Davis Faculty Association

Archive for the ‘Pensions’ Category

We Supports the UC Academic Senate Resolution Rejecting the “2016 Tier Pension Plan”

On February 10, 2016, the Assembly of the Academic Senate of the University of California adopted the following resolution and sent it to UC President Janet Napolitano:

The Assembly rejects the imposition of the PEPRA cap on the University of California and the discontinuation of the current pension plan in the absence of any plan or program to fund or to provide compensating increases in total remuneration, so as to prevent harming the mission of the University of California by eroding its ability to recruit and retain the best faculty. [1]

The Council of UC Faculty Associations strongly supports this resolution and calls on President Napolitano and the UC Regents to reject this disastrous, ill-conceived and unnecessary plan.

Background:

In fall 2015, President Napolitano and Governor Jerry Brown, the so-called Committee of Two, engaged in private talks about UC’s budget and pension plan. As part of their negotiations, Napolitano agreed to a new “2016 tier” to UC’s retirement plan that would limit the amount of covered compensation that can be used in calculating retirement income based on the 2013 Public Employee’s Reform Act (PEPRA) legislation ($117,020 in 2016), which was designed to address instability and the high cost of the California Employee’s Pension System (CalPERS). In response to Napolitano and Brown’s deal, the Regents appointed a Retirement Options Task Force (ROTF) that proposed two plans for a new 2016 tier. [2]

The proposed 2016 tier and adoption of the PEPRA cap would create inferior retirement options for future faculty (who are more likely to be women or under-represented minorities), create a two-tier retirement system and further undermine total compensation for faculty. The proposals will greatly weaken the University’s ability to recruit and retain the top faculty, undermine UC’s ability to make the competitive offers necessary to recruit and retain outstanding faculty members, and increase inequities between the UC campuses while doing little to address the unfunded liability of UC Retirement Plan.

In addition, the process that led to the decision to adopt the PEPRA cap and institute a new retirement tier lacked transparency, careful deliberation, and adequate consultation with the Senate.

We continue to collect UC employee signatures in opposition to these proposed changes at: http://www.protectmypension.org/

 

[1] The full text of the resolution: http://senate.universityofcalifornia.edu/reports/documents/AssemblyPensionResolution2-10-16.pdf

The full Academic Senate letter and divisional reports on the new retirement plan: http://senate.universityofcalifornia.edu/reports/documents/DH_JN_ROTF_2-12-16.pdf

[2] For an analysis of the proposals, see Celeste Langan, “Retirement plan impacts entire community,” http://www.dailycal.org/2016/02/12/343390/

Act now to prevent further degradation of our retirement system

The University of California is currently considering introducing a new  pension plan for its employees hired after 2016. These proposed changes  will dramatically reduce pension benefits for most new faculty.

The Davis Academic Senate is planning to have two town hall events  to discuss these proposals, one on Monday, January 25, at 10 am, at the  UCD Med Center’s Center for Health and Technology lecture hall 1341. The  other on January 28, at 10 am, in MU II. Please attend to learn more details or  to express your opinion on these issues.

The Davis Academic Senate has also set up a comment form at where you can express your concerns about this plan.

Your opportunity to provide input to the Senate lasts just a couple  weeks. For some purposes, it will be most effective to provide input  this week.

Please read on for additional background and contact information.

This ill-conceived and ill-advised plan, which was negotiated behind  closed doors by President Napolitano and Governor Brown without any  engagement with the Academic Senate, the Regents, the Legislature, or  the larger university community, will do serious damage to the quality  of the University of California.

While the details are highly technical

the implications are not:

1) This is a serious cut in benefits to faculty and many other  professional staff, such as staff scientists and nurses, hired after  July 2016. (See pages 44, 45 and 84 of the task force report.)

2) UC faculty are already much more poorly compensated than faculty at  UC’s peer institutions despite the fact that the cost of living in most  parts of California is very high.

This plan will make it much harder to attract faculty and other  professionals and keep them here.

3) This plan does not do anything to make the existing pension system  healthier and could actually decrease the rate at which the unfunded  liability is retired. (See page 57 of the task force report.)

