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The President’s Task Force on Post Employment Benefits Overview Local Forum
The President’s Task Force on Post Employment Benefits Overview Local Forum
The President’s Task Force on Post Employment Benefits Overview Local Forum

The President’s Task Force on Post Employment Benefits

Overview

Local Forum

Forum Agenda

Work Force Demographics

Background on UCRP

Background on Retiree Health

President’s Task Force on Post Employment Benefits

Questions & Answers

Objectives For Today

To provide an understanding of UC post employment benefits

To explain the scope of the financial issues due to post employment benefit liabilities

To provide an understanding of the need for significant funding and the need to review potential benefit changes

To answer your questions and to listen to your concerns

University Workforce Profile

Mgmt & Sr Professionals ~ 8,200

Sr Mgmt Group ~ 290

Mgmt & Sr Professionals ~ 8,200 Sr Mgmt Group ~ 290 Academics ~22,500 LBNL ~2,400 Professional

Academics ~22,500

Professionals ~ 8,200 Sr Mgmt Group ~ 290 Academics ~22,500 LBNL ~2,400 Professional Support Staff ~

LBNL ~2,400

~ 8,200 Sr Mgmt Group ~ 290 Academics ~22,500 LBNL ~2,400 Professional Support Staff ~ 82,300

Professional Support Staff ~ 82,300

Age Distribution of UCRP Active Members

Faculty Staff 7,81 9 60+ Years Old 3,234 26,215 50 - 59 Years Old 4,
Faculty
Staff
7,81
9
60+ Years Old
3,234
26,215
50
- 59 Years Old
4,
245
25,879
40
- 49 Years Old
4,540
24,577
30
- 39 Years Old
3,398
15,718
Under 30 Years Old
120

Active UCRP Members by Years of Service

45,173 22,219 12,317 8,382 6,228 5,889 4,767 3,540 2,181 1,783 1,922 1,344 0–4 Years 5–9
45,173
22,219
12,317
8,382
6,228
5,889
4,767
3,540
2,181
1,783
1,922
1,344
0–4 Years
5–9 Years
10–14 Years
15–19 Years
20–24 Years
25+ Years
Staff
Faculty

Total Remuneration Components and Allocation Values vs. Market Comparators

UC

UC

Market

Comparators

Market

Market

64%

64%64%

19%19%

19%

11%

11%11%

6%6%

6%

Market Market 64% 64%64% 19%19% 19% 11% 11%11% 6%6% 6% $68,089 $68,089 73% $19,940 $19,940 17%

$68,089

$68,089

73%

64%64% 19%19% 19% 11% 11%11% 6%6% 6% $68,089 $68,089 73% $19,940 $19,940 17% $6,179 $6,179 $11,833

$19,940

$19,940

17%

11%11% 6%6% 6% $68,089 $68,089 73% $19,940 $19,940 17% $6,179 $6,179 $11,833 $11,833 8% 2% $78,365

$6,179

$6,179

$11,833

$11,833

8% 2%

$19,940 17% $6,179 $6,179 $11,833 $11,833 8% 2% $78,365 73% 73% $18,777 17% 17% 8% 8%
$19,940 17% $6,179 $6,179 $11,833 $11,833 8% 2% $78,365 73% 73% $18,777 17% 17% 8% 8%
$19,940 17% $6,179 $6,179 $11,833 $11,833 8% 2% $78,365 73% 73% $18,777 17% 17% 8% 8%

$78,365

73%

73%

$18,777

17%

17%

8%

8%

2%

2%

$8,805 $2,034

0%

0%

10%

10%

20%

20%

30%

30%

40%

40%

50%

50%

60%

60%

70%

70%

80%

80%

90%

90%

100%

100%

Excludes medical centers

70% 70% 80% 80% 90% 90% 100% 100% Excludes medical centers Market Cash Compensation Market Health

Market Cash Compensation

100% 100% Excludes medical centers Market Cash Compensation Market Health & Welfare Market Retirement (DB/DC) Market

Market Health & Welfare

centers Market Cash Compensation Market Health & Welfare Market Retirement (DB/DC) Market Retiree Medical & Life

Market Retirement (DB/DC)

centers Market Cash Compensation Market Health & Welfare Market Retirement (DB/DC) Market Retiree Medical & Life

Market Retiree Medical & Life

Components of UCRS

Defined Contribution (DC) Plan

UC Retirement Plan (UCRP)

UCRP DC Plan 457(b) 403(b)
UCRP
DC Plan
457(b)
403(b)

Tax-Deferred 403(b) Plan

457(b)

Deferred

Compensation

Plan

8

UCRP Membership

Separated members owed a benefit ~ 64,600

Retirees & Survivors ~ 50,200

owed a benefit ~ 64,600 Retirees & Survivors ~ 50,200 Active Employee members ~ 114,200 ~229,000

Active Employee members ~ 114,200

What Does UCRP Provide?

