Why Arent We Sleeping

1
Why Arent We Sleeping?

• Michele French
• Executive Director-Policy Program Design
• Human Resources Benefits

2
What Keeps Us Awake at Night?

• Salaries
• Medical Trends
• Retiree Health Costs
• Pension Issues
• Demographics
• The Politics of Public Opinion
• Pension Reform
• Collective Bargaining
• What Next?

3
Summary Regents Staff Compensation Policy -
1978

• Subject to funding limits, pay market-based total
  compensation
• Survey comparable employers to establish
  benchmarks, needed funding
• Request funds from the State to support
  market-based total compensation

4
Staff Salaries
5
Faculty Salaries
-8 to -10
6
Medical Trends
1,060
Cost Millions
723
635
Total premiums
UC contributions
567
358
347
2010 UC contribution 68
2001 UC contribution 97
2001
2005
2010
7
Medical Insurance Increases Compared to Other
Indicators - 88 to 04
Employer Health Benefits 2004 Annual Survey,"
(7148), The Henry J. Kaiser Family Foundation
and Health Research and Educational Trust,
September 2004. Reprinted with permission of the
Henry J. Kaiser Family Foundation. The Kaiser
Family Foundation, based in Menlo Park,
California, is a nonprofit, independent national
health care philanthropy and is not associated
with Kaiser Permanente or Kaiser Industries.
8
Retiree MedicalGrowth in Number of Retirees with
UC Health Benefits (1000s)
9
Retiree MedicalGASB Unfunded Liability

• GASB Reporting Requirement 2006-07
• 205M - 2005 UC Premium Pay-as-You-Go
• 1.1B Annual Accrued (Normal) Cost
• 10B Unfunded Liability

Retirees 6
14M
205M
UC 94
10
Pension Issues

• No contributions since 1990
• 2000 20 years until contributions needed
• 2002 market losses mean contributions needed
  sooner
• Current annual cost of plan
• 1.2 billion per year
• Near 16 of payroll

11
Retirement Eligibility by Employment Group
2,781
4,583
216
2,147
16,627
6,276
Retirement Eligible
23
28
45
14
73
40
10,093 19,905 297
5,369 72,310
22,050
Data Notes Academic Senate includes Professorial
Series (8,408) and other qualified titles.

Staff groups include Career and Partial Year
Career, Professional
Support Staff includes represented and
non-represented employees.
Students are not included. Data
source HR Data Warehouse 7/04
12
Ratio of Retirees to Employees
(est.)
Ratio of Employees to Retirees UC Medical Plan
Enrollment
13
Campus Fund Sources
3
9
8
11
28
37
3
03/04 Base Payroll, excluding DOE All employees,
including students
14
How Does it Add Up?
Pension and Retiree Health shown as annual cost
to prefund Health and Welfare figure is UCs
2005 contribution towards premiums.
15
Private Sector Publicity

• Private employer pension plans lost value
• Employers declaring bankruptcy and tossing their
  pension plans into the Pension Benefit Guarantee
  Corp, e.g, United Airlines
• Terminating health plans for current retirees
  (e.g., airlines, Bethlehem steel)
• Strikes over health care costs
• 2-tier settlement agreements with unions

16
Public Sector Publicity

• Articles on cost of programs while governments
  struggle with budget crises, reductions in
  service
• Articles about rehired State, university retirees
  double-dipping
• Fortune Magazine May 2004 article on rich public
  pension plans and gaming the system

17
Political Activity

• Houston exempts itself from Texas constitutional
  amendment to lock in retirement benefits
• Oregon reduces future benefits for current state
  employees
• State legislative activity-revised Richman bill
  ACAX1 8 - others

18
Basic Pension Design
19
Current California Proposals

• Apply to new hires beginning 7-1-07
• Retain existing pension plan managers
• Permit combined DB/DC plan design
• Include disability and death benefits in DB plan
  component
• Have higher maximum contributions
• Give UC flexibility to set contributions

20
Unions and UC

• 20 separate collective bargaining agreements
• At any given time a number of systemwide and
  local contracts may be expired
• UC may be required to bargain changes to
  retirement, health and welfare benefits

21
What Next?

• Rebalance total compensation
• Pension, Health Welfare lead market
• Salaries lag market
• Respond to constitutional amendments, legislative
  activity
• Working with Regents, Governor, Legislators to
  shape outcome
• Propose changes and consult, consult, consult