UC borrows $2.7 billion to Fund Pension Debt
UC regents last week approved borrowing another $700 million internally to help close a pension funding gap, bringing the total borrowed to $2.7 billion in a pension bond-like strategy with risks or rewards, depending on investment earnings.
UC regents last week approved borrowing another $700 million internally to help close a pension funding gap, bringing the total borrowed to $2.7 billion in a pension bond-like strategy with risks or rewards, depending on investment earnings.
Comments
This seems to be UC borrowing from it's own short-term investment fund (which supports university operations). The purpose of the borrowing is for UC to make its actuarial-required contribution to UCRP without further increasing members' contribution rate. This is to continue to move the UCRP towards "full funding".
It appears that the borrowing will be repaid over 30 years by UC by very small changes in overheads collected from campuses and med centers. The interest rate must be pretty small, but I did not see that it was specified.
UCRP did not borrow this money, and does not have to repay it.
This is UC doing what it can to keep up with its commitments.
on the borrower. Since the treasuret controls both funds, how is the interest of the Savings plan contributors protected? The is a conflict of interest here.
July 29, 2014 at 3:00 PM: I don't think that the "Savings plan" (i.e. the UCRS savings plan fund) is involved in this. I think UC simply took money from a short-term UC money-market account (where UC keeps its pocket change)and paid the UCRS. I don't really understand why it is characterized as a "loan" at all. But that's probably why I'm not rich......
I believe the current UC Treasurer still keeps a short term investment pool called the Savings Plan for University purposes. The current assets of participating LLNL, LBL, University and LANL 403b, 457 and 401b account holders who are invested in the "Saving Plan" are commingled with other assets. UCRS funds are also commingled in this, which is a separate pot from Univesity assets, such as endowments.
But I am not sure of this.
If I recall correctly, historicaly, UC and the individual campuses could invest funds in various pools according to their objectives, the Equity Plan, Savings fund and Bond fund were three important pools managed by the UC Treasurer, at the time, Patricia Small. UCRS also invested some of its assets in these three pools, and branched out over time.
But I still think the University and UCRS and employee tax-deferred funds (that remain in these plans) are commingled.