While employed at UC

While employed at UC At Retirement During Retirement Death The After-life

At

Retirement

While employed at UC At Retirement During Retirement Death The After-life

During

Retirement

Death
Death

The After-life

Retirement During Retirement Death The After-life Disability Survivor Death Lifetime Annual

Disability

Survivor

Death

Lifetime

Annual

Death

Postretirement

Protection

Benefits

Benefits

retirement income

COLA’s

Benefits

Survivor

 

or lump sum equivalent

Continuance

UCRP Investment Rates of Return

25%

20%

15%

10%

5%

0%

-5%

-10%

-15%

-20%

-25%

19.0% 18.2% 14.5% 12.1% 12.7% 10.3% 5.2% 7.2% 9.3% 5.6% 11.5% 5.9% 1.7% -5.6% 1.9%
19.0%
18.2%
14.5%
12.1%
12.7%
10.3%
5.2%
7.2%
9.3%
5.6%
11.5%
5.9%
1.7%
-5.6%
1.9%
2.5%
2.7%
-5.5%
-9.0%
Market Value of Assets (MVA)
7.5% Assumed
-20.0%
Actuarial Value of Assets (AVA)
'99-'00
'00-'01
'01-'02
'02-'03
'03-'04
'04-'05
'05-'06
'06-'07
'07-'08
'08-'09

Est.

AVA recognizes each MVA return above or below the assumed rate (7.5%) over five years

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

the entire value of their benefit Current Year Normal Cost Actuarial Accrued Liability Future Normal Costs

Actuarial Accrued Liability

Actuarial Accrued Liability Future Normal Costs

Future Normal Costs

Current Year Normal Cost Actuarial Accrued Liability Future Normal Costs Entry Age Current Age Retirement Age

Entry Age

Current Age

Retirement Age

UCRP Historical Funded Status

$80 149% 140% $70 128% 119% $60 112% 106% 105% 103% $50 $40 $30 $20
$80
149%
140%
$70
128%
119%
$60
112%
106%
105%
103%
$50
$40
$30
$20
$10
$0
2001
2002
2003
2004
2005
2006
2007
2008
Actuarial Accrued Liability (AAL)
Actuarial Value of Assets (AVA)
Ratio
$ in billions
(AAL) Actuarial Value of Assets (AVA) Ratio $ in billions Campus/Medical Centers Only 160% 140% 120%

Campus/Medical Centers Only

160%

140%

120%

100%

80%

60%

40%

20%

0%

13

Percent Funded

What it Takes to Stay 100% Funded

110

110
110
110   105 Contributions equal Normal Cost (currently 17% of pay) 100   Assets earn assumed
 
 
110   105 Contributions equal Normal Cost (currently 17% of pay) 100   Assets earn assumed
110   105 Contributions equal Normal Cost (currently 17% of pay) 100   Assets earn assumed

105

105
110   105 Contributions equal Normal Cost (currently 17% of pay) 100   Assets earn assumed

Contributions equal Normal Cost (currently 17% of pay)

Contributions equal Normal Cost (currently 17% of pay)

100

Contributions equal Normal Cost (currently 17% of pay) 100   Assets earn assumed return (currently 7.5%
 

Assets earn assumed return (currently 7.5% )

Assets earn assumed return (currently 7.5% )
17% of pay) 100   Assets earn assumed return (currently 7.5% ) 95 All other experience
17% of pay) 100   Assets earn assumed return (currently 7.5% ) 95 All other experience

95

All other experience matches assumptions

All other experience matches assumptions
17% of pay) 100   Assets earn assumed return (currently 7.5% ) 95 All other experience
17% of pay) 100   Assets earn assumed return (currently 7.5% ) 95 All other experience
17% of pay) 100   Assets earn assumed return (currently 7.5% ) 95 All other experience

90

90

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)

