Top UC executives demand higher pension payments, threaten lawsuit

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Despite the massive unfunded liability in the University of California’s pension fund, three dozen of the state’s highest paid executives in the system are threatening to sue unless their pension benefits are dramatically increased, according to a story Wednesday in the San Francisco Chronicle.

The highly paid executives want UC to calculate their retirement payments based on their entire salaries, instead of a $245,000 limit imposed by federal law. They say that in 1999, regents agreed to lift the salary cap if the IRS granted a waiver, a courtesy sometimes granted to institutions like UC.

The IRS granted the waiver in 2007, although UC President Mark Yudoff now opposes the increases based on the fund’s deteriorating financial condition and continued cutbacks across the UC system by virtue of the state’s chronic budget problems. UC officials say that the increase was never guaranteed, but subject to various levels of final approval.

In a Dec. 9 letter obtained by The Chronicle, the executives said, “We believe it is the University’s legal, moral and ethical obligation” to increase the benefits, the executives wrote to the Board of Regents. “Failure to do so will likely result in a costly and unsuccessful legal confrontation,” they wrote, using capital letters to emphasize that they were writing “URGENTLY.”

The University’s pension plan is currently unfunded in the amount of $21.6 billion, and officials have been rushing to boost tuition payments, reduce benefits for future employees and requiring them to pay more of their salaries into the plan.

For the 2011 year, UC hiked its tuition 8 percent, most of which- about $175 million- will go straight into the pension fund. Last year, tuition was raised 32 percent.

The increased pension commitment would add about $5.5 million annually to the pension liability and about an estimated $51 million to make the change retroactive to 2007, as the executives are demanding.

UC’s pension troubles have been brewing for the last couple of years, as only recently it determined that its existing pension obligations far exceeded the monies in its pension fund. Largely contributing to the problem was that neither UC nor any of its employees had paid into the fund since 1990.

“I think it’s pretty outrageous that this group of highly compensated administrators of a public university are challenging the president and the chair of the Board of Regents,” said Daniel Simmons, chairman of UC’s Academic Senate and a law professor at UC Davis.

“What outrages me the most is that these 36 people are blind to the fact that this is a public entity in dire straits,” said Simmons, who also served on the retirement task force and opposed the higher pensions.

San Francisco Chronicle

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Comments (2)
  1. Skylar says:

    It does seem that if they were promised more money (even if it’s way more than the state can afford) the state has a moral obligation to pay them. They have families and living expenses just like everyone else!

  2. Sam says:

    @Skylar: Given the context of the current economic situation it’s pretty unreasonable to ask pension raises on top of an already-comfortable salary. Demanding money that isn’t there is just going to make things worse for the university as a whole. In other words, deal with it.

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