Gov. Jerry Brown’s 12-point pension plan to affect UC employees if approved

University of California employees could see a change in their retirement plans if changes formally proposed by Gov. Jerry Brown last week are approved.

The proposal, referred to as Brown’s 12-point pension reform plan, would amend the state constitution and require a two-thirds vote by the legislature to appear on the Nov. 6 ballot. Ultimately, the plan will need a majority vote from California residents to go into effect.

Changes include raising the retirement age to 67, or 57 for public safety employees, ending additional service credit purchases, and calculating benefits based on a 36-month salary average instead of 12 months.

If signed into law, the UC would be required to comply with the proposal, said Sam Chui, spokesman for Brown.

“All (UC) employees would be affected … especially in areas where the UC has challenges competing for top-tier researchers and professors sought after around the country and the world,” said Jason Sisney, deputy legislative analyst at the Legislative Analysts Office.

Some changes proposed in the plan, which affect all state employees, are similar to the UC’s current retirement plan, said Diane Klein, spokeswoman for the UC Office of the President.

Similarities include basing retirement payouts off the three highest years of consecutive compensation instead of the single highest year, not allowing purchases of service credit.

Under Brown’s plan, UC employees would have to wait an additional two years to retire.

UC officials have raised concerns about the plan’s impact on attracting top UC faculty in the future.

The main issue is a provision that would require employees to pay at least 50 percent of the annual cost of their retirement benefits, said Gary Schlimgen, director of pension and retirement programs at the UC Office of the President, in a December hearing addressing the legislature.

Schlimgen said it would effectively make employees pay 9 percent more into their retirement plans, harming the UC’s ability to retain top faculty.

These concerns were also contained in a report released by the nonpartisan Legislative Analyst’s Office in November, which responded to the governor’s initial proposal.

The report cited the need to be competitive when hiring highly skilled and highly educated public sector employees.

“If the state reduces pensions it would make it difficult for the UC to compete when trying to attract researchers, professors and other top faculty nationwide,” Sisney said.

Sisney added the UC might have to offer higher salaries to remain competitive if Brown’s 12-point proposal becomes law.

Daniel Mitchell, professor emeritus at the UCLA Anderson School of Management and the UCLA School of Public Affairs, said the UC feels it should be exempt from the proposal because the UC Board of Regents has already reformed the system’s retirement plan. In December 2010, the UC Board of Regents approved changes that include raising the retirement age to 65 and creating a new tier for employees hired after July 1, 2013.

It’s been more than 20 years since the state has contributed to the UC pension plan, and in that time, the state has saved more than $2 billion. The state made annual contributions to the UC Retirement Plan for 29 years until 1990. The plan was overfunded at the time, Klein said.

The state has yet to take up its previously assumed role for funding UC pension plans when funds were low, Mitchell said.

Brown’s current budget proposal allocates $90 million that can be used toward the UC Retirement Plan, but that plan is contingent on the approval of a tax package.