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Wednesday, Sept. 17, 2008

Dear Colleague:

The purpose of this letter is to update you regarding the restart of employer and employee contributions to the UC Retirement Plan (UCRP).

As you know, the University has been engaged in a multi-year process concerning the need to keep UCRP fully funded in order to ensure the plan remains able to pay retirement benefits to employees in the future, and that UC’s benefits remain competitive in the marketplace.  At their July meeting, the Regents discussed a proposed funding policy for the UCRP to accomplish these objectives.

This proposal, which includes restarting employer and employee contributions, is now being brought to the Regents for approval at their September 16-18 meeting.  If you have not already seen the proposal and would like to, it is available online.

As it states, the proposal establishes the date of July 1, 2009, subject to collective bargaining where applicable, for the resumption of employer and employee contributions to the UCRP.  However, the actual amounts of employer and employee contributions will not be decided at the September meeting – that is expected to happen at a future meeting.  In November, UC’s actuary will present the Regents with the annual valuation for UCRP, and information regarding the total recommended level of contributions required from both UC and employees to keep UCRP fully funded.  Then, at one of their 2009 meetings, Regents are expected to determine the amount of resources available, and how contributions should be divided between the University and employees (i.e., the amounts UC will contribute and the amounts employees will contribute).  As the proposal also indicates, the level of employer contributions from the UC will never be lower than what employees are contributing.

Although, we won’t know specific contribution amounts for several months, as previously announced the University’s expectation is that there would be no impact on employee net take-home pay in the first year of contributions, because employee contributions could begin in the form of a redirection of mandatory employee contributions currently going into the UC Defined Contribution Plan.  Additionally, the university expects that its long-term approach to how UC and employees share the cost of UCRP benefits will be consistent with the State’s approach to contributions to CalPERS (see below websites for current CalPERS rates).

As you know, the University has been very fortunate in that it has enjoyed a UCRP funding surplus since the early 1990s which has allowed the Regents to suspend UCRP contributions.  This has meant that, unlike the vast majority of employees at other institutions, UC employees have not been required to contribute to the cost of their pension benefits for the last 18 years.

At the same time, it was understood that this “contribution holiday” would end at some point and that contributions, from both UC and its employees, would be needed to keep UCRP fully funded.  The market returns on UCRP have declined over the 2007-08 year, due to the performance of the financial markets.  In addition, we are seeing the impact of delaying the restart of contributions.

We will continue to update you about the restart of contributions as decisions are made.  Meanwhile, you are encouraged to visit the following websites to learn more about the process the University has been engaged in concerning this issue, and the CalPERS approach to contributions:

The Future of the UC retirement Plan

CalPERS – Employer Contribution Rates

CalPERS – Employee Contribution Rates (Cal State University example):


Judith W. Boyette
Associate Vice President

Systemwide Human Resources and Benefits