Monday, October 11, 2010

Duelling PEB Reports

When the Post-Employment Benefits (PEB) Task Force finished its deliberations, it published a majority and minority report. See earlier postings. UCOP responded to the dissenting report with a rebuttal. The dissenters replied to that response. In turn, UCOP responded to that response. Depending on when you looked at the UCOP webpage on PEB, you may not have seen the full back and forth. So here is the menu as of today:

The full report of August 30 is at

The minority dissenting report of August 30 is

The UCOP response to the dissent of Sept. 14 is at

The dissenters' response (Prof. Robert Anderson's response) to the Sept. 14 response of Sept. 30 is at

The UCOP response to Prof. Anderson's response of Oct. 1 is at

On the table are three options for new hires and - assuming certain legal issues are overcome - a choice for incumbent employees to switch future accruals into whatever plan is created for new hires. The PEB majority proposed options A and B. The dissenters proposed adding a less complicated but more expensive (in total, i.e., employer+employee contribution) option C. The dissenters also insisted that whether B or C is chosen, there needs to be a concrete plan to bring total remuneration up to competition levels.

The dissenters point out that the unfunded liability of the existing plan remains the same no matter what happens with regard to options A, B, and C. The unfunded liability has already accrued. Even if UC were to have no future pension plan accruals for anyone, the unfunded liability would remain. Thus, none of the options directly address funding issues for the unfunded liability. The UCOP response is essentially to acknowledge that point but to argue that if UC spends less on future pension accruals under any option, there will be more money left to plow into dealing with the unfunded liability. But note that in the end, there can be more money only if it is assumed that UC continues to pay below-competition salaries. Otherwise, it cannot be assumed that a dollar saved in future pension accrual under some two-tier plan proves a dollar to put into dealing with the unfunded liability.

Part of the issue here is that the state has so far not resumed assuming some liability for the UC pension. Language from the legislature stating that there was no such liability has been removed. But no dollars have been appropriated as a result. Obviously, given the shaky state of California's budget, immediate extra dollars are not likely. There is also the issue of what may happen in January when a new governor takes office. If UC does not have some type of plan in place, it could be swept into some statewide reform, possibly through a ballot measure. And there is no guarantee that even with a plan, UC might be swept into some statewide measure - although there would be better odds of avoiding that outcome.


Toby Higbie said...

Thanks for this update Dan. Doesn't the state's deal with SEIU to reduce pensions in their contract lessen the likelihood of a ballot initiative solution?

California Policy Issues said...

Tobie: Those political forces that have been pushing the public pension issue characterize the deal with SEIU as a good first step. They want more in the way of concessions and tilt toward defined contribution plans for new hires. --Dan