Pension Demands Anger Public
On Dec. 9, three dozen UC executives submitted a letter to the Board of Regents that insisted on an increase in retirement benefits that would cost the university system roughly $5.5 million, claiming that the Pension Restoration benefits were promised in an agreement in 1999. The group of executives threatened to pursue legal action if their demands were neglected.
The University of California system currently uses a standardized pension formula to assess retirement benefits. Normally, pensions are restricted by a maximum amount and looked at as a fraction of the salary of a UC employee. The provision in question, Appendix E, would essentially remove the upper limit on retirement benefits applied by the IRS.
“Currently, the first $245,000 of the salary of an employee is counted toward determining both the employee’s contribution to the UCRP and the benefit that will eventually be paid from UCRP,” said Robert Anderson, vice chairman of the Academic Senate. “If Appendix E were implemented, the $245,000 cap would be eliminated: employees with salaries above $245,000 would contribute on their whole salaries, and their whole salaries would be taken into account in determining their eventual pension benefits.”
The 36 petitioners argued that failing to implement Appendix E could reduce their final payments by up to 38 percent. This means a chancellor retiring after 30 years of employment, whose average salary is $500,000, would receive a pension of $185,000 rather than $375,000. To date, the provision applies to 200 individuals, including both present and former employees.
“Dean Edley [of UC Berkeley’s Law School] made a remark along the lines of ‘I’m trying to defend my family’s welfare and income,’ and I respect him for that. It’s a legitimate statement,” said Student Regent Jesse Cheng. “It’s really no different from how students said ‘We’re defending our income and our parents’ income.’ I put the two arguments on the same level. The timing for it is really unfortunate, because at a time where we talk about shared burdens, we have a group of people saying they don’t want their benefits cut.”
Needless to say, the group of signees — comprised of some of the highest paid senior executives within the entire UC system — has garnered public ire. With students facing rising tuition fees and unions protesting widespread faculty and staff layoffs, the woes of senior management have failed to elicit much sympathy.
According to Vice Chairman Anderson, the state’s financial crisis has resulted in an approximate 1 percent drop in the amount of ladder-rank faculty and an increase in the student-to-faculty ratio. “As administrators, they have an obligation to keep the welfare of UC front and center in their thoughts and actions,” said Anderson. “They failed to live up to that obligation.”
Citing the public resentment, the President’s Task Force on Post-Employment Benefits, an advisory organization featuring system-wide representatives, including members of the Academic Senate, published a report condemning the endorsement of Appendix E.
“It is unseemly to provide a large ‘restoration’ of pension benefits to highly compensated employees at the same time that pension benefits of other groups are being curtailed,” the UC Task Force noted. “The effect on faculty and staff morale and on the University’s public relations would be highly detrimental.”
It seems the Regents have heeded the Task Force’s advice. In response to the pension controversy, President Yudof and Chairman of the Board of Regents Russel Gould released a statement on Jan. 4, claiming the UC system is exempt from any legal obligation to implement Appendix E. The official response read:
“ … [T]he initial Regental action required that an implementation plan be developed and submitted by the President of the University and approved by the Chair of the Board and the Chair of the Finance Committee. For reasons of fiscal prudence in a changing economy, this step — necessary for the proposal to become effective — was never taken. For this reason, and contrary to the arguments presented in the letter, it is our belief that the action taken by the Board 10 years ago was not self-executing and that the pension proposal was never implemented.”