We agree with the assessment of Academic Senate leaders J. Daniel Hare  and James A. Chalfant’s analysis who concluded:

“If salaries don’t increase to compensate for these reduced benefits,  then UC will have to settle for a lower-quality of faculty who did not  receive better offers elsewhere. Many UC faculty members were hired in  spite of more lucrative salary offers elsewhere, just as many have  either declined outside offers or declined to pursue them. It may have been true at one time that benefits made up for our uncompetitive  salaries. The 2014 Total Remuneration Study showed that no longer to be  the case. While salaries and benefits continue to lag, and we are  contemplating making the lag even greater with the new-tier options, it  is important to note that most of the non-pecuniary attributes of UC  employment also are declining.”

As Academic Senate Chair Dan Hare stated in his remarks to the Regents  in September:

“Any reduction in either salary or benefits surely will have  consequences for the ability of UC to build and retain a future faculty  that is as distinguished as the current faculty. As recommendations are  brought forward in early 2016, I encourage the Regents to carefully  consider not only the budgetary cost of future retirement options, but  also their impact on how faculty members behave in terms of recruitment  and retention. If we are not careful, small budgetary savings will risk  far greater costs to the University, our students, and the citizens of
California.”

We urge you to sign our petition http://www.protectmypension.org/to  express your opposition to proposed changes to the UC Retirement Plan.  We will forward the names of those that sign to local campus faculty  welfare committees so they are aware of local concern about this issue.

UCOP President Janet Napolitano has also invited faculty feedback. Please consider  sending a copy of your comments to us at newtier@cucfa.org.

Petition opposing changes to the UC retirement plan

The Davis Faculty Association, via the Council of UC Faculty Associations, is a member of the UC Union Coalition. A Union Coalition petition in opposition to detrimental changes to UC pension benefits is available here:

http://www.protectmypension.org/

Please read it and consider joining in the opposition to changes that would harm the quality of the university.

Some background material about this issue:

Following unfortunate developments in the Governor Brown/President Napolitano Committee of Two, the Governor’s budget May revise, and the final State budget, the 2016 Retirement Options Task Force has been working to modify key elements of retirement benefits for faculty and other employees hired after June 30, 2016. The Task Force sent its report to President Napolitano on Dec. 15, 2015. The report will be widely released on January 15.

Although we have not seen the report, the information that is currently available indicates that it will recommend changes that are detrimental to the University and to future employees. In particular, it will concede to the President’s decision in the Committee of Two to impose a lower cap on pensionable income for future employees. This will likely be only partly compensated for by a defined contribution supplemental plan.

Available information also indicates that the report fails to oppose the offering of a full defined contribution plan, which new employees can select rather than the current defined benefits of the UC Retirement Plan.

We have already written about the harm that will be done to the University if these changes are adopted:

http://cucfa.org/2015/11/uc-task-force-considering-pension-cuts/

By reducing total compensation, these proposals will reduce the ability of UC to recruit and retain top quality faculty and staff.

Please consider objecting to these changes by signing the petition at:

http://www.protectmypension.org/

UC task force considering pension cuts – we need your help

President Napolitano has charged a task force with developing a new 2016 UC Retirement Plan tier for faculty and other employees hired after June 30, 2016. We urge you to read CUCFA’s letter which details the proposed changes to the UC Retirement Plan and lays out the threat they pose to overall compensation for new faculty, as well as for the health of the pension system for all faculty. The letter includes a link and a pdf version with the names of faculty and task force representatives to whom concerns can be directed.

FA statement to the UC Regents about proposed new UCRS tier

Professor Celeste Langan spoke on behalf of the UC Faculty Associations at the July 22, 2015 UC Regents meeting during the public comment period. Below is a copy of her full comments:


 

As co-Chair of the Berkeley Faculty Association and on behalf of the Council of UC Faculty Associations, I wish to address the Regents concerning the third discussion item of the Finance Committee agenda, item F3, “Update on Final 2015-16 Budget.” The update, produced by the Office of the President, misleadingly claims that the final budget “incorporates the funding framework developed by UC and the Governor.” If you’ll recall, the “framework” of the May Revise proposed that the state make a contribution of $436 million toward the unfunded liability of the UC Retirement Plan. The final budget, however, promises only a “one-time payment” of $96 million; there is nothing in the budget that commits the state to two additional payments of $170 million. Yet even this meager one-time payment is contingent upon Regential approval of a cap on pensionable salary consistent with PEPRA (Public Employee Pension Reform Act) for employees hired after July 1, 2016.

