[September 18, 2006]

At the September 2006 UC Board of Regents meeting, the President will recommend a revision to the methodology for the determination of the initial and interim transfer of assets to the Los Alamos National Security, LLC (LANS) defined benefit plan (LANS Plan). The President will specifically seek authority to make an initial transfer of $10 million in University of California Retirement Plan (UCRP) assets to the LANS Plan trust, and supplemental transfers not to exceed a combined total of $50 million, to facilitate and expedite the payment of benefits to former UCRP members and/or their beneficiaries who are entitled to benefits from the LANS Plan and to cover plan administrative costs.

This action will facilitate and expedite the payment of benefits to former UCRP members and/or their beneficiaries who are now members of the LANS Plan and who are entitled to benefits. Approximately 6,600 former UC employees elected to transfer their accrued UCRP benefits and service credit to the LANS Plan. This action will allow for the coverage of administrative and related costs payable from the LANS Plan trust.

This action requires Regental approval. This action will in no way weaken or reduce the solvency of UCRP. Any interim or supplemental transfers of UCRP funds will be accounted for in the final reconciliation of UCRP assets and liabilities that will be eventually transferred to the LANS Plan trust. 

This action proposed by the President will not affect Los Alamos National Laboratory retired and inactive members retained in UCRP who will receive the benefits to which they are entitled to under the UCRP.

In order to protect the interests of all involved, UC will require that various documents from the Los Alamos National Security, LLC and the Department of Energy be in place before any transfer actually occurs.

Background on the transfer of UCRP assets to the LANS Plan
In December 2005, the Department of Energy awarded the management and operations contract for LANL to Los Alamos National Security, LLC. The new contract began June 1, 2006. As part of the transition process to the new management team, and consistent with the requirement set forth in the University's contract with the Department of Energy, UC is required to transfer UCRP assets at a rate sufficient to meet the cash flow requirements of the LANS Plan. In May 2006, the UC Board of Regents authorized the President to transfer UCRP assets to the LANS Plan on a monthly basis to the extent necessary to fund the plan's current claims. That methodology will be changed for the initial and interim transfers if The Regents approve the President's recommendation described above.

Background on Contract Close-out Discussions with DOE/ NNSA
In addition to this transfer of assets, the University of California is engaged in broader discussions with the Department of Energy/ National Nuclear Security Administration concerning all aspects of the close-out of the contract (W-7405-ENG-36). This is part of the normal procedures for closing out a federal contract. An initial meeting was held in Oakland and teleconferences are being held every other week to continue discussions and track progress. The next full day session is scheduled for early October in Albuquerque, New Mexico. UC administrators will continue to provide The Regents and the LANL and UC community with progress reports on discussions between UC and the DOE. Consultation with internal and external counsel, faculty leadership and UC actuaries is ongoing. Future reports to The Regents will discuss the special actuarial valuation required by the contract and ultimately seek authority to transfer the final amount of applicable assets and liabilities from UCRP to the LANS Plan trust.

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