). That means that at retirement, each faculty member will receive a defined monthly amount based on years of service (service credit), average of the highest three years of compensation (HAPC), and age at retirement (age factor). Employer and employee contributions each month have built up a substantial pool of funds for these monthly disbursements. Employee contributions are automatically deducted from pretax wages at roughly the rate of 2% to 4% less $19 a month for faculty with Social Security and 3% for those without.

Recently, the UCRP pool of funds has been large enough to meet payment obligations without receiving any employee or employer contributions. For good reason, UCRP management decided not to stop employee contributions but to continue the monthly deductions. The pretax amount deducted each month is defined according to the level of employee compensation, and thus is considered a Defined Contribution Plan (DCP). If employee contributions to the UCR pool of funds would be required again in the future, then it would be simple to stop the DCP contributions and resume the UCRP contributions without affecting the amount in the monthly paycheck. At retirement, the amount an employee withdraws is based on how the employee has invested these funds and not on a predetermined formula. The employee can direct DCP funds into any of the UC managed investment funds, such as Money Market, Equity, or Fidelity. If the employee does not specify, the monthly DCP employee contributions are invested in UC-managed Savings.

The current controversy is the level of employer and employee contributions to DCP accounts for summer teaching and funded summer research salaries. The University has come under pressure to include summer teaching salary and funded summer research in retirement compensation. So far, the administration has been reluctant to do so because those amounts may vary each year. The reason is that faculty could increase the highest three years of covered compensation by teaching summer school or working on funded summer research for three consecutive years near the end of employment. This would have a major impact on the actuarial levels required for the UCRP pool of funds to meet obligations.

Instead, the University is considering making a contribution to an employee’s DCP account. To get this employer contribution, the employee would be asked to make a matching contribution on the eligible amount for summer teaching salary or summer funded research. The university has suggested the rate of 7%, with 3.5% from the University and 3.5% from the faculty member. The Faculty Associations have argued for a higher level, 14%, corresponding to University contributions on covered compensation to the UCRP pool. Of this 14%, we believe the employer portion should be 10% and the employee 4%. Recently the Faculty Associations wrote a letter (please see below) to President Atkinson and circulated it widely throughout systemwide Senate committees to explain why the higher contribution level is more equitable.

Feb. 14, 2000

Dear President Atkinson:

I am writing to you on behalf of the Council of UC Faculty Associations, which are, by far, the largest independent, dues supported organizations representing the faculty at the campuses of the University of California. Our members have urged us– and we urge you– to support an important policy change in the University of California retirement plan. The Council would like to address the issue of level of employer and employee contributions to DCP accounts. We believe the University should make a comparable contribution to retirement for summer salaries and funded summer research as it does for regular gross earnings. The normal cost of the UCRP Defined Benefit Plan is currently about 14% of salary. Using this amount as the guideline, the employer should contribute 10% of summer teaching salaries or funded summer research to employee DCP accounts and the employee 4%. Moreover, we urge that this change in policy take place as soon as possible, preferably at the beginning of fiscal 2001.

The FA’s understand that there has been discussion of a 7% contribution level, to be divided between employer at 3.5% and employee at 3.5%, based on the current contribution rate used for DC Plan temporary and part-time employees. We believe that the proper contribution comparison is to full-time faculty. For example, at the Comparison 8 institutions that offer only a Defined Contribution Plan (DCP), Harvard, University of Michigan, and Stanford, all of them include summer school or summer research salary in their benefit formula. At Harvard, there are no employee contributions and the employer contributes 10% up to the Social Security wage base and 15% of salary over that level for faculty aged 40 or over. At Princeton, the employer contribution is 9.3% up to the SS wage base and 15% over on all salary paid by or through the University. The lowest level of employer contributions at Stanford is 5%, with escalating amounts up to 10% for increased employee contributions. At the University of Michigan, a large public university system much like UC, the employer contribution is 10% of eligible gross salary, which includes summer teaching and funded summer research.

The Faculty Associations believe that 10% would also be a fair level of contribution for the University of California, with the employee contributing 4% into the DCP accounts. Such a policy would bring the University of California in line with the policies at the Comparison 8 and with other major universities. It would preserve the same level of contribution for summer teaching salary and funded research as it does for the regular academic year. This policy would be welcome by faculty in all disciplines who regularly teach summer school or engage in funded summer research. Given the high level of competition for faculty in all fields, this change in policy would help make the University of California retirement benefits more attractive in faculty recruitment and retention.

Mary Ann Mason President, UC Faculty Associations

DFA Invites Senate Response to SCAPP

SCAPP Reminder: Recently, the Academic Senate appointed a special committee to study faculty pay and promotion practices. The committee has been asked to finish their tasks and submit a final report by May 1. We have heard from the Committee that they are greatly concerned that they may not receive sufficient input from faculty. We are reminding DFA members that the Special Committee has established an e-mail address (SCAPP@geology.ucdavis.edu) to which members of the Academic Senate may address their concerns and comments; all communication will be confidential. The committee has organized its work by forming three sub-committees to address: (1) Comparison of salary data; (2) Campus Personnel Policies, Procedures, and Practices; (3) Inter campus Comparison of Personnel Policies, Procedures and Practices. We also encourage you to contact members of the Special Committee with information relative to their task. The committee members are: Howard Day (Geology), Anna Marie Busse Berger (Music), Colin Cameron (Economics), Robert Hansen (Vet. Med. Mole. Sci.), Ines Hernandez-Avila (Native Am. Studies), Martin Privalsky (Microbiology), John Robbins (Medicine, Med. Sch.), Robert Rucker (Nutrition), and Edward Schroeder (Civil & Env. Engr.). The DFA has commented on the issue in email bulletins that are provided on our web site http://www.dcn.davis.ca.us/~dfamhays/

DFA Election: According to the bylaws of the DFA, it is time to appoint a nominating committee and fill vacancies on the DFA board. Maintaining strong leadership is essential to DFA success in pursuing faculty interests. Please contact Myrna Hays by return email to nominate yourself or a colleague to either serve on the nominating committee or on the DFA board. We need your help.

