Recent headlines indicate that UC will receive an additional $500 million from the state over the next two years, of which most will be used to pay the state’s portion of our pension contribution.
|| That sounds great, until you read the fine print.
UC wants to encourage new employees to opt-out of the pension plan and to enroll in a 401k-style retirement savings plan. This is bad for employees, bad for UC, and bad for the state of California. Why?
- A retirement savings plan (401k/403b) yields, on average, only half the total benefit of a pension plan (a “defined benefit plan”).
- A retirement savings plan puts all the risk of market volatility and living “too long” onto individual employees, instead of averaging it out over everyone in the pension plan.
- If many employees opt out of the pension plan, it will mean fewer funds for the plan, making it more difficult to cover liabilities.
- Providing different retirement plans (different tiers) divides employees and creates morale problems in the workplace.
“Many APs nearing retirement do not understand why they should care about making sure UC does not institute a defined contribution plan. They don’t realize that their own retirement income is dependent on contributions made to the plan by incoming and newer employees. If those employees are NOT contributing to UCRP (and the UC is not contributing to UCRP on their behalf) OUR retirement funds are going to dry up and disappear, potentially AFTER we have retired, but before our lives end!” –UCLA AP employee
President Napolitano’s proposal undermines the stability of our pensions. Employees with union contracts will negotiate this proposal with the University. Employees without a union have no say in the matter.
The Regents are likely to discuss this proposal at their July meeting. Stay tuned for additional updates as we get more information about this frightening proposal.
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