The Council of UC Faculty Associations is opposed to the University making permanent changes in the structure of its retirement plan in exchange for a very modest one-time contribution from the State. We are especially opposed to the introduction of a full defined-contribution option. There is absolutely no justification for the proposed introduction of a full defined-contribution option; neither the Legislature nor the Governor called for the introduction of a Defined Contributions plan in aligning the UCRP with PEPRA. Yet UCOP seems bent on introducing such an option, to the point that their statement exposes their intention as a foregone conclusion rather than a possible outcome of consultation and deliberation — those elements of what we once understood as “shared governance.”

I call your attention to the third paragraph on page 3 of the F3 agenda item. First OP declares, “The President will convene a retirement options task force to advise on the design of new retirement options that will include the pensionable salary cap consistent with PEPRA. The retirement options will be brought to the Regents next year for review and approval.” But apparently the “design of new retirement options” is a fait accompli, for the penultimate sentence of that paragraph declares, “new employees will have the opportunity to choose a fully defined contribution plan as a retirement option, as an alternative to the PEPRA-capped defined benefit plan.”

Since the two minutes allotted in the public comments session is the temporal equivalent of Twitter’s 140 characters, let me ask: #What’s up with UCOP? If I had to speculate, I’d say that UCOP’s attempt to replace Defined Benefits with Defined Contributions suggests its preference for a mobile, “flexible,” precarious professoriate with a consequently short-term institutional memory — a professoriate that wouldn’t recall that only 6 years ago, the relative merits of defined contribution versus defined benefit plans were thoroughly, carefully, and widely discussed by UC constituents. Given substantial evidence that defined benefits are more cost-efficient than defined contributions in achieving the same level of benefits, it was agreed that the University of California was best served by continuing with UCRP as a defined benefit plan. Thus in 2010, when the President recommended and the Regents endorsed pension reforms, UCRP was preserved as a defined benefit plan.

Ironically, the paragraph in question concludes, “For represented groups, retirement options will be subject to collective bargaining.” Well, the UC Faculty Associations represent a good number of those faculty, members of the Academic Senate, without collective bargaining rights, and we say that UCOP has vitiated the interests of that faculty, both those vested in the current UCRP and those who will be hired after 2016. We deplore the introduction of a different tier of faculty benefits, but we firmly oppose the attempt of UCOP to introduce a fully defined contribution plan in this untoward and unjustified manner.

Continuing deterioration of compensation and benefits

Dear Colleagues,

A year ago Colleen Lye and James Vernon, co-chairs of the Berkeley Faculty Association, drew the attention of faculty across the ten campuses of the University of California to the continuing degradation of their pensions, benefits and salaries.

Faculty were, they noted, still underpaid in relation to their peers at competitor institutions. Despite this salary gap they were being increasingly asked to pay more but get less from their health insurance and pensions. Moreover, the introduction of a new and less generous pension ‘tier’ for those hired after 2013, last year’s chaotic roll out of the new health plans with the prestige UC Care option working only on campuses with medical schools, and the cutting adrift of out of state retirees from all health plans with a good luck lump sum payment of $3,000, created new inequities between UC faculty.

This analysis has recently been confirmed by UCOP’s own study of total remuneration. The executive summary of this document contains the following depressing bullet points:

• Between 2009 and 2014, UC’s total remuneration fell from 2% below market to 10% below market.

• Health and welfare benefits fell from 6% above market in 2009 to 7% below market in 2014, primarily caused by higher medical employee contributions at higher salary bands compared to the market.

• Changes to retirement plan designs since 2009 reduced positioning against market from 29% above market to 2% below market.

• Total retirement decreased from 33% above market to 6% above market.

• Total benefits decreased from 18% above market to 1% below market.

