7.25 > 6.75

July 30, 2026

Nathan Brostrom

Executive Vice President & Chief Financial Officer, UC Finance

Re: Recommendation to Increase the Actuarial Rate of Return for UCRP

Dear CFO Brostrom:

At the July 22, 2026 meeting, the Academic Council unanimously endorsed the recommendation of the University Committee on Faculty Welfare (UCFW) and its Task Force on Investments and Retirement (TFIR) to increase the assumed actuarial rate of return for the University of California Retirement Plan (UCRP) from 6.75% to 7.25%.

Council first reviewed the proposal at our June 2026 meeting, when TFIR presented its analysis of UCRP’s long-term investment performance, funding position, and cash flows. TFIR concluded that the current assumption is unnecessarily conservative and increasing it to 7.25% would better reflect expected long-term returns, reduce unnecessary contribution requirements, and preserve resources for the University’s core mission without reducing pension benefits.

Before taking action, Council asked the University Committee on Planning and Budget (UCPB) to review the proposal. UCPB subsequently endorsed the proposed increase, while emphasizing the importance of adhering to Regents Policy 5601. Council agreed that UC should follow the policy’s established mechanisms for adjusting contributions when investment performance differs from actuarial assumptions and that future funding shortfalls should not be addressed by shifting additional costs to University employees.

Council recognizes that the actuarial rate is a long-term planning assumption rather than a guarantee of future investment performance.

Nevertheless, Council concluded that the evidence presented by TFIR supports the proposed 7.25% rate and that maintaining an unnecessarily conservative assumption carries substantial opportunity costs for UC.

I am forwarding the attached UCFW-TFIR proposal and UCPB endorsement for your consideration as the University reviews the actuarial assumptions governing UCRP Sincerely,

Ahmet Palazoglu

Chair, Academic Council

cc: Academic Council, Chief Investment Officer Bachher, Executive Vice President and Chief Operating Officer Nava, Vice President Henderson, UCFW Chair Bales, TFIR Chair Hollenbach, UCPB Chair Brosnan, Senate Division Executive Directors, Senate Executive Director Lin

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Comment:

The important thing to note is that changing assumptions about the future does not change the future. The actual rate of return that will occur in the future depends on the investment strategy (the mix of assets held by the plan) and future financial market conditions. From the TFIR report:

"Changing the assumed rate of return does not change the actual return on investments; actual returns to the UCRP investment portfolio follow from the asset allocation policy set by The Regents and the returns those assets produce."

Note that the same can be said about liabilities of the plan which depend on policies regarding eligibility that may be enacted by future Regents, changes in life expectancy, changes in hiring and retirement behavior at UC, etc. Making assumptions about such matters in the future does not, by itself, change the actual future course of events.

Basically, being more conservative about assumptions requires more funding to achieve a planned 100% pension funding ratio. Being less conservative requires less funding, but increases the risk of underfunding. Although it is not explicitly stated in the report, in a period in which the funding model for UC is under strain, the attraction of being less conservative - even if it entails more risk - increases.

Yesterday's COLA

If you are receiving a UC pension that began before July 1, you should have received a 2% COLA (cost of living adjustment) increase as of yesterday. Yes, inflation is running above 2%, but the COLA formula does not provide complete protection against inflation above 2%.

The University of California Retirement Plan (UCRP) COLA formula matches the annual increase in the California Consumer Price Index (CPI) up to 2%, plus 75% of the CPI increase exceeding 4%, up to a maximum adjustment of 6%.

More Conversations - Part 2

In a prior post, we provided the audio to UC CFO Jagdeep Bachhar recent "conversations" with several figures from the world of finance.* As we noted, they were all anxious to tell a story of not-to-worry about such developments as the Iran War and the related boost of energy prices. They all urged taking a long view in which these short term events won't matter. Bachhar indicated a similar view, i.e., we're in it for the long term with our pension and endowment. 

So here's an excerpt from a recent op ed in the NY Times:

Over the past few years, one of the signature funds at Blackstone, the private equity giant, has delivered, on average, 10 percent annual returns for its investors. The fund, which specializes in private credit, has lent money to more than 400 borrowers, who in turn have deployed those loans to become more profitable themselves. And yet, in the first quarter of this year, nearly 8 percent of the fund’s investors declared they wanted out. Something similar has happened at funds managed by Apollo (where redemption requests hit 11.2 percent), Ares (11.6 percent) and Blue Owl (21.9 percent).

When asked on CNBC to explain why his investors are asking for their cash back, the Blackstone president, Jonathan Gray, blamed “noise” — a “disjointed environment now between what’s happening on the ground with underlying portfolios and what’s happening in the news cycle.” He may well be right. Another explanation might be that we are witnessing a kind of slow-motion bank run. Investors, spooked by a litany of bad news, are rushing to pull their money out of private credit funds. If they all ask at once, these funds — and potentially the firms that manage them — could falter.

To quote the great Taylor Swift, “I think I’ve seen this film before and I didn’t like the ending.” ...

Full op ed at https://www.nytimes.com/2026/04/06/opinion/banking-crisis-private-credit.html.

Just saying...

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*https://uclafacultyassociation.blogspot.com/2026/04/more-conversations.html.

Pension Payments at Risk - Part 3

We have been cautioning UC pensioners about a security breach whereby pension payments are diverted from the bank to which they are supposed to go to some other account held by a scammer.

More cases of such diversion are being reported. If you get a UC pension, your February payment should have been sent to your chosen bank over the past weekend. You should verify that the transfer occurred.

If you did not get your payment, notify RASC. See our prior post on this matter for contact information.* We have been told that UC will reimburse diverted payments - but how long that process might take is unclear.

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*https://uclafacultyassociation.blogspot.com/2026/01/pension-payments-at-risk-part-2.html.