Regents Approved April 15, 2010 Contributions

Employer

FY 09/10

All employer payroll funding sources will start at 4%

FY 10/11

At least 4%, higher if funding available

Member

Beginning April 15, 2010

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

Examples of Member Contribution Amounts

Monthly Covered Compensation

Monthly Member Contribution

Percent

$2,500 ($30,000 annual)

$31

1.24%

$4,167 ($50,000 annual)

$64

1.54%

$6,250 ($75,000 annual)

$106

1.70%

$8,333 ($100,000 annual)

$148

1.78%

$10,417 ($125,000 annual)

$220

2.11%

Funded Ratio

Funded Ratio (Actuarial Value Basis)

120%

100%

80%

60%

40%

20%

0%

Ratio (Actuarial Value Basis) 120% 100% 80% 60% 40% 20% 0% -20% MV return for 2008/09;

-20% MV return for 2008/09;

7.5% Per Year Starting July 1, 2009

2013 Funded Ratio = 61% ($18 Billion Unfunded Liability)

2008

2009

2010

2011

2012

2013

2013 Funded Ratio = 61% ($18 Billion Unfunded Liability ) 2008 2009 2010 2011 2012 2013

Plan Year Beginning July 1,

18

What is NOT Changing for UCRP ?

Pension benefits that current employees have already earned

Pension benefits for current retirees

Retirees will not be asked to contribute to UCRP

UC Retiree Health Benefits

UC Retiree Health Benefits 20

UC Retiree Health Benefits

Medical

Medicare

Non Medicare

Dental Wellness Program Access to Vision plan Access to Legal plan

Medical Plan Enrollment

~110,100 Employees

Medical Plan Enrollment ~110,100 Employees Retiree dependents ~17,500 Employee dependents ~128,000 ~ 34,000 Retirees UC

Retiree dependents ~17,500

Employee dependents ~128,000

~ 34,000 Retirees

Financial Background on Retiree Health

Annual Retiree Health Valuation

Financial Reporting Obligations

“Pay-as-you-go” cash costs

Annual Required Contribution (ARC)

Net OPEB balance sheet obligation (GASB)

Unfunded actuarial accrued liability (GASB)

Budget Impact

CY 2009 cash costs ~ $230 million

CY 2010 cash costs ~ $255 million

GASB Impacts

Unless changes to plan design and/or funding are made Significant operating deficits Significant unfunded liability Erosion of University's equity

Retiree Health TRUST 115 established July 2007 Pre-funding annual liability has not started

in Millions

in Billions

$

$

Retiree Health Benefit Program Unfunded Liability and Cash Costs

$60

$50

$40

$30

$20

$10

$0

$600

$500

$400

$300

$200

$100

$0

$373 $332 $295 $259 $225
$373
$332
$295
$259
$225

$14.3

$15.4

$16.5

$17.7

$416

$18.9

$13.3

2008

2009

2010

2011

2012

2013

Plan Year Beginning July 1

Unfunded Retiree Health Benefit Program Liability "Pay-As-You-Go" Cash Costs

Unfunded Retiree Health Benefit Program Liability "Pay-As-You-Go" Cash Costs

* Based on 7/1/2008 valuation

25

5-Year Projection Growth in Balance Sheet Obligation

$7,828 Projected $6,358 $4,953 $3,607 $1,087 $2,319 $0 FYE 2007 FYE 2008 FYE 2009 FYE
$7,828
Projected
$6,358
$4,953
$3,607
$1,087
$2,319
$0
FYE 2007
FYE 2008
FYE 2009
FYE 2010
FYE 2011
FYE 2012
FYE 2013

* Based on 7/1/2008 valuation

Deloitte Consulting LLP

26

2010 Retiree Health

What is not changing for 2010:

No change to basic or graduated eligibility

No change to definition of eligible dependents

Retiree medical benefits continue to mirror employee benefits

Blended experience to continue (employees and non- Medicare)

Retiree dental will continue to be fully paid (subject to graduated

eligibility)

2010 Retiree Health Changes

What is changing for 2010:

The average UC contribution for retirees, as a percent of total premiums (including Medicare Part B), will be more closely aligned with the percent contributed for active employees due to budget constraints and financial reporting obligations

UC contribution overall average changes from 92% to 89%

Retiree rates will be increasing

UC still paying $25 million more in CY 2010 over CY 2009

Current PEB Valuation Comparisons

(7/1/2008)

114,200

29,400

Current PEB Valuation Comparisons (7/1/2008) 114,200 29,400 A c t i v e Employees Vested Inactive

