1. UC Retirement System and the Restart of Contributions UCI Financial Expo April 15, 2010

2. 2 UC Retirement Plan (UCRP) UCRP DC Plan 403(b) 457(b) 457(b) Deferred Compensation Plan Defined Contribution (DC) Plan Tax-Deferred 403(b) Plan Components of UCRS

3. 3 While employed at UC At Retirement DeathThe After-life During Retirement What Does UCRP Provide? Disability Protection Survivor Benefits Death Benefits Lifetime retirement income or lump sum equivalent Annual COLA’s Death Benefits Postretirement Survivor Continuance

4. 4 Funding Retirement Benefits – Elements of Cost The Normal Cost is the portion of the long term cost allocated to a year of service. –Only active members have a current Normal Cost The Actuarial Accrued Liability (AAL) measures the Normal Costs from past years. –For retired members, the AAL is the entire value of their benefit Current Year Normal Cost Actuarial Accrued Liability Future Normal Costs Current AgeEntry AgeRetirement Age

5. 5 What it Takes to Stay 100% Funded

6. 6 UCRP Investment Rates of Return AVA recognizes each MVA return above or below the assumed rate (7.5%) over five years

7. 7 UCRP Historical Funded Status Campus/Medical Centers Only

8. 8 Why Restart Contributions? Sustain and preserve UC retirement benefits Maintain UCRP target funded status of 100% Allocate cost of UCRP to all funding sources: –State and UC general funds and student fees –Contracts and grants –Medical Centers and other self-supporting enterprises –Department of Energy (Lawrence Berkeley National Lab)

9. 9 Regents Approved 2010 Contributions Employer –FY 09/10, beginning April 15 All employer payroll funding sources will start at 4% –FY 10/11 At least 4%, higher if funding available Member –Beginning with May earnings –Amounts currently redirected to the DC Plan ─ No reduction in take home pay ─ About 2% for most members –Same amounts for FY 10/11 –Gradually increase to parallel CalPERS member rates (currently 5%) –Subject to collective bargaining, as applicable

10. 10 2014 Funded Ratio = 60% ($20 Billion Unfunded Liability) UCRP Funded Ratio (Actuarial Value Basis) Campus/Medical Centers Only Illustration Assumptions: Initial 4% employer contribution increases 2% per year starting 7/1/2011 Initial 2% employee contribution increases 1% per year starting 7/1/2011 (maxing at 5%) 7.5% market value return per year starting 7/1/2009

11. 11 PEB Task Force Charge Using the Task Force’s Guiding Principles Assess and analyze the impact of: –Market Competitiveness –Work Force Behavior –Employee and Labor Relations –Legal Implications and Risks –Current and Long-term PEB Funding Options –Impact on UC Financial Integrity Make recommendations to the President which allow the Regents to meet: –Fiduciary Obligations –Educational Responsibilities

12. 12 Pension benefits that current employees have already accrued to date Retirees will not be asked to contribute when active employees begin contributions What is NOT Changing for UCRP ?

13. Task Force Considerations for Current Faculty and Staff - Pension Faster ramp up of contributions for all employer funding sources and for active members* Offering choice to current faculty and staff* Complete stakeholder discussions on risks and impacts of applying new tier defined benefit options to current faculty and staff for future pension benefits* *PEB changes are subject to collective bargaining for represented groups 13

14. 14 Q U E S T I O N S