Pension Payments at Risk - Part 2

In a previous post, we noted that there has been a security breach of some type whereby pension payments were diverted from the bank account to which they were supposed to go to a scammer's bank account.* 

Exactly how this breach occurred, and why the victims' were not immediately notified, remains murky.

The UC Retirement Administration Service Center (RASC) has now posted a warning on its website:

https://ucnet.universityofcalifornia.edu/employee-news/staying-safe-in-a-digital-world/

It instructs pensioners immediately to contact RASC and gives this contact information:

Contact RASC

1-800-888-8267 (international callers: 1-510-987-0200)
Monday through Friday, 7:00 a.m. to 4:30 p.m. (PT)

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NOTE: Apparently, it is assumed that scammers don't work evenings, nights, or weekends.

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*https://uclafacultyassociation.blogspot.com/2026/01/pension-payments-at-risk.html.

Pension Payments at Risk

CUCEA, the systemwide group of campus emeriti associations, became aware of a particular theft of a pension payment earlier this month. It appears that the theft may have been accomplished by someone indicating that he/she had forgotten the password and being given authority to change the password, bank to which the pension was deposited, etc. That is, the theft seems to have occurred without any high-tech breach. (Exactly what occurred is not clear at this time, however.) 

What appeared to be a single case of theft now seems to have occurred more widely. Excerpt from a message by the chair of CUCEA:

...There have been further reports of pension checks not arriving because of a security failure at UCRAYS. As a precaution, we strongly encourage retirees who receive pension checks to verify that their monthly payments have been distributed as expected. If your pension check does not arrive as anticipated, please contact UCRAYS and your campus retirement center as soon as possible and let CUCEA Chair Joel Dimsdale know as well (jdimsdale@ucsd.edu).

This situation is also a timely reminder to review and update your passwords. That updating process may be slower for UCRAYS in the near future as it tightens security.

The CUCEA board wrote UCOP January 13, 2026 advising them to:

1. Institute corrective training for RASC (retirement administration service center) personnel.

2. Disable telephone-based requests for password resets. We do understand that this will adversely affect RASC response times until security is enhanced, but it is necessary.

3. Perform a “lookback” on all password change requests since December 1 and communicate with those individuals.

4. Notify all retirees about the possible threats and advise them to take necessary actions.

We will be meeting with UCOP to review progress next week...

Exactly what is being done to reimburse the victims of these thefts is also unclear at this time.

No Retroactive Pension Payments for Delayed Filings

The Regents have won a court case (and won again on appeal of that case) in which two individuals eligible for a UC pension, but separated from UC, delayed applying after reaching age 60. When they finally did apply, they discovered that the UC pension plan takes the position that there is no retroactivity. You simply lose potential monthly benefits until you apply.

The court decision in favor of the Regents indicated that the Plan has no obligation to make retroactive payments in such cases. In one case, the individual received a letter indicating that after age 60, there was no obvious benefit in not applying. Apparently, it did not explicitly state that therefore the individual should apply to avoid forfeiting benefits. In the other case, it isn't clear that a letter was received. But either way, the court decision says there is no obligation of the plan to provide retroactive payments.

The details can be found at https://caselaw.findlaw.com/court/crt-app-fir-dis-cal-div-fou/117878698.html.

Watch the Afternoon Regents Meeting of Nov. 19, 2025

The main event of the November Regents meetings was renewal and approval of the "tuition stability plan" by the full board. The essence of the plan was that tuition goes up automatically by cohort. But once a student enters, the tuition is constant in nominal dollars thereafter. Each cohort pays more, but then the rate is fixed. As several speakers noted, the plan does not deal with non-tuition costs (living expenses, textbooks, etc.), which can be a significant element in the total cost. 

Given current fiscal stringencies and federal uncertainties, the proposed plan was less generous than the previous with a 5% cap on inflation but with "banking" of inflation above 5% that would be applied in lower-inflation years, a drop in the diversion of revenue to student aid dropping from 45% of incremental revenue down to 40%, and a 1% surcharge above inflation for capital needs (said to be student-oriented buildings, whatever that exactly means). There were several disruptions at the beginning of the presentation that led to the room being cleared.

Two changes in the proposal were eventually adopted. One set a 7-year deadline for revisiting the plan instead of no specific deadline. Another allowed campuses to use the 1% surcharge for whatever needs they had, rather than just capital.

The plan passed with a handful of negative votes.

At a meeting of the Finance and Capital Strategies Committee, a long-range plan for the UC-Santa Barbara campus was approved, but with a call for the campus to lower the proposed costs. Reports on capital spending and finances were passed. An operating budget for UC was passed. But Regents raised the question of whether there is really a "compact" with the state, given the propensity of the governor and legislature to "defer" compact obligation to the future when the budget outlook is constrained. It was noted that the outyear of the compact extends to the period when a new governor will be in place. Finally, it was noted that given the recent boom in the stock market, the pension is now funded at 90% on a market basis.

At Academic and Student Affairs, there was a report on the UCAD-Plus committee that is dealing with "disruptions" in state and federal payments to UC and their impact on research, the academic advancement on junior faculty (who must demonstrate research capability), and related issues. The new committee is composed of both administration and Academic Senate members. It is to deliver a report in January 2027. (Meanwhile, the Regents are negotiating behind closed doors with the feds so it is unclear how what UCAD-Plus will be doing relates to these negotiations.)

One hint of what's to come came in the form of references to cross-campus programs for low enrollment programs such as languages. Presumably, cross-campus means online education. 

Finally, there was a presentation on UCLA's program dealing with the aftermath of the Palisades and Altadena fires.

At the Investments Committee, everyone was cheerful because of recent gains in the stock market. The above-mentioned 90% funding ratio for the UC pension came up. There was vague discussion about the proposed investment in the Big Ten athletic conference - which has yet to happen. CIO Bachhar was upbeat about the prospect and no one seemed in a mood to challenge him. Basically, UC is 64% invested in public equity, 19% in private assets (which are harder to value - the word "opaque" came up -and create liquidity risks), 15% in fixed income, and 2% in cash.