Active Employees Vested Inactive

64,000 Vested 50,200 Non-Vested

$42.6 B*

Vested Inactive 64,000 Vested 50,200 Non-Vested $42.6 B* Active 113,100 Employees 25,800 Eligible Now 87,300
Vested Inactive 64,000 Vested 50,200 Non-Vested $42.6 B* Active 113,100 Employees 25,800 Eligible Now 87,300
Vested Inactive 64,000 Vested 50,200 Non-Vested $42.6 B* Active 113,100 Employees 25,800 Eligible Now 87,300
Vested Inactive 64,000 Vested 50,200 Non-Vested $42.6 B* Active 113,100 Employees 25,800 Eligible Now 87,300
Vested Inactive 64,000 Vested 50,200 Non-Vested $42.6 B* Active 113,100 Employees 25,800 Eligible Now 87,300
Vested Inactive 64,000 Vested 50,200 Non-Vested $42.6 B* Active 113,100 Employees 25,800 Eligible Now 87,300
Active 113,100 Employees 25,800 Eligible Now 87,300 Earning Eligibility $13.3 B Retirees (UCRP & PERS)
Active
113,100
Employees
25,800 Eligible Now
87,300 Earning Eligibility
$13.3 B
Retirees
(UCRP & PERS)
31,500 Primary Lives
47,800 Total Lives

Annuitants 41,600 Retired 50,200 Total

UCRP

Retiree

Health

Overview of Employee PEB

Assets / Liabilities / Shortfall

$80 -20% MV Return for 2008/09 and 7.5% per year beginning July 1, 2009 for
$80
-20% MV Return for 2008/09 and 7.5% per year beginning July 1, 2009 for UCRP
$70
$60
$18.9
$17.7
$50
$16.5
$15.4
$37
$14.3
$13.3
$26.5
$32.3
$40
$16.4
$21.7
$12.1
$30
$46.3
$43.7
$20
$41.2
$38.8
$35.5
$36.4
$34.3
$34.3
$32.5
$31.2
$29.1
$28.2
$10
$0
2008
2009
2010
2011
2012
2013
$ in Billions

Plan Year Beginning July 1,

PEB Work Teams Interactive Process

Steering Committee

PEB Work Teams Interactive Process Steering Committee Pension Benefits Work Team Retiree Health Work Team Finance

Pension Benefits Work Team

Retiree Health Work Team

Teams Interactive Process Steering Committee Pension Benefits Work Team Retiree Health Work Team Finance Work Team

Finance Work Team

PEB Task Force Mission Statement

The University of California is committed to providing competitive pay and benefits programs to attract and retain excellent faculty and staff to accomplish its mission for the people of California, while ensuring sustainable post employment benefits for current and future retirees.

PEB Task Force Charge

Consider the impact of:

Market competitiveness,

Talent management, work force development and renewal, work force behavior,

Affordability and sustainability

Analyze:

Cost and cash flow

Long-term funding options & impact on UC financial integrity

Complete work within a reasonable timeframe

Make recommendations which allow the Regents to meet:

Fiduciary obligations

Educational responsibilities

PEB Task Force Process Timeline

2009

July –Sept

2009

OctDec

2010

Jan–Mar

2010

Apr –Jun

2010

July –Aug

Steering Steering Steering Steering Steering Committee Committee Committee Committee Committee Meeting Meeting
Steering
Steering
Steering
Steering
Steering
Committee
Committee
Committee
Committee
Committee
Meeting
Meeting
Meeting
Meeting
Meeting
Work
Work
Work
Work
Work
Work
Work
Work
Work
Work
Team
Team
Team
Team
Team
Team
Team
Team
Team
Team
Meetings
Meetings
Meetings
Meetings
Meetings
Meetings
Meetings
Meetings
Meetings
Meetings
Local Forums
Local Forums
Phase 1:
Phase 2:
Phase 3:
Phase 4:
Assessment and
Preparation
Defining Options and Analysis
Frame
Recommendations
Prepare Report and
Recommendations

Consultation and Communication Process

President’s charge: engage in a robust consultation and communication process.

Local Forums with stakeholders and advisory groups

Meeting all HEERA obligations with unions

State of California

Website :

http://www.universityofcalifornia.edu/news/ucrpfuture/

Q U E S T I O N S 36
Q U E S T I O N S 36

Q U E S T I O N S