Unions Rail against Mandate for EE Contributions to Pensions

June 29, 2006 (PLANSPONSOR.com) - Unions representing 70,000 workers in the University of California (UC) system are against a plan by the Board of Regents to mandate employee contributions to their pension plan for the first time since 1990, the Union-Tribune reports.

The Regents plan would require all the system’s 125,000 workers to contribute as much as 8% of their salary to the pension plan, the Union-Tribune said. The Board has already decided that the 55,000 non-union workers will contribute to the system beginning July 2007. The UC system plans to negotiate the proposal with unions as their contracts lapse.

The proposal also includes contributions of an undetermined amount from UC employers.

While the system is currently overfunded, the UC said the overfunding is decreasing and the plan could be underfunded by 2009 if employees do not start contributing. In 2002, the $42 billion UC pension fund was funded 138%. But the system was 110% funded in May.

Since 1990, employees have not been required to make contributions to the pension fund. Before 1990, they contributed 2% to 3% of their annual earnings, and the UC contributed between 4% and 16%, according to the unions. They also said the pension plan has realized an annual return on investments of 12.3% per year over the past two decades.

However, a recent report by the UC treasurer’s office projects that the pension fund investment returns “will be below 7.5% in the near term” and estimates that the pension plan needs a return of 16% per year to avoid underfunding.

The five statewide unions protesting the employee contributions are the American Federation of State, County and Municipal Employees; the Coalition of University Employees; the California Nurses Association; University Professional and Technical Employees and the American Federation of Teachers, according to the news report.