The president of University of California has unveiled a proposal to change pension benefits for future employees and solve the crisis facing UCs unfunded pension system.
UC President Janet Napolitano sent an email to university employees Friday outlining a proposal for a new retirement program she will present at the Regents March 23-24 meeting.
The proposed changes would offer employees hired on or after July 1, 2016 a 401k-style program or one that combines a pension with a 401k.
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Napolitano believes the changes will save an average of $99 million a year for the next 15 years.
In exchange, the university system will budget regular pay increase for faculty and staff and add merit-based pay increases to reward its employees based on performance.
Critics have said changing the UC pension system will hurt the university’s ability to hire top-tier faculty.
Under a May 2015 agreement with the state of California, UC gets nearly $1 billion in new annual revenue and one-time funding over the next several years.
Those funds include $436 million to help pay down UC’s unfunded pension liability.
UC's pension fund, which is running a multi-billion-dollar deficit and has become a sore point between university and state leaders. The state stopped contributing to the fund in 1990, when the retiree benefit system had more money than it needed.
Employees hired before July 1, 2016 will continue receiving their current pension benefits. Union employees will continue to receive retirement benefits negotiated as part of collective bargaining agreements.