Why Did Mark Yudof Discuss the Pension Report Ahead of its Release?

UPDATE: The Report of the Post Employment Benefits Task Force has now been posted.
So has the 10-page "Dissenting Statement" (without appendicies).

Mark Yudof has released a statement about the Task Force report on the UC pension system that has itself not yet been make public.   The Yudof  message contains perfectly OK principles regarding pension attractiveness and stability, and also some information about cost issues.  I read through it wondering why President Yudof was jumping the gun.  A paragraph towards the end prompted a theory.



As background, the Task Force  focused not only on when to start recontributions and by how much, but on a range of permanent, fundamental pension changes. These included the wholesale conversion of the UC Retirement Program to a defined contribution plan for new employees -- an imitation of the decades-old trend in corporate America that is one major reason why half of all baby boomers are "at risk" of insufficient retirement income.  The original concerns were more narrow, and for some of the history of the Task Force on Post-Employment Benefits, see UCRP expert and incoming Senate Vice-Chair Bob Anderson's Q&A on the Senate recommendations,  my reservations about the Senate call for a rapid ramp-up, Michael's report on a Task Force visit to UCLA, Bob Samuels' call for a better position than that of the Senate's, a report about a UCSB discussion of the pension,  our section on pensions,  various UCLA Faculty Association coverage, and Charles Schwartz's 27- part series of detailed financial analyses.

Like the UC Commission on the Future, the pension and benefits task force had working groups with major faculty representation and expertise, and then a decision-making body, a Steering Committee, with little faculty representation, in this case, two members.  Since the June 29th occasion of the Anderson interview linked above, the Steering Committee has selected two options. Mark Yudof describes the approved options as "shifting the minimum retirement age from 50 to 55, and raising the age of eligibility for the maximum pension benefit from 60 to 65." He continues:

The two alternatives advanced by the Task Force also introduce a new form of pension calculation, one that integrates a career employee�s Social Security benefit with the UCRP benefit to replace the employee�s working income in retirement.

Recommended options also would allow current employees with lower salaries to make a lower level of contribution and receive a lower pension benefit, if they so desire. The Task Force has proposed that current UC employees be given a one-time opportunity to enroll in that lower-cost plan. 

These are major reductions of benefits for new employees. Some are defensible, like raising retirement ages.  Others are misdescribed as benefits (lower contributions for a lower pension from a lower salary base), or integrating Social Security income with the UCRP benefit, which of course means subtracting Social Security income from the UC benefit.

I kept reading, on through incomplete and therefore misleading financial factoids that would be in a better world limited to press releases:

• "UC currently contributes 4 percent of annual pay to the UCRP, while employees contribute about 2 percent. Yet the current cost of the pension is roughly 17.6 percent of annual pay."

Without minimizing the funding problem (e.g. Anderson), Mark Yudof could also note that other major revenue stream -- UCRP  iinvestment income --on which the fund has rested for nearly twenty years, and which for most pensions is still currently estimated to be around 7.5% annually as a return on assets.  So the gap is not 11.6%, as implied. [

And then:

• "One thing is certain: UC must make changes to its retiree health and pension programs. If we do nothing, in four years the University will be spending more on retirement programs each year than we do on classroom instruction."

While UCRP costs are incurred on the total UC payroll, only  1/3 of UC payroll is state funded, and significantly less than 1/3 of payroll goes directly to faculty and staff time spent on instruction. The only purpose of this otherwise arbitrary comparison is to set up UCOP's traditional, inaccurate trade-off between the interests of faculty and the interests of students, which can then be used to weaken the faculty.

The main news here is that "faculty and staff" members of the task force working groups issued a Dissenting Statement - dissenting from the two options endorsed by the Steering Committee.  Also not yet released, "this third option more closely mirrors the current UCRP benefits, although it moves the age for maximum pension benefit to 65, as do the two other plans. It does not, however, integrate UCRP benefit payments with an individual�s Social Security benefits."

The text that follows then proffers more alarming factoids:

The option will cost UC and its employees approximately 3.2 percent more than the Task Force�s least expensive alternative. To put that figure in perspective, each percent adds more than $80 million in costs for employees and the University, or roughly $256 million in permanent, annual UC expenses that must be paid by the University and its employees together, if the more expensive plan were adopted. This is in addition to the roughly $1.6 billion that we must pay annually to restore UCRP to health.

UC's overall budget is about $20 billion, and Mark Yudof should have provided this figure to allow readers to decide whether $80 or $256 million more is a lot of money, given the "third option"'s attempt to minimize "tiering" younger from older employees.

My theory, then, is that the statement is an odd kind of preemptive strike -- an attempt to weaken the pension solution preferred by the faculty and staff members of the working groups before anyone has been able to read the report. Mark Yudof is right to say that the debate  is just getting started -- but in the context of a projection of authority that rarely leads to the best decisions.