Post-retirement health benefits

Colleagues,

As your delegates to the Council of UC Staff Assemblies (CUCSA), we would like to share information on an issue that was addressed at our September meeting in San Diego last week. The issue concerns post-retirement health benefits and potential changes that have not been widely shared. CUCSA chair Lina Layiktez provided the summary below and links for more information.

What is the change to post-retirement health benefits that is being proposed?
The proposed action item for the July 2017 Regents meeting was to remove the 70 percent floor on the UC contribution to retiree health benefits and place a cap of 3 percent on year-over-year increases to UC costs. This is a policy change to offset the accounting rule changes required in "GASB 75." GASB 75 requires that the full actuarial value of other postemployment benefits (OPEB) be included on the systemwide balance sheet. This means that UC will have a perceived “new” liability of $21 billion, which would affect the system's overall credit rating. A hit to the UC's credit rating has obvious impacts to financing for the university.

The “new” GASB 75 requirement definition is subject to interpretation, since it was already a liability that was disclosed in previous year's financials. The value of this liability under current assumptions/retiree rules is approximately $21 billion. The current assumptions are being driven by the number of retirees in the system plus the number of potential retirees (active staff and faculty) and how much it would cost the system in health-care costs should the current employees retire today.

What does this all mean?
By removing the floor and capping UC's costs, the university effectively transfers rising health-care premiums to retirees. The assumed rate of health-care cost increase is 7 percent. Over the course of 20 years this would flip the proportion that UC pays to ~30 percent and the retiree to ~70 percent. The 70 percent floor was designed to provide some stability to retiree health-care costs.

What do we see happening?
Many UC employees choose to retire after calculating their retirement income. This is necessary because, except for Cost of Living Adjustments (COLA), there is no way for retirees to increase their income from the university. So when out-of-pocket health-care costs go up for retirees, this eats into their living expenses. There are already retirees and survivors of retirees who have to choose between health-care costs and food. To suddenly remove the 70% floor exacerbates this problem.

What can you do?
The campus staff assemblies are collecting feedback locally and sharing this up to the Council of UC Staff Assemblies (CUCSA), who will be coordinating a response to the UC President and/or Board of Regents. We are also working on a list of questions that include queries, such as what OPEB would look like if it grandparented current employees and implemented the changes to future retirees? What does this mean for retention of employees with 10 to 20 years of service?

The most powerful and helpful thing for us now is to hear about your personal concerns and how this impacts you. Would no OPEB mean you are less likely to retire from the UC system and take a job elsewhere for more money now? Will you have to postpone your retirement if, in retirement, you will have to pay a greater portion of your OPEB than you had planned for under the current plan?

Share your questions and stories with us on the UC ANR Staff Assembly website.

What's next?
Fortunately, the July agenda was revised and this item was moved to the November meeting agenda. Moving the item to November will allow for more consultation and discussion. It is unknown what approach the UC Office of the President (OP) will take to solicit feedback and engage in discussion. But as that information becomes available, we will make sure to share it broadly. We are hopeful that CUCSA (and therefore a voice of staff) will be included in the discussions and that OP will convene a task force representing all parties that will be affected by the proposed changes. Stay tuned.

Click here for the original July Regents Meeting Agenda Item (F7), which was then revised to remove the discussion on the 70 percent floor.

The immediate past chair of the systemwide Academic Senate, Jim Chalfant, has already written a letter to the President on this issue. You can read it online here: http://senate.universityofcalifornia.edu/_files/reports/JC-JN-Retiree-Health.pdf.

We can work collectively to inform and educate staff on this important matter. We are stronger together and the more voices that participate, the louder the message will be to those making the decisions that affect all of us.

UC ANR human resources director John Fox also said one important point that isn't addressed in the CUCSA summary is Medicare coverage. “When a UC retiree enrolls in Medicare, the monthly medical premium costs are significantly reduced (both for the retiree and for UC). Much of the future liability that UC is trying to control (and the risk of high monthly costs for the retirees) is during the time between retirement from UC and the start of Medicare eligibility (typically age 65).”

If you would like to share your stories or post a comment on this proposed change, please fill out the form on the UC ANR Staff Assembly website. We will share comments and stories from UC ANR with CUCSA leadership, who will compile it with information from other campuses to share with the UC President and UC Regents.

Sincerely,

Jeannette Warnert, UC ANR senior delegate to CUCSA

LeChé McGill, UC ANR junior delegate to CUCSA