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As always, we preserve recordings of Regents meetings indefinitely since the Regents have no fixed policy on retention and the recording are on YouTube with unlisted addresses which cannot be searched.

The general address for the afternoon sessions of Nov. 19 are at:

https://archive.org/details/2-regents-board-finance-and-capital-strategies-committee-11-19-2025

The board and Finance and Capital Strategies sessions are at:

https://ia801703.us.archive.org/28/items/2-regents-board-finance-and-capital-strategies-committee-11-19-2025/2-Regents%20Board%2C%20Finance%20and%20Capital%20Strategies%20Committee%2011-19-2025.mp4

Academic and Student Affairs is at:

https://ia801703.us.archive.org/28/items/2-regents-board-finance-and-capital-strategies-committee-11-19-2025/3-Regents%20Academic%20and%20Student%20Affairs%20Committee%2011-19-2025.mp4

Investments is at:

https://ia801703.us.archive.org/28/items/2-regents-board-finance-and-capital-strategies-committee-11-19-2025/4-Regents%20Investments%20Committee%2011-19-2025.mp4

Athletic Investments - Part 4

As blog readers will know, the UC Regents in a closed-door session seem to favor an "investment" of pension and/or endowment funds - the outlines of which are not clear - into some kind of Big Ten athletic conference enterprise.* We have noted that as trustees of these funds, the Regents have an obligation to act in the best interest of those funds. Using them for the purpose of fostering the athletic programs of UC - really UCLA in this case - raises a host of questions.

We are not the only source of these questions:

An Open Letter to the Trustees and Regents of Big Ten Institutions

November 10, 2025

By Michael B. Poliakoff, President, American Council of Trustees and Alumni

To the Regents and Trustees of Big Ten Member Institutions:

Recent reports that the Big Ten Conference is moving toward a vote on a $2.4 billion private-equity transaction with UC Investments, the investment arm of the University of California system, demand your immediate attention as fiduciaries. As a fellow governing board member and as a president of a national organization whose mission is to support higher education accountability through engaged trusteeship, I have serious concerns about the process behind this proposal. These concerns have critical implications not just for college athletics, but for the integrity of American higher education writ large.

A university’s board exists to serve as the ultimate guardian of its mission, integrity, and assets. That stewardship includes oversight and final authority over all material university decisions and resources, including those related to intercollegiate athletics. Effectively selling or transferring an athletic department’s most valuable rights—its media, branding, or commercial assets—is unquestionably a material institutional decision requiring board oversight.

All governing board members, whether they are called trustees, regents or visitors, have a responsibility to ensure that America’s institutions act in the best interests of all stakeholders, especially the public. And yet there is a credible claim that governing boards have received insufficient information to make any such determination with respect to the Big Ten Enterprises proposal. This would be a shocking lack of transparency given the stakes of this transaction.

This is not how responsible governance functions. Boards cannot discharge their fiduciary duties without having access to the full text of any proposed agreement, sufficient time to study its implications, and a formal role in authorizing or declining their institution’s participation before a binding vote is cast.

By bypassing their governing boards, the Big Ten universities risk undermining the legitimacy of any decision and eroding confidence in their leadership.

To restore integrity to this process, we urge each governing board to adopt a clear resolution requiring that:

• The university president or chancellor abstain from any Big Ten vote on the proposed transaction until his or her governing board has been fully briefed;
• The board is provided with all relevant documents, analyses, and legal opinions; and
• The board has formally authorized the president or chancellor to vote on behalf of the institution.

Furthermore, the Big Ten’s governance structure should be amended to ensure that boards of trustees and regents are not merely informed but serve as the ultimate authorities on any future decision involving the sale, transfer, or monetization of university-owned athletic assets.

The universities of the Big Ten have earned global respect for their commitment to integrity, excellence, and public trust. That trust now rests on whether their governing boards will insist upon proper oversight in a moment of historic consequence.

As stewards of these great institutions, trustees and regents must not permit others to act on their behalf without clear authorization. The process must change so that the boards, and only the boards, hold final authority over this matter.

Respectfully,

Michael B. Poliakoff

President, ACTA

Source: https://www.goacta.org/2025/11/an-open-letter-to-the-trustees-and-regents-of-big-ten-institutions/.

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*https://uclafacultyassociation.blogspot.com/2025/11/athletic-investments-part-3.html; https://uclafacultyassociation.blogspot.com/2025/10/athletic-investments-part-2.html; https://uclafacultyassociation.blogspot.com/2025/10/athletic-investments.html.

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Further background:

From Yahoo Sports: Big Ten executives are socializing a plan with member schools to move forward with their capital investment proposal — even without Michigan and USC. The league has signaled to schools that it may hold a vote in two weeks to potentially adopt a 20-year, $2.4 billion deal with a California pension fund and extend the conference grant of rights an additional 10 years in what would be an unprecedented decision from a major conference — striking a membership extension without all of its current schools. The move for a vote, supported and encouraged by many university administrators at 16 Big Ten schools, threatens to drive a schism within the league — between those supportive universities and the Wolverines and Trojans, who are not in support of the measure.

Several university administrators, board members and industry executives spoke to Yahoo Sports under condition of anonymity about the Big Ten’s latest proposal in partnering with an investment fund of the University of California pension system called UC Investments. In messages sent to Michigan and USC, the Big Ten has signaled that it is moving forward with the deal, even delivering to each program a proposed deadline for their decision. If they don’t agree to the deal, the schools may lose the additional capital as part of the landmark proposal and risk their future within the conference beyond 2036, the current end of the existing grant-of-rights agreement. League officials are socializing a specific date — Nov. 21 — for a vote on the capital investment proposal.

