Transcript Slide 1
UC Retirement System and the Restart of Contributions UCI Financial Expo April 15, 2010 Components of UCRS UC Retirement Plan (UCRP) UCRP Defined Contribution (DC) Plan 457(b) DC Plan 457(b) Deferred Compensation Plan 403(b) Tax-Deferred 403(b) Plan 2 What Does UCRP Provide? While employed at UC Disability Protection Survivor Benefits Death Benefits At Retirement During Retirement Death Lifetime retirement income or lump sum equivalent Annual COLA’s Death Benefits The After-life Postretirement Survivor Continuance 3 Funding Retirement Benefits – Elements of Cost • The Normal Cost is the portion of the long term cost allocated to a year of service. – Only active members have a current Normal Cost • The Actuarial Accrued Liability (AAL) measures the Normal Costs from past years. – For retired members, the AAL is the entire value of their benefit Current Year Normal Cost Actuarial Accrued Liability Entry Age Future Normal Costs Current Age Retirement Age 4 What it Takes to Stay 100% Funded 110 Percent Funded 105 Contributions equal Normal Cost (currently 17% of pay) 100 Assets earn assumed return (currently 7.5% ) 95 All other experience matches assumptions 90 5 UCRP Investment Rates of Return 30% 26.1% 25% 21.3% 20% 17.0% 15% 10% 5% 0% -5% -10% 25.8% 13.6% 21.6% 19.0% 18.2% 15.5% 16.8% 9.8% 22.1% 21.4% 19.4% 12.3%12.7% 14.5% 10.3% 15.2% 11.5% 7.2% 12.1% 5.6% 11.3% 11.2% 11.1% 11.0% 11.2% 9.3% 5.9% 5.2% -2.6% -5.5% Market Value of Assets (MVA) Assumption (7.5% starting 1994) Actuarial Value of Assets (AVA) 1.9% 2.5% 2.7% 1.9% -5.6% -9.0% -15% -19.2% -20% '89- '90- '91- '92- '93- '94- '95- '96- '97- '98- '99- '00- '01- '02- '03- '04- '05- '06- '07- '08'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 AVA recognizes each MVA return above or below the assumed rate (7.5%) over five years 6 UCRP Historical Funded Status $80 160% 149% 140% $70 140% 128% 119% 112% $ in billions $60 106% 120% 105% 103% 95% $50 100% $40 80% $30 60% $20 40% $10 20% $0 0% 2001 2002 2003 2004 Actuarial Accrued Liability (AAL) 2005 2006 2007 2008 Actuarial Value of Assets (AVA) Campus/Medical Centers Only 2009 Ratio 7 Why Restart Contributions? • Sustain and preserve UC retirement benefits • Maintain UCRP target funded status of 100% • Allocate cost of UCRP to all funding sources: – State and UC general funds and student fees – Contracts and grants – Medical Centers and other self-supporting enterprises – Department of Energy (Lawrence Berkeley National Lab) 8 Regents Approved 2010 Contributions • Employer – FY 09/10, beginning April 15 • All employer payroll funding sources will start at 4% – FY 10/11 • At least 4%, higher if funding available • Member – Beginning with May earnings – Amounts currently redirected to the DC Plan ─ No reduction in take home pay ─ About 2% for most members – Same amounts for FY 10/11 – Gradually increase to parallel CalPERS member rates (currently 5%) – Subject to collective bargaining, as applicable 9 UCRP Funded Ratio (Actuarial Value Basis) Illustration Assumptions: • Initial 4% employer contribution increases 2% per year starting 7/1/2011 • Initial 2% employee contribution increases 1% per year starting 7/1/2011 (maxing at 5%) • 7.5% market value return per year starting 7/1/2009 2014 Funded Ratio = 60% ($20 Billion Unfunded Liability) Campus/Medical Centers Only 10 PEB Task Force Charge Using the Task Force’s Guiding Principles • Assess and analyze the impact of: – Market Competitiveness – Work Force Behavior – Employee and Labor Relations – Legal Implications and Risks – Current and Long-term PEB Funding Options – Impact on UC Financial Integrity • Make recommendations to the President which allow the Regents to meet: – Fiduciary Obligations – Educational Responsibilities 11 What is NOT Changing for UCRP ? Pension benefits that current employees have already accrued to date Retirees will not be asked to contribute when active employees begin contributions 12 Task Force Considerations for Current Faculty and Staff - Pension • Faster ramp up of contributions for all employer funding sources and for active members* • Offering choice to current faculty and staff* • Complete stakeholder discussions on risks and impacts of applying new tier defined benefit options to current faculty and staff for future pension benefits* *PEB changes are subject to collective bargaining for represented groups 13 QUESTIONS 14