The UC Office of the President has convened a Task Force with administration and faculty representatives from the five health sciences campuses, to review the current retirement benefits for members of the Health Sciences Compensation Plan. OP has been generous in providing resources for active actuarial and legal consultation and this has been enormously helpful in the TF's discussions. At least some preliminary material is available at the TF's web site

and additional material is being developed on an ongoing basis. We hope to have a plan to present to several critical "audiences" in the next several months, including the Health Sciences faculty, the general UC faculty, the OP, the UC Retirement Board (UCRB) and the Regents among others. The following comments summarize what I've taken away from the meetings so far.

1. An extensive comparison with more than 20 university retirement plans for their health sciences faculty indicates that the UC Defined Benefit Plan ranks very favorably among universities. Most of UC's health sciences faculty have a "covered compensation" base of at least 1.3 times "X", the salary scale for their rank and step (some UCSF Departments have scales up to 1.6) which increases the value of our DB Plan. Also, UC employees have not had to contribute to this very generous DB Plan for some years, and the prediction is that we won't have to start comtributing for a decade or longer.

2. I hear often that "other health sciences faculty have all of their income covered by retirement benefits". While that may be true, at least in part, one has to remember that there are IRS limits to retirement contributions in any given year. So even in the best of all possible worlds, some contributions on a "total income" might be higher than the IRS allows, and so some compensation isn't covered after all in all industries.

3. Nonetheless, with the philosophy that "something good maybe can be better", the TF is examining ways that we can get some additional retirement benefits, e.g. on "Y+Z" compensation.

4. After much discussion, the option that is getting the TF's support as of now is a mandatory 7% contribution of "Y+Z" to a Defined Contribution Plan for each HS faculty. This money is "portable" in that it can be taken by the faculty member if he/she moves from UC. Unfortunately there is no money to pay for this from state or university money, so it will come out of "department funds", generally clinical or other funds. It might seem unreasonable that the state doesn't fund this benefit. However, we assume that for most health sciences faculty at other universities, funding for their retirement comes from their department, i.e. grant and clinical income - which reduces the amount of money immediately available for salaries (staff to the TF is following up to confirm this assumption). To ease the transition to this 7% goal, the benefit likely would be phased in over 2-4 years. If clinical income increases over this time, the benefit perhaps could be funded out of the increases so that there was as little effect on take-home salaries as possible.

5 One source of money currently not used for retirement benefits is from grants, both government and private. A uniform retirement benefit is a legitimate charge against grants, but since there is no employee or UC contribution to retirement now, there is no charge to grants. The estimate currently (varies between schools and campuses) is that about 20% of money needed for the proposed Defined Contribution benefit could come from grant sources. A phase-in over several years would allow new grants to include the new costs in the grant proposal as a direct cost part of "fringe benefits".

6. The TF will have an actuarial analysis done to estimate the cost of raising the "compensated salary" base for the health sciences faculty up to 1.4 or 1.5. If we can get this adopted by the Regents, it would reduce the costs to departments since the assessments to the health sciences "reserve fund" would be reduced or eliminated. Increased benefits (e.g. increased payouts) from UCRS may cause earlier resumption of contributions to the UCRS by all faculty and staff, and so will be heavily scrutinized by the Regents and UCRB. 7. The TF learned that many HS faculty currently are contributing either nothing (25% of the total HS faculty) or less that the full amount (35%) currently available to the pre-tax defined contribution 403(b) plan available to all UC employees. So many of our faculty now are not fully taking advantage of a retirement plan available to you now. For those of you who are not fully participating in the 403(b), you should seriously consider doing so.

8. There are new Federal changes in provisions for IRS 457 Plans that have not yet been worked out by the State, that would allow another pre-tax contribution of about the same amount as the 403(b). This could be used by faculty who fully fund their 403(b) and would like to put more pre-tax money into retirement funds. It's not clear yet when this type of plan might be available to UC employees.

Larry Pitts, M.D.
12/20/01