Administrators and board members at both Michigan and USC were informed earlier this week that, if a 16-school agreement is reached, the two programs would be granted a grace period — three to six months — to agree to join the deal if they wish to reap the full financial benefits. That period is only a proposal for now...

In public comments made last month, University of Michigan trustees described the deal as a “payday loan” and called it an unnecessary step and a “bail out” for those Big Ten schools that have mismanaged their finances. While those at USC have kept their feelings more private, Trojans athletic director Jen Cohen and her university board members hold reservations about an agreement that, for one, would distribute more revenue to league members Ohio State, Michigan and Penn State than all other schools...

Full story at https://sports.yahoo.com/college-football/breaking-news/article/sources-big-ten-execs-pressing-to-make-24-billion-investment-deal--without-michigan-and-usc-if-needed-140045573.html.

NOTE: Is anyone going to raise this issue at the upcoming meeting of the UC Regents Investments Committee?

Athletic Investments - Part 3

We are following up on the proposed investment of pension and maybe endowment funds in some kind of deal with the Big Ten athletic conference which UCLA joined - setting off a months-long brouhaha at the Regents after an intervention by the governor.*

There are questions, to say the least, about the use of pension funds to support the athletic program. Presumably, it was "sold" to the Regents during a closed-door meeting as a good deal by investment criteria. 

Yours truly does not know what "a 100-year investment" means. See below. Does it mean we have to wait that long to determine if it was a good deal? If so, a not-so-nice interpretation would mean that no one currently alive can be held responsible for the long-term results. Does it make sense to talk about 100 years in the context of college sports which are undergoing rapid change due to such factors the legal climate surround pay for players and the changes in technology for delivery of sports events to households?

From the Daily Bruin: UC Investments offered $2.4 billion for a 10% stake in a new entity that would manage the Big Ten’s league-wide media rights and sponsorship deals. The UC said it would use a pension fund to invest in Big Ten Enterprises, which would then direct funds to individual Big Ten schools’ athletic departments, according to ESPN. The UC’s investment arm manages investment funds for the University and provides fiduciary oversight, managing about $190 billion in its portfolio, according to the office’s website...

UC Investments considers Big Ten Enterprises “a 100-year investment,” a UC Investments spokesperson said in an emailed statement. They added in the statement that UC Investments has offered other Big Ten universities the chance to buy its stake if they are seeking a larger amount of ownership for themselves. “Our prospective partnership reflects our shared belief in stability, excellence, and purpose,” said Jagdeep Singh Bachher, the UC’s chief investment officer, in the statement. “UC Investments would be proud to support the Big Ten’s enduring legacy and its continued commitment to the success of student-athletes and scholars alike.” ...

Full story at https://dailybruin.com/2025/10/30/uc-investments-offers-2-4-billion-for-stake-in-new-big-ten-entity.

Note that ESPN reported that the University of Michigan and USC concluded that the deal was NOT a great investment. See:

https://www.espn.com/college-sports/story/_/id/46620086/proposed-big-ten-private-capital-deal-holding-pattern.

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*https://uclafacultyassociation.blogspot.com/2025/10/athletic-investments-part-2.html; https://uclafacultyassociation.blogspot.com/2025/10/athletic-investments.html.

Athletic Investments - Part 2

Yesterday, we noted that a mysterious item at a closed-door Regents meeting likely had something to do with a proposed investment of UC pension and endowment funds into some kind of entity linked to UCLA's change in athletic conference.

The Regents have a duty of prudence when it comes to investment of funds. Pension funds are ultimately to be invested for the benefit of pension system participants. Investments that have some other purpose raise questions. In particular, investments aimed at bolstering the athletic program raise questions.

Recently, a group of retirees - suspicious of certain CalPERS policies - hired an independent investigator to audit activities in that retirement system.*

Unless what the Regents are planning to do with the funds to which they are entrusted is made clear, there could be similar pressures within the UC retirement system.

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*https://www.sacbee.com/news/politics-government/the-state-worker/article312576983.html.

Terms Not Disclosed

From the Mercury News: Notre Dame de Namur University, a historic Catholic institution, announced Tuesday it reached a deal for the University of California to purchase its 100-acre Belmont campus.*

UC’s investment arm will lease the current facilities back to Notre Dame de Namur University for five years as part of the agreement, according to a news release. NDNU officials said the deal would provide time for UC to plan its long-term use of the property and for NDNU to find a new location in San Mateo County. Details about UC’s future plans or potential relocation sites for NDNU were not immediately available. The terms of the deal, including the sale price, were not disclosed...

“UC Investments moved quickly to explore this unique investment opportunity close to the heart of Silicon Valley,” said Jagdeep Singh Bachher, UC’s chief investment officer. “We’re convinced this long-term asset will greatly benefit UC, Notre Dame de Namur University, and the Sisters of Notre Dame de Namur for at least the next 100 years.”

The Belmont institution had spent four years negotiating a potential sale to Stanford University, but that deal fell through in February. Stanford attributed its decision at the time to “changes in the landscape for research universities,” stating these changes were “resulting in greater uncertainties and a different set of institutional and financial challenges for Stanford.” ...

As part of the deal, UC will renovate two historic buildings on the campus: Ralston Mansion and the Carriage House, both designated national and California historical landmarks...

Full story at https://www.mercurynews.com/2025/05/28/notre-dame-de-namur-uc-campus-deal-belmont/.

Yours truly is so glad to learn that UC doesn't face any of those nasty "changes in the landscape for research universities" or "uncertainties" that Stanford does.

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*News release at https://www.ndnu.edu/notre-dame-de-namur-university-announces-sale-agreement-of-nearly-100-acres-of-property-to-uc-investments-university-of-california/.