It is the first UCOP study to compare the new (2103) and old (1976) tier benefits for UC faculty with equally depressing results.

• New tier retirement benefits (the defined benefit plan) are valued 16% below old tier retirement benefits.

• New tier retiree health benefits (medical, life, dental) are valued 23% below old tier retiree health benefits.

• New tier retirement benefits (defined benefit plan plus retiree health) are 17% lower than the old tier.

In short, we have moved to a new system where the old deferred benefits of our pension and healthcare helped offset lower salaries to one in which the cash compensation of salaries still lag behind our competitors and in addition benefits have now also been reduced to a point where they are below comparable institutions. In 2009 UC cash compensation by salary represented 68% of total remuneration, yet for assistant professors in 2014 it represents 86%.

The Faculty Associations believe that it will not be possible to retain and protect the quality of UC faculty if their salaries remain uncompetitive and the value of their deferred benefits continue to erode dangerously.

The Degradation of Faculty Welfare and Compensation

UC faculty need to wake up to the systematic degradation of their pay and benefits. In 2009, when the salary furlough temporarily cut faculty salaries between 6 and 10%, faculty were outraged. Yet since then our compensation has been hit by a more serious, and seemingly permanent, double blow.

First, despite modest salary rises of 3% and 2% in October 2011 and July 2013, faculty take-home pay has been effectively cut as employee contributions to pension and healthcare have escalated. Faculty now pay more for retirement and healthcare programs that offer less. Secondly, faculty are no longer treated equally. Different groups of faculty are increasingly pitted against each other as – depending on our age or where we live or when we were hired – we receive different levels of retirement, health and other benefits.

Faculty salaries were already uncompetitive. Even with the recently-announced 3% raise, they remain 10-15% below UC’s own comparator institutions and a further 10% behind those of the private 4 (Stanford, Yale, Harvard and MIT).

Back in 2009 strong benefits, in the form of pension and health care provisions, once allowed UC to excuse its uncompetitive salaries by reminding us of what it called our ‘total compensation package’.

This is no longer true. Now, as continued austerity management grips University administrators, and campaigns are launched to divest public sector workers of their pensions and retiree healthcare, faculty are being stripped of these deferred (and other) benefits.

One reason faculty are largely unaware of the degradation of their benefits is that changes have been made incrementally and target different constituencies. Gone are the days when all faculty and retirees were treated equally and received the same benefits. And yet for all faculty these changes mean we are paying more and getting less.

Firstly, faculty are divided by a new two-tier pension system. The old pension, the so-called 1976 tier, has seen a steady escalation of employee contributions from 0% in 2009 to 8% in 2014. These raises alone mean that faculty take-home pay has deteriorated by as much as 3%.

The new pension introduced for those hired since 2013 has begun with a 7% employee contribution. Despite paying more new faculty get less. The minimum retirement age has been raised from 50 to 55, the retirement age for maximum pension has been raised from 60 to 65, and the lump sum cash-out and subsidized survivor benefits have been eliminated.

Secondly, although there is as yet no legal evidence that retiree health benefits are less ‘vested’ (and thus unalterable except by legislation) than pensions, they have been progressively stripped. And here again different groups of faculty are treated differently.

Since 2010 UC’s contribution to retiree health benefits has fallen from 100% to 70%, but this pales in comparison to the changes introduced in 2013 which have affected 50% of faculty and staff. All new hires, together with those with fewer than 5 years of service, or those whose age plus service is fewer than 50 years, will now receive nothing from UC towards their healthcare if they retire before 55. Meanwhile contributions for those retiring after 56 will be on a sliding scale (depending on length of service) beginning at just 5%!

Worse still, in what is being considered a pilot program by the Regents, retirees no longer living in California have been removed from UC’s insurance plans. Instead they will be given a lump sum of $3,000 per annum to help defray costs not covered by Medicare. This represents a significant shift of the risk and the responsibility for healthcare from UC on to retirees. If it generates the projected $700 million savings of total liability as reported by UCOP’s CFO to the regents this year, it is likely soon to be coming to a group of retirees near you.