Who Are the DFA Members? As we hope you know, the DFA board is actively seeking to recruit new members in order to strengthen our base of support. Often, as we talk with faculty to invite them to join the DFA, they ask who on the campus currently are members. In past DFA newsletters we have often listed the DFA membership. We plan to provide such a membership list on our web site. We would like to include your name and hope you agree that this will be useful; if you disagree, please let us know. And we urge you to actively seek new members to recruit. The new web site is a good place to start by informing potential members of DFA activities.

Legislative Update

Update on LAO Proposed UC Budget Reductions:
Report on the Senate Budget Hearing March 8, 2000 and
Issues to Discuss at Assembly Budget Hearing Set for March 15:

The Senate chose not to accept the LAO recommendations to cut UC’s base budget to equal that of K-12, nor to reduce enrollment growth funding, nor to alter the marginal cost figure for UC.. The Senate subcommittee also agreed to the proposed $1.1M augmentation to begin planning for a UCSC off-campus center in the Santa Clara Valley with the agreement to work on language to restrict the funds to actual planning. The Governor’s proposal will stand on these issues unless the Assembly, which is scheduled to meet next week, acts differently. If so, these issues would go to the Conference committee near the end of the budget process. The committee put several items on a “checklist,” meaning items to reconsider after the May Revise when the state’s revenue picture is expected to improve considerably: Senator Brulte asked that they not act on the resident undergraduate student fee freeze because he hopes to be able to reduce student fees by 50%. The committee held over discussion of non-resident student fees pending more information from UC about financial aid. They held over consideration of the $25M to purchase medical equipment for the hospitals. UC needs to convince them that the money will actually be needed and used for the stated purpose rather than used to cover other medical hospital losses.

The Faculty Association presented the following “white paper” to key legislators prior to the hearing and will continue to meet with and present it to key members of the Assembly prior to their hearing next week. We will keep you informed of the progress of the budget.

UCFA “White Paper” re. UC Budget Proposals:

About the Council:
The Council of UC Faculty Associations (CUCFA) is a voluntary coalition of approximately 1500 dues-paying members of the University of California Academic Senate. The Council meets regularly with the University Administration to exchange views on selected issues, but it is not a trade union. The mission of the Faculty Associations is to support and safeguard the principles of University governance embodied in the Academic Senate; to improve the economic status and general welfare of the faculty; to consult with the University Administration about salary, benefits and working conditions; and to provide external advocacy on matters pertinent to the interests of the faculty. CUCFA works with the various branches of State government to improve and protect the terms and conditions of employment of Academic Senate members. Council representatives monitor legislative activity and meet with legislators to discuss pending bills and other relevant matters.

CUCFA Position on the UC Budget:

At the moment the Council position on the UC budget is very simply stated: we see the one submitted by the Governor in January as a highly encouraging departure point, but not necessarily the last word. We will very likely wish to revisit certain of its elements when the State’s revenue picture becomes clearer in May.
In the meantime, the Council is sorely troubled by the recent report of the Legislative Analyst, who recommended huge cuts in the Governor’s proposed budgets for higher education in a fiscal year for which State revenues are predicted to outstrip budgeted demand by more than $4 billion.

The most puzzling and damaging recommendation is one to shift some $83 million from the budgets for UC and Hastings College of Law to the K-14 systems. The stated reason–to equalize the percentage base budget increases for “higher” and “lower” education–is surely without precedent, and a truly absurd approach to budgetary policy making. At the proposed marginal cost of instruction ($8554 per FTE student) this cut would be tantamount to eliminating the funding for 9,700 FTE students. The University could not and would not take the cut that way, but instead would greatly reduce or even eliminate faculty and staff salary increases, further defer some critical maintenance projects, pare equipment and library expenditures to the bone, etc.

Within UC the net effect of these actions would be seen as a return to the difficult budgetary climate of the early 1990s at exactly a time when the State is well known to be flush, not strapped. Faculty recruitment would be nearly impossible and retention would be problematic at best; all this when Tidal Wave II is just beginning to break over our heads.

We are also troubled by the LAO’s recommendation to reduce the funding for enrollment growth to a figure equivalent to an additional 4000 FTE students rather than the 6000 FTE students called for by the Governor.

We realize that there are discrepancies among the enrollment increases projected by various State agencies, but what is not arguable is that UC’s budgeted enrollment has never been equal to or greater than the actual enrollment at any time in the 1990’s. It is also true that the ratio of students to faculty across the UC system is the highest in American universities of the first rank. Enrollment funding at the higher figure mentioned above would either maintain the status quo ante if the projection of 6000 is correct, or lower the systemwide student:faculty ratio from 18.7 to 18.5 if it is not. We ask the Legislature not to heed this recommendation.

CUCFA is represented in Sacramento by James W. Bruner of Orrick, Herrington & Sutcliffe, LLP. Current Council contacts are listed on the letterhead above. We welcome the opportunity to meet with you from time to time, and welcome your comments and questions

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