Watch the Regents Meeting of May 15, 2025

The third day of the Regents meetings of May - at least the public portion - was largely devoted to public comments, a lengthy presentation on Lawrence Livermore National Lab, approvals of committee reports of the previous two days, and a short open session of the Governance Committee to approve a contract with a UC-San Diego basketball coach. 

Public comments included concerns about federal funding cuts for a STEM diversity training program, staff pay, undocumented student support, adverse impact on workers of UC-San Francisco's takeover of Children's Hospital-Oakland, anti-Israel remarks, union relations and negotiations for "frontline" workers, NSF grant cuts, civil liberties, anti-Hawaiian telescope (TMT), civil liberties, and needed repairs of Hilltop housing (at UC-Santa Cruz). Following the comments, there was a disruption over union issues and the Regents moved to another room.*

When the meeting resumed, Chair Reilly endorsed the expansion of UC-Riverside's medical program. As noted above, there was a presentation on the activities of Lawrence Livermore. (Yours truly - who is old and remembers the Cold War - has to note that once upon a time, the activities of what were then called the nuclear labs - because they dealt with The Bomb - was a matter of controversy. Somehow, the calls for "military" divestment nowadays don't seem to be linked to UC's role at Lawrence Livermore or Los Alamos. We seem to have, as they say, moved on.) 

Stipends for advisors to the Health Services Committee were approved. Regent Leib on behalf of Academic and Student Affairs noted that the proposal for speeded-up faculty discipline would be presented at the July meeting. He also added there would be a related proposal for a process for students to complain if instructors pushed political viewpoints unrelated to class content in courses. And he mentioned the BOARS admissions controversy with the legislature. Notably, Regent (and Lieutenant Governor) Kounalakis - who is officially the presiding officer of the state senate - voted "no" on the report. Regent Makarechian again abstained on the report from Finance and Capital Strategies, presumably over the pension funding issue.

Apart from the short Governance meeting mentioned above, the rest of the Board's open session was devoted to ceremonial resolutions and statements regarding departing Regents and chancellors and, of course, President Drake.

As always, we preserve Regents meetings indefinitely since the Regents have no fixed policy on recording retentions.

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*According to the Daily Bruin, over twenty people were arrested. See:

https://dailybruin.com/2025/05/23/over-20-labor-demonstrators-arrested-during-uc-regents-public-comment-sit-in.

Note: The Regents immediately moved to another room, suggesting that there had been some planning for the demonstration with another room available. Usually, when such protests occur, the existing room is cleared.

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You can see the May 15th meeting at the links below:

Full board at:

https://ia800303.us.archive.org/5/items/governance-committee-board/Board%205-15-2025.mp4

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Governance at:

https://ia800303.us.archive.org/5/items/governance-committee-board/Governance%20Committee%2C%20Board.mp4

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General link for May 15: https://archive.org/details/governance-committee-board.

Two Abstentions

We have been posting about the discussions at the Regents this past week about deferring certain pension contributions. CIO Bachhar, at the Investments Committee on Tuesday, noted the incompatibility of the desire for full (100%) funding of the pension and deferring contributions in response to a question by Regent Makarechian. Senate Chair Cheung, at a full board meeting on Wednesday, supported the deferral. When the proposal - as Item F6 - came up for discussion and a vote at Finance and Capital Strategies later that day, Makarechian again raised the issue. You can see the discussion that followed at:

https://ia600101.us.archive.org/14/items/3-board/Regent%20Makarechian%20on%20deferring%20pension%20funding%205-14-2025.mp4.

In the end, the committee voted for the deferral plan with Makarechian and Regent Cohen - a former state budget director - abstaining.

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Our previous posts on this issue are at:

https://uclafacultyassociation.blogspot.com/2025/05/not-on-same-page.html and

https://uclafacultyassociation.blogspot.com/2025/05/a-cautionary-note-on-pension-finance.html.

Not on the same page

As blog readers will know, we posted yesterday about Chief Investment Officer Bachhar's cautionary response at the Regents on Tuesday to the proposal to defer certain pension contributions in the light of budget pressures.* Academic Senate Chair Cheung, however, endorsed the proposal to defer at the Wednesday meeting of the Board:

https://ia600101.us.archive.org/14/items/3-board/Senate%20Chair%20Cheung%20on%20deferring%20pension%20funding%205-14-2025.mp4. 

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*https://uclafacultyassociation.blogspot.com/2025/05/a-cautionary-note-on-pension-finance.html.

A cautionary note on pension finance from CIO Bachhar

We'll be providing our usual coverage of the May 13-15 Regents meetings as time permits. But it is worth noting a brief excerpt from today's meeting of the Investments Committee. Regent Makarechian took note of item F6 to be discussed in tomorrow's meeting of Finance and Capital Strategies:

F6 Action: University of California Retirement Plan – Amendment of a Previously Approved Action: Authorization to Maintain the Current University Employer Contribution Rate for 2025-26 and to No Longer Transfer $700 Million from the Short Term Investment Pool in 2025-26.

He asked Chief Investments Officer Bachhar for his opinion on delaying previously-scheduled pension contribution increases and cancelation of the STIP contribution in the face of anticipated federal and state budget cuts.* Bachhar noted that the funding ratio for the pension has for years been in the mid-80% range but that the faculty wants the goal to be 100% funding. He diplomatically says that if the goal is 100%, relying on growth of the portfolio cannot be the strategy. Only a combination of growth and contributions will get you to the goal. Put another way, Bachhar did not come across as a fan of the F6 approach.

You can see this exchange at the link below:

https://ia800300.us.archive.org/27/items/cio-bachhar-on-deferring-pension-funding-5-13-2025/CIO%20Bachhar%20on%20deferring%20pension%20funding%205-13-2025.mp4.

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*Makarechian is a member of both the Investments Committee and Finance and Capital Strategies.