Thirdly, in the fall, the majority of faculty and staff were forced to change their healthcare plan in little over two months. We were promised that these had been negotiated to secure great savings for UC and lower insurance rates for all UC employees. It quickly became clear that those lower monthly rates masked a huge turnover in eligible providers, geographically uneven coverage of service (across as well as between campuses), and considerably higher deductibles. It is too soon to calculate how much more faculty are paying for their healthcare, but once again we are certainly paying more for less.

It is time for faculty to wise up to this systematic and universal downgrading of our salaries and benefits that also sets different groups of us on different tracks. The contrast with the new contracts recently signed by CNA, UPTE and ACSFME is worth noting. In addition to significantly improved salaries, these unions have been able to maintain a single-tier pension (for an additional 1% contribution) and retain retiree health benefits.

So how will faculty respond? With a sigh of resignation? A determination to get an outside offer that would increase one’s personal compensation package? Or will we seek better mechanisms that would permit faculty to negotiate all elements of our compensation rather than have it decreed, and diminished, from on high?

Money behind CA pension proposition also secret money behind PBS pension news series

John Arnold — the billionaire former Enron trader who has been the financial backing for a proposed California ballot proposition that would eliminate constitutional protections for vested pension and retiree healthcare benefits for current public employees, including UC employees, if it gathers enough signatures to make it to the November ballot — turns out to be the hidden money behind a new a new two-year PBS news series titled “Pension Peril.”

Full story is at:
http://pando.com/2014/02/12/the-wolf-of-sesame-street-revealing-the-secret-corruption-inside-pbss-news-division/

Here is an excerpt:

In recent years, Arnold has been using massive contributions to politicians, Super PACs, ballot initiative efforts, think tanks and local front groups to finance a nationwide political campaign aimed at slashing public employees’ retirement benefits. His foundation which backs his efforts employs top Republican political operatives, including the former chief of staff to GOP House Majority Leader Dick Armey (TX). According to its own promotional materials, the Arnold Foundation is pushing lawmakers in states across the country “to stop promising a (retirement) benefit” to public employees.

Despite Arnold’s pension-slashing activism and his foundation’s ties to partisan politics, Leila Walsh, a spokesperson for the Laura and John Arnold Foundation (LJAF), told Pando that PBS officials were not hesitant to work with them, even though PBS’s own very clear rules prohibit such blatant conflicts…

The stealth Arnold-PBS connection, however, represents a major escalation in the larger trend. In this particular case, PBS seems to be defying its own rules and regulations about conflicts of interest. At the same time, the fact that PBS is obscuring the financial arrangement suggests the network may be deliberately attempting to hide those conflicts from its own viewers…
But most troubling of all, the report on Vallejo promoted the city councilor’s “campaigning to change (state) law to give cities the right to negotiate for pension cuts.” PBS’s “Pension Peril” correspondent noted that the legislator’s coalition is “hoping to get the initiative onto the ballot” so that cities can unilaterally cut public employee pensions. What the PBS “Pension Peril” series omitted is the fact that the “Pension Peril” series’ own benefactor, John Arnold, is the major financier of the very California ballot initiative PBS was promoting. Arnold’s involvement in that ballot measure follows his earlier funding of pension-cutting advocacy in California, which PBS also did not mention.

Union pension consultant to speak about UC Retirement System Nov. 1

Several unions representing UC employees — AFSCME, CNA and UPTE — have hired Pension Trustee Advisors, Inc. (PensionTrusteeAdvisors.com), to examine the UC Retirement System. This pension consultant will be presenting the results of his research online in a “webinar” to be held Thursday, November 1, at 1pm. UC faculty are invited to “meet’ the consultant online. People can participate by rsvp-ing with AFSCME’s Trevor McNeil: tmcneil@afscme3299.org.

The unions feel this adviser has identified cost saving measures and are trying to get this issue placed on the November Regents’ agenda. I spoke with Trevor and asked him about these cost savings and have pasted his response below:

—————————

William “Flick” Forina – a contributor and leader in his field – is the actuary we’ve asked to look at the UCRP. He has found that the funding policy adopted by the UC Regents in 2008 amortizes the University’s unfunded liability incorrectly which results in a front-loading of liabilities and an inflation of pension costs. What that means for UC faculty and our members is a new two-tier system of greater contributions, less benefits, and a less attractive tool for recruiting and retaining top talent.

