A new budget deal, recently crafted and passed by California lawmakers, contains an overhaul of the University of California retirement system.
The UC retirement system is shouldering $7.8 billion in unfunded, largely because nobody – the state, the school or employees – contributed money to the system for a period of 20 years.
From the Sac Bee:
A budget deal reached this spring holds the biggest changes for future university employees.
As part of an arrangement that includes four years of funding increases, a two-year tuition freeze and additional money for UC’s sizable pension debt, the university is undertaking a significant overhaul of its retirement system. Though details remain to be worked out, it will introduce a pension tier with a dramatically lower compensation cap, and could shift new hires from a guaranteed benefit to a 401(k)-style defined contribution plan.
The changes would apply to employees of the university’s 10 campuses, five medical centers and dozens of peripheral enterprises hired after July 1, 2016. They seek to address UC’s rising retirement costs, which were cited last fall as a major reason for the proposed tuition increase.
Any savings won’t be realized for decades, however. Until then, stabilizing the fund, and curbing how much it eats into the university’s multibillion-dollar annual operations, will largely depend on whether UC, and the state, remain committed to paying down the current debts.
The overhaul will decrease future pension costs, but won’t address the $7.8 billion in current unfunded liabilities. That burden can only be addressed by the University, in the form of consistent contributions to the system.