Period of Adjustment

Do you have a sense that the chart above could do more to "adjust" current political trends affecting UC than all the protests combined? Of course, it's not good news for pension funding. And relying on the stock market for such things is risky. Reversals can occur. But sometimes a reversal is just a Dead Cat Bounce* and the trend continues.

Or direct to https://www.youtube.com/watch?v=ndG2yv9aIkE.

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*In finance, a dead cat bounce is a small, brief recovery in the price of a declining asset. Derived from the idea that "even a dead cat will bounce if it falls from a great height," the phrase is also popularly applied to any case where a subject experiences a brief resurgence during or following a severe decline. This may also be known as a "sucker rally." ...

Source: https://en.wikipedia.org/wiki/Dead_cat_bounce.

Some retirees will benefit - Part 2

You may recall our earlier post in January noting that some older UC retirees who were not integrated into Social Security would be eligible for added money thanks to a bill signed by Biden in the waning days of his term.

What was at stake was a penalty for those who were a) not integrated and b) had some non-UC income that entitled them to Social Security benefits. These people  were penalized under the old system that was repealed by the bill Biden signed. 

Most faculty who were under the UC pension at the time the Regents coordinated with Social Security were given the option of opting out or going into Social Security. Most opted to stay out given the rules of that time. But the rules subsequently changed, including the imposition of the penalty. 

What the Biden bill did was to drop the penalty with some limited retroactivity. It appears that lump sums for the retroactivity adjustment have been going out. At what point the monthly payments will be recalculated is unclear but the material from Social Security below suggests it will be next month.

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Social Security Fairness Act: Windfall Elimination Provision (WEP) and Government Pension Offset (GPO)
Last updated March 3, 2025
https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html

What is the Social Security Fairness Act (Act) and who does it help?

The Act was signed into law on January 5, 2025.

The Act ends the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These provisions reduced or eliminated the Social Security benefits of over 3.2 million people who receive a pension based on work that was not covered by Social Security (a “non-covered pension”) because they did not pay Social Security taxes. This law increases Social Security benefits for certain types of workers, including some:

• teachers, firefighters, and police officers in many states;
• federal employees covered by the Civil Service Retirement System; and
• people whose work had been covered by a foreign social security system.

Learn more below about the steps the Social Security Administration (SSA) is taking to implement the law.

Will every teacher, firefighter, police officer, or public worker receive a benefit increase because of the new law?

Not necessarily. We know that some press articles have mentioned teachers, firefighters, police officers, and other public employees when discussing the new law. However, only people who receive a pension based on work not covered by Social Security may see benefit increases. Most state and local public employees – about 72 percent – work in Social Security-covered employment where they pay Social Security taxes and are not affected by WEP or GPO. Those individuals will not receive a benefit increase due to the new law.

UPDATE! When will a person see their Social Security benefit increase because of the Social Security Fairness Act?

Starting February 25, 2025: SSA is beginning to pay retroactive benefits and will increase monthly benefit payments to people whose benefits have been affected by the WEP and GPO.

If a beneficiary is due retroactive benefits as a result of the Act, they will receive a one-time retroactive payment, deposited into the bank account SSA has on file, by the end of March. This retroactive payment will cover the increase in their benefit amount back to January 2024, the month when WEP and GPO no longer apply.

Social Security benefits are paid one month behind. Most affected beneficiaries will begin receiving their new monthly benefit amount in April 2025 (for their March 2025 benefit).

Anyone whose monthly benefit is adjusted, or who will get a retroactive payment, will receive a mailed notice from Social Security explaining the benefit change or retroactive payment.

NOTE: A beneficiary may receive two mailed notices, the first when WEP or GPO is removed from their record, and a second when their monthly benefit amount is adjusted for their new monthly payment amount. They may receive the retroactive payment before receiving the mailed notice.

We have been able to expedite payments due to the use of automation. For the many complex cases that cannot be processed automatically, additional time is required to manually update the records and pay both retroactive benefits and the new benefits amount.

We urge beneficiaries to wait until April to inquire about the status of their retroactive payment, since these payments will process incrementally throughout March.

Beneficiaries should also wait until after receiving their April payment before contacting SSA to ask about their monthly benefit amount because the new amount will not be reflected until April for their March payment.

The chart below shows SSA’s progress with processing adjustments since February 25, 2025:

Social Security Fairness Act Processing Progress Chart

By how much may a person's monthly benefit increase?

The amount monthly benefits may change can vary greatly. Depending on factors such as the type of Social Security benefit received and the amount of the person’s pension, some people’s benefits will increase very little while others may be eligible for over $1,000 more each month.

For someone already receiving benefits affected by WEP or GPO, how far back might they receive increased benefits under the Social Security Fairness Act?
December 2023 is the last month that WEP and GPO will apply. This means that those rules no longer apply to benefits payable for January 2024 and later. Important reminder: Social Security benefits payable for January 2024 would generally have been received in February 2024.

UPDATE! What should people do now that the Social Security Fairness Act is law?

The Act applies to benefits you get on your own record (retirement or disability benefits) and to spouse’s or surviving spouse’s benefits on another person’s record. What action you need to take depends on your situation and on what type of benefits you are eligible for.

If you are entitled to retired or disabled workers’ benefits, and your benefits are currently being reduced by WEP; OR if you are entitled to spouse’s or surviving spouse’s benefits, and your benefits are currently being reduced or eliminated by GPO:

• If you know that SSA has your mailing address and/or direct deposit information on file, no other actions are needed from you at this time.
• If you want to verify that the mailing address and/or direct deposit information that SSA has on file is accurate and up to date:
• Check your personal my Social Security account. Visit www.ssa.gov/my account to sign in or create an account.
• If you are unable to create an account, please call 1-800-772-1213 to verify the information we have on file.
• Ensuring that SSA has the correct information allows you to get any retroactive benefits and your new benefit amount quicker.

