|The new tier won’t affect me, why should I care?
How will the implementation of new tiers for pension and retiree health benefits for new hires affect those of us already working at UC?
- About half of current UC employees will be forced on to tier 2 for their retiree health benefits. If your years of service plus your age add up to less than 50 or you have worked fewer than 5 years as of July 1, 2013, you will be moved on to tier 2. This pushes back the age at which UC will pay half of the employer contribution from 50 to 60 [THIS IS REFERRED TO AS THE "RULE OF 50"].
- In future years, it is likely that UC will push for pay cuts for those on tier 1 to pay for the superior pension benefits, essentially leveling everyone down to the lowest cost level.
- Until UC forces employees on tier 1 to pay more, those employees will be more costly. In times of financial hardship, employers often seek to get rid of the more costly employees and replace them with cheaper new hires. To prepare for this, UC has already eliminated the seniority requirement for layoffs for employees without a union contract.
- Our union will be divided in bargaining because those on tier 1 with superior benefits will prioritize preserving those benefits, whereas those on the second tiers will focus more on wage increases. This will make it more difficult to come together to pressure UC, especially if we want to go on strike.
- UC employment will become more of a revolving door because the incentive to stay because of superior benefits has been watered-down. Good pension benefits have shown up on surveys as the main reason employees stay at UC.
- It is simply not fair to have some employees get worse benefits than others who are doing the same job.
UC will undoubtedly try to convince us that many current employees will not be placed on
tier 1. That will be their main tactic to mute opposition to the pension changes. We will have to educate ourselves about what is really happening with these new tiers, and stay unified with new hires instead of seeing ourselves as “grandfathered in” and therefore, safe.
Join the discussion on this issue at the UPTE forum.
Union v. non-union
The university must bargain all pension changes with employees covered by a union contract. Conversely, UC unilaterally imposes Tier 2 on all those not covered by a contract. Iin the long run unionized employees may end up paying the same amount for the pension and getting the same benefits, unions will win extra wage increases and other benefits to offset these changes.
Over the last three years, UPTE-CWA members covered by the TX and RX contracts received 15% in wage increases to offset the 3% pay cut for pension contributions, while those without a union only received 3%, effectively getting no raise at all.
The implementation of contributions to the pension plan have augmented the benefits of unionization. Non-union employees are making the same as they were 3 years ago.
What’s UC’s motive?
UC has chosen to make up for the budget shortfall from the state by cutting costs for employee benefits and increasing student fees. These both have long-term harmful impacts on the University.
The financial situation of the pension plan is not UC’s motive. UC plans to contribute less to tier 2 than for tier 1, even though employees will pay more. If the plan was not financially sound, paying less would be inadvisable. The value of pension plans goes up and down with the economy. While UC’s plan lost value in 2008 & 2009, in 2010 the plan made a 12% return on investment. By having a large fund the risk for adequate funding is spread across many years and many employees resulting in great stability. The opposite would be a 401k style plan where one individual at one time (when they retire) takes all the risk.
UC executives believe that employee benefits are too generous. They do not believe that an employee that works at UC for 20 years and retires at age 60 should have a pension that is half of their salary and on-going medical benefits.
UC assumes that it can continue to attract and retain the same quality employees even though employees are underpaid and now no longer have an attractive benefits package. In UC’s own surveys, the pension and retiree health benefits are the two main reasons employees stay at UC, followed closely by job satisfaction.
Unfortunately, UC loses more than it gains by cutting benefits costs. More than 85% of UC employees are not funded by state funds. When UC increases the costs of benefits, those costs can be passed on to the funding source, e.g. medical center, federal research grant. By forcing employees to pay a larger portion of the cost of benefits (including pension), UC ends up receiving less from these external sources.