We think the UC Regents should hear us out at their November meeting and we hope that after you hear from our actuary and ask him questions in this webinar, you’ll agree with us.

CUCFA Responds to UC Commission on the Future Report and Pension Reform Plan

The following is a press release that the Council of UC Faculty Associations distributed to media outlets:

At their Special Meeting on Monday, December 13, the Regents of the University of California will be making decisions on two significant issues – endorsing the principles of the UC Commission on the Future (UCOF) and drastically changing the University of California Retirement Plan (UCRP).

“One thing we can agree on, said Robert Meister, President of the Council of UC Faculty Associations “is the first sentence of the UCOF Report: ‘UC is at a crossroads.’” Meister continued, “Unfortunately the University leadership has ignored the outcome of this year’s election and is about to enshrine outgoing Governor Arnold Schwarzenegger’s vision of a privatized higher education system. The result will be a lower quality more expensive institution financed by ever increasing student debt.”

While faculty now use online tools to enhance their classroom teaching, CUCFA is concerned that the move toward fully online courses “taught” by non-research faculty and grad students, coupled with a push toward three-year degrees, means that future UC undergraduates will be trained in job skills rather than educated as citizens, leaders or thinkers. “On-line ed, apart from its notorious drop-out and failure rates, is designed to impart information, not create reflective, creative and articulate citizens,” argued Wendy Brown, co-chair of the Berkeley Faculty Association. She added, “the three year degree path will inevitably compress breadth and major requirements, discourage double majors and further attenuate aspects of an undergraduate education that broaden the individual and shape a thoughtful citizenry to engage an increasingly complex world.”

The UCOF also envisions increasing out-of-state undergraduate enrollment to raise more money. “Increasing out-of-state enrollment would raise revenues for only a few campuses—not the system as a whole—while decreasing the opportunity for Californians wishing to attend UC,” according to Meister. “The result,” he said, “will be increasing enrollment pressure on CSU and the Community Colleges.” To raise revenue, he argued “UC should make private businesses pay the full cost of the research they hire it to do, rather than losing money on such contracts as it presently does.”

CUCFA continued to express concern about proposals to reform the University of California Retirement Plan. Christine Rosen, Berkeley Faculty Association co-Chair and CUCFA Secretary, said, “I am still concerned about the inequitable two-tiered nature of the new proposal. Employees hired on or after July 1, 2013 will only have access to a pension plan with lower benefits.”

Rosen continued, “despite large increases in the UC and employer contributions, the new plan still does not adequately address the unfunded liability created by the 20-year suspension of contributions by the UC, the State of California, and UC’s employees.” It is not likely, she argued, that the still very vague proposal to borrow from the University’s Short-Term Investment Pool (STIP) and/or restructure University debt using STIP interest to fund the UCRP Annual Required Contribution (ARC) will be enough to raise the $4.5 billion needed to bridge the gap identified by the PEB Task Force between the funds raised by the contribution increase and the sum needed to fully fund the ARC prior to 2018, when contributions are supposed to reach a level where they can satisfy the ARC. Rosen also expressed concern that the plan seems to put UC on track to funding UC pension liabilities in part by charging employees more for health care. “The proposal to increase employee contributions to their healthcare premium, coupled with a big increase in employee contributions to their retirement plan, represents a cut in take home pay that will make it increasingly difficult for UC to recruit and retain outstanding faculty and staff.” Because this is happening without a plan to fully fund the ARC, she argues, the pension plan’s unfunded liability will continue to grow, putting its future increasingly at risk, despite the sacrifices UC and its employees are making to increase their contributions.

In his October 14 letter to President Yudof, CUCFA President Meister warned that, “a never-ending cycle of … more contribution increases, and more benefit cuts [would make] anticipated benefits … less cost effective, less calculable and less secure, [and lead] many lower and middle income employees [to] demand a defined contribution opt-out. Our defined benefits system would then collapse due to adverse selection.”

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