If you are not sure whether you ever applied for retirement, spouse’s, or surviving spouse’s benefits:

You may need to file an application. The date of your application might affect when your benefits begin.

If you never applied for retirement due to WEP or spouse’s or surviving spouse’s benefits because of GPO:

You may need to file an application. The date of your application might affect when your benefits begin and your benefit amount. However, each case is different, and all other Social Security laws and policies, such as benefit reductions for claiming benefits before the full retirement age, the retirement earnings test, and others, still apply.

Retirement or Spouse’s Benefits

The most convenient way to apply for retirement or spouse’s benefits is online at www.ssa.gov/apply.
Please note that the online application continues to collect pension information until we are able to update it; however, we will not offset the benefit.

If you are applying for spouse’s benefits, please note that selecting “Family Benefits” will take you to the application for Retirement/Medicare benefits. This process ensures that you will be considered for all benefits you are entitled to.

We can take an application by telephone for people who did not previously apply for retirement benefits because of WEP or spouse’s benefits because of GPO. If you meet these conditions, call 1-800-772-1213 Monday through Friday, from 9:00 a.m. to 6:00 p.m. ET. When the system asks, “How can I help you today?”, say “Fairness Act.” Then, you'll be asked a few questions. Your answers will help us connect you to a WEP-GPO trained representative to take your application.

Surviving Spouse’s Benefits:

The survivor benefit application is not available online.

Call 1-800-772-1213 Monday through Friday, from 9:00 a.m. to 6:00 p.m. ET. When the system asks, “How can I help you today?”, say “Fairness Act.” Then, you'll be asked a few questions. Your answers will help us connect you to a WEP-GPO trained representative to take your application.

For additional eligibility information, visit www.ssa.gov/apply.

As of week ending February 28, 2025: SSA has taken 68,000 new applications since the Social Security Fairness Act was passed. We have completed 72% of the new applications.

What if a person pays their Medicare premium directly to the Centers for Medicare & Medicaid Services due to the Windfall Elimination Provision or Government Pension Offset reduction?

SSA recommends that, until they get a notice from SSA, the person should continue to follow the instructions on the Medicare premium bill and pay the bill to ensure their Medicare coverage does not stop. SSA will send a notice telling people when their Social Security record is updated. Once the person begins receiving a Social Security benefit, the Medicare premium will be deducted from their monthly payment. If the benefit is not enough to cover the Medicare premium, the person will be billed for the remainder. SSA's notice will include this information.

If the person prepaid their premiums to the Centers for Medicare & Medicaid Services, and SSA tells them that their premiums will now be deducted from their monthly Social Security benefits, they will receive any applicable refund. SSA's notice will include this information.

You may need to take action. For people who pay their Medicare premium using Automated Clearing House (ACH), also known as Medicare Easy Pay or Online Bill Payment: Once SSA notifies the person that they will receive a benefit increase, the Medicare premium will automatically be deducted from their monthly Social Security payment.

For people using Medicare Easy Pay: They should arrange to stop the ACH payments by completing the Authorization Agreement for Preauthorized Payments form (SF-5510) and sending to the address on the form or online at Medicare.gov. Both options are located at https://www.medicare.gov/basics/costs/pay-premiums/medicare-easy-pay.

For people using Online Bill Payment: If a person is paying their Medicare premiums through their bank's online bill payment service, they should contact their bank to stop their online bill payments.

Call 1-800-MEDICARE (1-800-633-4227) for assistance.

What happens if my Medicare premium is deducted from my Civil Service Retirement System (CSRS) annuity?

If a person has had their premiums deducted from their CSRS annuity, and then applies for Social Security benefits, SSA will tell the person that their premiums will now be deducted from their monthly Social Security benefits. SSA's notice will include this information. Please contact SSA if you have any questions about your premiums.

UPDATE! Why did I receive a request from SSA regarding my pension amount?

WEP and GPO still apply to months prior to January 2024. In some instances, we may need to request the amount received for your pension from work not covered by Social Security to verify we are paying you correctly for these months. You do not need to contact us to report changes if this applies to you. If we need updated pension information, we will send a request for information to you.

How can someone avoid scams about the repeal of WEP and GPO?

Unfortunately, bad actors might attempt to take advantage of situations when money is involved. SSA will never ask or require a person to pay either for assistance or to have their benefits started, increased, or paid retroactively. Hang up and do not click or respond to anyone offering to increase or expedite benefits. Learn more about Social Security-related scams, and how to report them to SSA's Office of the Inspector General, at www.ssa.gov/scams.

What is SSA doing to tell people about the repeal of WEP and GPO?

SSA has taken several steps to tell people what it is doing to implement the Act and to provide important updates to avoid unnecessary calls or visits while we finalize the implementation plan. SSA:

• Created this Social Security Fairness Act webpage to explain what the Act does, what steps—if any—someone should take, and other helpful information. The webpage offers the option to subscribe to receive alerts when SSA updates the webpage, eliminating the need to return to the webpage to check for updates. SSA encourages media and third-party groups to direct people to this webpage for information.
• Added upfront messaging to its National 800 Number about the Act so callers do not need to wait to speak to a representative.
• Plans informational meetings with state retirement boards, labor unions, financial planners, human resources professionals, and the advocate community.

What is SSA doing to ensure it can help people affected by the Social Security Fairness Act?

SSA is currently processing pending or new claims for benefits and using automation to pay retroactive benefits and increase monthly benefit payments to people whose benefits have been affected by the WEP and GPO.

The Act requires SSA to adjust benefits for over 3 million people. Since the law’s effective date is in the past, SSA must adjust some people’s past benefits as well as future benefits. Processing these changes is very complex and SSA’s analysis shows that some of the work must be done manually, on a case-by-case basis. Our electronic payment systems cannot make all the necessary changes at the same time and we will need to process the actions in several stages, beginning the week of February 24th.

