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
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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
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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
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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
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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
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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
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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)
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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
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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
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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
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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
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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
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QUESTIONS
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