The Great UC Social Security Scam

By Robert Weil, UC-AFT Field Representative and Part-time/Part-year Lecturer, UCSC

When people think of Social Security, they usually have in mind a universal plan that every working person is supposed to get - even those casual employees who do not have any other form of pension. Yet at the very time when President George W. Bush and California Governor Arnold Schwarzenegger have been trying to dismantle Social Security and state retirement plans and replace them with privatized systems, few people seem aware that the University of California already denies both the federal and state plans to large numbers of its part-time and part-year employees, including hundreds of lecturers and librarians. These members of the UC work force have never even had the right to Social Security or other retirement plans that most workers, and especially, but by no means only, many elderly and retired, are now so fearful of losing.

However, the University does not just deny excluded employees the right to take part in the federal system. UC makes them contribute instead to a Defined Contribution Plan into which, unlike Social Security, it does not have to contribute a single penny in matching funds. The University is very explicit about this policy: “Certain casual, part-time, and temporary employees who are not UCRP members contribute a percentage of their salary to the Pretax Account [of DCP] rather than having Social Security taxes deducted from their paychecks.” And UC is equally clear about its own non-contribution to the plan:

10. Will the University match my DC Plan contributions?
No. There is no matching employer contribution; retirement benefits from the DC Plan are based exclusively on participants’ contributions, plus any earnings.
(UC Benefits, “Information About Plan Coverage for Safe Harbor Participants”)

While virtually all UC employees have small amounts taken out for DCP, even if they also pay into Social Security, lecturers and librarians working under 50% are required to set aside a full 7.5% of their salaries in this “Safe Harbor,” into which UC pays nothing.

This refusal of the University to pay into Social Security for large numbers of its employees is both a scandal and a scam. A scandal, because it is a morally indefensible denial of rights, particularly for those who are approaching their retirement age, and who face having no income - except for the relative pittance accumulated in DCP that will be easily exhausted in a year or two. A scam, because UC tries to convince its employees that this is all for their own benefit, a “Safe Harbor” substitute for Social Security.

This denial of benefits is based on a “legal” decades-old arrangement between UC and the federal government, under Sect. 218. [42 U.S.C. 418] of the Social Security Act, providing for agreements with the states, which can choose to exclude some workers:

(c)(3) Such agreement shall, if the State requests it, exclude (in the case of any coverage group) any one or more of the following:
(A) All services in any class or classes of (i) elective positions, (ii) part-time positions, or (iii) positions the compensation for which is on a fee basis . . . .

It is (A)(ii), the “part-time positions” provision - which at UC means any employee whose appointment is below 50% - that is used to exclude them from Social Security.

Under this “deal,” inclusion in Social Security at UC comes only with enrollment in its Retirement Plan, which in turn also depends on being employed more than 50% for the year. Thus both the UCRP and the arrangement with Social Security are set up in such a way so as to keep as many employees as possible out of both systems - a “double whammy” for those who do not qualify, since they are denied access to either UC or federal old age benefits, and are left without any retirement plan other than their own required “savings.”

The final bitter pill in all of this, is that the enforced DCP contributions are in turn counted as a “pension plan” by Social Security – though they have no resemblance to any honest system of pensions – so that any payments from the federal system which you may have been earned in non-UC employment, will be lowered by a prorated formula. Of course, DCP is not a “pension” in any normal meaning of that term. It is a 401a, that is, a temporary tax-deductible retirement account – the public equivalent of an individual private IRA. But “pension” or not, Social Security still penalizes you for these funds under a so-called “Windfall” provision, so that any of its payments to you on lifetime earnings other than those from UC are reduced, on the basis of your DCP “savings.”

Finally, almost “nobody” seems to know about this. Though I have not made a scientific survey, I have talked over the years with many of our unit members, including some approaching retirement age. It is extremely rare to find anyone who is acquainted even with the basic existence of this exclusion, much less familiar with the details of how it works. Many, if not most of our unit members who do not receive Social Security contributions at UC seem not even to realize what is happening to them. Obviously, UC has every incentive to avoid any wider publicity on this exclusion, which is an extremely lucrative way to rip off its employees, since it has avoided what must be tens of millions in Social Security taxes. So our first need is to carry out education on this matter.

UC unions have on occasion brought up this situation either at the bargaining table or in meetings with University administrators. The reaction has been adamant: the University will not consider changing their approach, and it shows no interest in even wanting to talk about it. Any changes in this area will therefore require a long and no doubt very difficult struggle with the UC administration. In this we will have allies, among fellow UC employees and unions, in the labor movement, in the state Legislature, and perhaps even among our national representatives. But the University is already floating ideas for the conversion of UCRP into DCP-type accounts for future employees that would reduce or eliminate guaranteed pensions (see story on page ______ and also The condition of part-time and part-year lecturers and librarians is therefore the future that all employees at UC may face if such policies succeed. As federal and state retirement plans come under attack, the time is ripe to take up this fight, part of a broader struggle to protect existing pensions, to extend them to every employee, and to demand Social Security for all, regardless of their status.

A committee of UC-AFT members and staff has formed to work on this issue. If you want to join us, please email me at or contact your local leadership or staff. A fuller version of this article is attached.

THE GREAT UC SOCIAL SECURITY SCAM, original version.doc41 KB