What challenges does SSA face implementing the Social Security Fairness Act?

The law requires SSA to adjust benefits for over 3 million people. Since the law's effective date is retroactive, SSA must adjust people's past benefits as well as future benefits. SSA is helping most affected beneficiaries now, but under SSA's current budget, SSA expects that some complex cases that need to be processed manually could take up to one year to adjust benefits and pay all retroactive benefits.

Callers to SSA's National 800 Number hear a message about the Act. This message has helped tens of thousands of people avoid holding for a representative. However, more than 6,000 people each day still choose to wait to speak to a representative about the Act. These calls, as well as visitors and appointments in local offices, will continue to increase over the coming weeks and months.

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Social Security Press Release

Tuesday, February 25, 2025
For Immediate Release

Mark Hinkle, Press Officer

press.office@ssa.gov

Social Security Announces Expedited Retroactive Payments and Higher Monthly Benefits for Millions
Actions Support the Social Security Fairness Act

https://www.ssa.gov/news/press/releases/2025/#2025-02-25-a

Today, the Social Security Administration announced it is immediately beginning to pay retroactive benefits and will increase monthly benefit payments to people whose benefits have been affected by the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These provisions reduced or eliminated the Social Security benefits for over 3.2 million people who receive a pension based on work that was not covered by Social Security (a "non-covered pension") because they did not pay Social Security taxes. The Social Security Fairness Act ends WEP and GPO.

“Social Security’s aggressive schedule to start issuing retroactive payments in February and increase monthly benefit payments beginning in April supports President Trump’s priority to implement the Social Security Fairness Act as quickly as possible,” said Lee Dudek, Acting Commissioner of Social Security. “The agency’s original estimate of taking a year or more now will only apply to complex cases that cannot be processed by automation. The American people deserve to get their due benefits as quickly as possible.”

People who will benefit from the new law include some teachers, firefighters, and police officers in many states; federal employees covered by the Civil Service Retirement System; and people whose work had been covered by a foreign social security system.

Many beneficiaries will be due a retroactive payment because the WEP and GPO offset no longer apply as of January 2024. Most people will receive their one-time retroactive payment by the end of March, which will be deposited into their bank account on record with Social Security.

Many of these people will also receive higher monthly benefits, which will first be reflected in the benefit payment they receive in April. Depending on factors such as the type of Social Security benefit received and the amount of the person's pension, the change in payment amount will vary from person to person.

Anyone whose monthly benefit is adjusted, or who will get a retroactive payment, will receive a mailed notice from Social Security explaining the benefit change or retroactive payment. Most people will receive their retroactive payment two to three weeks before they receive their notice in the mail, because the President understands how important it is to pay people what they are due right away. Social Security is expediting payments using automation and will continue to handle many complex cases that must be done manually, on an individual case-by-case basis. Those complex cases will take additional time to update the beneficiary record and pay the correct benefits.

Social Security urges beneficiaries to wait until April to ask about the status of their retroactive payment, since these payments will process incrementally into March. Since the new monthly payment amount will begin with the April payment, beneficiaries should wait until after receiving their April payment, before contacting Social Security with questions about their monthly benefit amount.

Visit the agency’s Social Security Fairness Act webpage to learn more and stay up to date on its progress. Visitors can subscribe to be alerted when the webpage is updated.

Remember?

Remember the Blackstone Real Estate Investment Trust (BREIT) that got a $4.5 billion bailout investment from UC's pension and endowment funds when it was experiencing a slow-motion run on the bank? In exchange for its investment, UC was supposed to receive a super-normal return for taking on the risk. We noted in an earlier posting that it is unclear if UC is actually receiving this return or whether it is being put on a tab owed to UC.*

The year 2024 was not especially kind to BREIT:

Blackstone Real Estate Income Trust's returns reached 1.95% in 2024. It’s the second year that Blackstone’s managers failed to reach the 5% return floor required for the firm to reap profits. 

The investment giant acknowledged headwinds in the real estate sector impacted the fund’s performance but said that a market rebound was already beginning to manifest. 

“While the sharp increase in base rates impacted fourth quarter performance, we see substantial data indicating we are in the early stages of a real estate recovery supported by healing capital markets and collapsing new construction in our key sectors,” a Blackstone spokesperson said in a statement...

Full story at https://www.bisnow.com/national/news/capital-markets/breit-grew-by-less-than-2-last-year-blackstone-says-2025-will-be-better-127598. 

Although BREIT isn't doing all that well, apparently its parent and its parent's CEO isn't hurting:

Blackstone Inc. Chief Executive Officer Steve Schwarzman collected just over $1 billion in pay and dividends in 2024, putting the spotlight on the billionaire’s wealth just as Washington takes aim at how private equity profits are taxed. Most of Schwarzman’s annual windfall came in dividends, not fund profits. He is the single largest holder of Blackstone stock with a stake of almost 20% in the world’s largest alternative asset manager worth roughly $37 billion...

Full story at https://finance.yahoo.com/news/blackstone-schwarzman-takes-home-more-223619198.html.

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*https://uclafacultyassociation.blogspot.com/2024/08/well-likely-hear-more-about-this.html.

3% Plus

Source: https://www.bls.gov/news.release/pdf/cpi.pdf.

The latest news release on the Consumer Price Index from the U.S. Bureau of Labor Statistics is a reminder that inflation is stuck in the 3+ percent per annum range, despite the Federal Reserve target of 2%. That observation has implications for pay adjustments. It is also a reminder that the pension plan provides full protection only up to 2%, so that the value of monthly payments in real terms will tend to decline. The Regents in the past have made ad hoc adjustments for pensioners whose real value has fallen below around 80% of the initial value. But the last time this was done, it was done grudgingly.