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The President’s Task Force on Post Employment Benefits Overview Local Forum - 2009 Tour. 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. - PowerPoint PPT Presentation
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The President’s Task Force on Post Employment Benefits
Overview
Local Forum - 2009 Tour
2
Forum Agenda
Work Force Demographics
Background on UCRP
Background on Retiree Health
President’s Task Force on Post Employment Benefits
Questions & Answers
3
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
4
University Workforce Profile
~116,000 faculty and staff career employees
Professional Support Staff ~ 82,300
Lawrence Berkeley Nat’l Lab ~2,400
Academics ~22,500Mgmt & Sr Professionals ~ 8,200
Sr Mgmt Group ~ 290
and ~69,000 student and other non-career employees
5
120
3,398
4,540
4,245
3,234
7,819
15,718
24,577
25,879
26,215
Under 30 Years Old
30 - 39 Years Old
40 - 49 Years Old
50 - 59 Years Old
60+ Years Old
Faculty Staff
120
3,398
4,540
4,245
3,234
7,819
15,718
24,577
25,879
26,215
Under 30 Years Old
30 - 39 Years Old
40 - 49 Years Old
50 - 59 Years Old
60+ Years Old
Faculty Staff
Age Distribution of UCRP Active Members
6
Active UCRP Members by Years of Service
4,767 3,5402,181 1,783 1,344 1,922
5,8896,2288,382
12,317
22,219
45,173
0–4 Years 5–9 Years 10–14 Years 15–19 Years 20–24 Years 25+ Years
Staff Faculty
7
Total Remuneration Components and Allocation Values vs. Market Comparators – Campus and UCOP
Market Cash Compensation Market Health & Welfare Market Retirement (DB/DC) Market Retiree Medical & Life
73% 17% 8% 2%
$68,089 $19,940 $11,833 $6,179
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Market
UC
64% 19% 11% 6%
73% 17% 8% 2%
$68,089 $19,940 $11,833 $6,179
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Market
UC
64% 19% 11% 6%64% 19% 11% 6%
$78,365 $2,034$8,805$18,777
73% 17% 8% 2%
Market Comparators
Excludes medical centers and LBNL
8
72% 15% 11% 2%
$71,409 $15,503 $14,911 $6,652
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Market
UC
66% 14 % 14% 6%
Market Comparators $72,859 $1,535$11,462$15,429
Market Cash Compensation Market Health & Welfare Market Retirement (DB/DC) Market Retiree Medical
71% 15 % 11% 2%
Total Remuneration Components and Allocation Values vs. Market Comparators – Medical Centers
9
UC Retirement Plan (UCRP)
UCRP
DC Plan
403(b)
457(b)457(b)
Deferred Compensation
Plan
Defined Contribution (DC)
Plan
Tax-Deferred 403(b) Plan
Components of UCRS
10~222,000 Members in UCRP (7/1/09)
Active Employee members ~ 115,700
Retirees & Survivors ~ 51,700
Separated members owed a benefit ~ 54,900
UCRP Membership
11
While employed at UC At Retirement Death The After-life
During Retirement
What Does UCRP Provide?
Disability Protection
Survivor Benefits
Death Benefits
Lifetime retirement income
or lump sum equivalent
Annual COLAs
Death Benefits
Post retirement Survivor
Continuance
12
UCRP Investment Rates of Return
AVA recognizes each MVA return above or below the assumed rate (7.5%) over five years
5.6%
14.5%
10.3%
19.0%
22.1%21.4%
12.1%
5.2%
1.9%
5.9%
9.3%
7.2%
12.3%
21.6%21.3%
25.8%26.1%
-19.2%
-5.6%
-9.0%
-5.5%
12.7%
-2.6%
16.8%15.5%
13.6%9.8%
1.9%2.7%2.5%
11.5%
18.2%
19.4%
15.2%
11.2%
17.0%
11.0%11.1%11.2%11.3%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
'89-'90
'90-'91
'91-'92
'92-'93
'93-'94
'94-'95
'95-'96
'96-'97
'97-'98
'98-'99
'99-'00
'00-'01
'01-'02
'02-'03
'03-'04
'04-'05
'05-'06
'06-'07
'07-'08
'08-'09
Market Value of Assets (MVA)Assumption (7.5% starting 1994)Actuarial Value of Assets (AVA)
13
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 AccruedLiability
Future Normal Costs
Current AgeEntry Age Retirement Age
14
UCRP Historic Funded Status
149%
140%
128%119%
112%106% 105% 103%
95%
$0
$10
$20
$30
$40
$50
$60
$70
$80
2001 2002 2003 2004 2005 2006 2007 2008 2009
$ in
billio
ns
0%
20%
40%
60%
80%
100%
120%
140%
160%
Actuarial Accrued Liability (AAL) Actuarial Value of Assets (AVA) Ratio
Campus/Medical Centers Only
15
What it Takes to Stay 100% Funded
90
Assets earn assumed return (currently 7.5% )
Contributions equal Normal Cost (currently 17% of pay)
Pe
rce
nt
Fu
nd
ed
110
105
100
95 All other experience matches assumptions
16
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)
17
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
18
Examples of Member Contribution Amounts
Monthly Covered Monthly Member Percent Compensation Contribution
$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%
$12,500 ($150,000 annual) $303 2.42%
19
0%
20%
40%
60%
80%
100%
2009 2010 2011 2012 2013 2014Plan Year Beginning July 1,
Fu
nd
ed R
atio
7.5% Market Value Return Per Year Starting July 1, 2009
2014 Funded Ratio = 60% ($20 Billion Unfunded Liability)
Funded Ratio (Actuarial Value Basis)
Campus/Medical Centers Only
20
Pension benefits that current employees have already earned
Pension benefits for current retirees
Retirees will not be asked to contribute to UCRP
What is NOT Changing for UCRP ?
2121
UC Retiree Health Benefits
2222
UC Retiree Health Benefits
Medical
• Medicare
• Non Medicare
Dental
Wellness Program
Access to Vision plan
Access to Legal plan
2323
Medical Plan Enrollment
UC medical program covers ~290,000 employees, retirees and their dependents
~110,100 Employees
~ 34,000 Retirees
Retiree dependents ~17,500
Employee dependents ~128,000
2424
Financial Background on Retiree Health
• “Pay-as-you-go” cash costs
• Budget impact– CY 2009 cash costs ~ $230 million
– CY 2010 cash costs ~ $255 million
• Retiree Health Trust (Section 115) – Established July 2007
– Pre-funding annual liability has not started
2525
Annual Retiree Health Valuation
• Financial reporting obligations (GASB)
– Annual Required Contribution (ARC)
• Net OPEB balance sheet obligation
– Unfunded actuarial accrued liability
• Unless changes are made to plan design and/or funding, liability will lead to an erosion of the University's net assets
2626
Retiree Health Benefit Program Unfunded Liability and Cash Costs
$14.5 $15.6 $16.8 $18.0 $19.3 $20.6
$242$272
$312
$354
$399
$447
$0
$100
$200
$300
$400
$500
$600
$0
$10
$20
$30
$40
$50
$60
2009 2010 2011 2012 2013 2014
$ in Millions$
in B
illio
ns
Plan Year Beginning July 1
Unfunded Retiree Health Benefit Program Liability"Pay-As-You-Go" Cash Costs
2727Deloitte Consulting LLP
5-Year ProjectionGrowth in Balance Sheet Obligation
2828
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 retirees)
– Retiree dental will continue to be fully paid (subject to graduated eligibility)
2929
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
3030
Current PEB Valuation Comparisons
UCRP
$45.2 B*
RetireeHealth
$14.5 B
115,700ActiveEmployees
65,700 Vested50,000 Non-Vested31,200 Vested Inactive
Annuitants
43,000 Retired51,700 Total
Retirees (UCRP & PERS)
32,300 Primary Lives48,800 Total Lives
114,300 26,900 Eligible Now87,400 Earning Eligibility
Active Employees
* Includes campus/medical centers and National Laboratories
31
$34.9 $33.0 $31.5 $29.4 $28.4 $29.4$36.9 $39.0 $41.5 $44.0 $46.6 $49.2
$14.5$15.6
$16.8$18.0
$19.3$20.6
$0
$10
$20
$30
$40
$50
$60
$70
$80
2009 2010 2011 2012 2013 2014
$ in
Bill
ions
Plan Year Beginning July 1UCRP Actuarial Value of Assets UCRP Actuarial Accrued Liability UC Retiree Medical Unfunded Actuarial Accrued Liability
7.5% MV return per year beginning July 1, 2009 for UCRP
$16.5 $21.6$26.8 $32.6
$37.5$40.4
Overview of Employee PEB Assets / Liabilities / Shortfall
32
PEB Work Teams Interactive Process
Pension Benefits Work Team
Retiree HealthWork Team
Finance Work Team
Steering Committee
33
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.
34
PEB Task Force Charge
• Consider the impact of:
– Market competitiveness,
– Talent management, work force renewal, work force behavior,
– Affordability and sustainability
• Analyze:
– Cost and cash flow impact
– 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
35
PEB Task Force Process Timeline
2009July –Sept
2009Oct – Dec
2010Jan –Mar
2010Apr – Jun
2010July –Aug
Phase 1: Phase 2: Phase 3: Phase 4:Assessment and
PreparationPrepare Report and Recommendations
Defining Options and Analysis Frame Recommendations
Steering Committee
Meeting
Work Team
Meetings
Work Team
Meetings
Steering Committee
Meeting
Work Team
Meetings
Work Team
Meetings
Steering Committee
Meeting
Work Team
Meetings
Work Team
Meetings
Steering Committee
Meeting
Work Team
Meetings
Work Team
Meetings
Steering Committee
Meeting
Work Team
Meetings
Work Team
Meetings
Local Forums Local Forums
36
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/
President’s charge: engage in a robust consultation and communication process.
37
Q U E S T I O N S