March 31, 2006
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| CORRE 2006
Position Paper March 31, 2006 |
2006
POSITION PAPER
A
STATEMENT OF
PROPOSED CHANGES
IN PENSION BENEFITS FOR 2006 by THE COALITION OF OAK RIDGE RETIRED EMPLOYEES Approved 03-31-06 The Coalition of Oak Ridge Retired Employees (CORRE) was formed in 2000 to represent the interests of the approximately 12,000 retirees (and surviving spouses) who have retired from Department of Energy contractor-managed facilities at Oak Ridge, Tennessee – Oak Ridge National Laboratory (ORNL), K-25 Gaseous Diffusion Plant (K-25), the Y-12 Plant (Y-12), grandfathered employees under the same pension plan at Bechtel-Jacobs and its subcontractors with Work Force Transition employees, and Wackenhut. The primary objectives of CORRE as stated in its Bylaws are: (1) to obtain and maintain pension and other benefits that are fair and equitable and competitive compared with other industries in the region and with other major DOE federal and private contractors in the technical field; and (2) to safeguard the Pension Trust Fund from which these benefits are derived. Officers
Dave Reichle, President Joe Setaro, First Vice President Bob Keil, Second Vice President Mary Helen Rose, Secretary/Treasurer Sandy Dean, Communications Charlie Kuykendall, Past President Board
Members
Advisors
Mike Bradshaw Ken Bernander Joe Dykstra Marty Goolsby Dean Eyman Bob Henderson Ben Gaylor Julia Hoppe Fred Jones Kaye Johnson Tom Lemons John Jones Pete Lotts Charles Landguth Ed Mee Fred Postma Ken Moore Gary Riser Pete Peterson John Sergent Teresa Riggs Bill Wilcox Fred Shull Troy Trotter Harriett Westmoreland Don Wood Bob Worrell EXECUTIVE SUMMARY
The increased cost of living for our 12,000 retirees and surviving spouses is becoming more and more damaging to them each year that goes by, particularly because of the skyrocketing costs of prescription drugs and medical care. The average length of retirement (in 2005) for our 12,000 is 14.7 years; we represent 941 who have been retired over 25 years! They have really been hurt badly and, being over 87 years old, many have exhausted their resources. The average impact of inflation (CPI) on our 12,000 pensioners is that they have seen prices go up 64.3%, and for individuals it ranges from 11% inflation for those retiring 5 years ago to a whopping 394% for the 56 individuals who retired in the year 1970! (BLS: Inflation Calculator) Yes, there have been a few adjustments by “the Company” to increase pensions over the past 35 years. Their combined average is a pitiful 19.3%, and the last couple of increases were “capped” (limited by income or years of service), so many retirees did not get anywhere close to the stated increase. CORRE for the last several years has been urging, and now redoubles our urging, that the Contractors propose a fair, equitable, reasonable pension adjustment that will restore at least 75% of the lost value of retirees’ pensions. The proposed increases of course would be graduated, meaning a 2000 retiree would get an increase say of 9%, a 1990 retiree would get 15%, and so on. The recovery of inflation for everyone would therefore work out to be the same, at least 75%. Still not up to what Government employees get with their COLAs, but much better than where our 12,000 stand today. (BLS: CPI-U) This average increase we are urging amounts to less than 1.3% for each year for each of our 12,000 pension recipients! Here’s what makes this easy. At the present time, no new money needs to be appropriated by Congress to grant this increase. No new money needs to be added to the Pension Trust Fund by the Contractors or by DOE or by Congress. There will be no increase in Contractor overhead dollars. All the money to cover the out-of-pocket increase as well as liabilities is available in the Pension Trust Fund set up years ago, and the surplus of assets over liabilities is more than enough to cover this cost. 2006
PROPOSAL
This position paper focuses on two specific goals, which CORRE would like to achieve in 2006 (see page 4 for Background Information): 1.
An Ad Hoc
Increase in pension
benefits for all retirees that will restore at least 75 percent of the
loss in value of their pensions that occurred due to the increased cost
of living since their retirement. An overall adjustment averaging less
than 1.3 percent per year since retirement would accomplish this. The
increase would be spread across the board, so that all retirees would
achieve about the same level of recovery since retirement.
2. A flat-rate reduction factor of 2 percent for retirees who have chosen the surviving spouse option effective July 2004 (same benefit that was extended to active employees in July 2004). Ad Hoc Increase. The proposed Ad Hoc Increase is NOT an unreasonable proposal. It represents only a small fraction of the value of the Multi-Employer Pension Plan (MEPP) Trust Fund of BWXT and UT/Battelle. As a matter of fact, the current value of the MEPP Trust Fund “surplus” of about $600M is currently sufficient to support CORRE’s proposed adjustments for 2006, and still have a significant surplus far in excess of liabilities. This proposed action is patterned after the pension adjustments approved at Sandia, January 1, 2002, except that we propose the same level of recovery for all retirees, rather than giving all retirees the same percent of increase. Adjustments have also been provided on an annual basis for retirees of the DOE contractors for LBNL, LANL, and LLNL. This Ad Hoc Increase is proposed for all retirees, regardless of retirement date or pension income. A modest pension adjustment in April 2001, the first adjustment in over 10 years, resulted in the recovery of less than half the loss of purchasing power due to inflation, but excluded all individuals who have retired since 1998, all vested retirees, and arbitrarily capped the pension benefit for many other retirees. Additionally, the recent adjustment of extremely low pensions (some at poverty level) for certain long-time retirees and surviving spouses arbitrarily excluded all retirees after December 1993, unless they were given an involuntary reduction-in-force, and excluded those retirees with less than 20 years’ service. These arbitrary and discriminatory practices of excluding or capping specific subgroups among the retirees seem to be peculiar to Oak Ridge. They are not practiced among other DOE contractor sites or other pension programs such as civil service, social security, military, etc. Because they are arbitrary and discriminatory, we believe they should end! Two (2) Percent Reduction Factor. As a result of union negotiations in early 2004, the reduction factor for those retirees who elect the surviving spouse option was decreased to a flat rate of 2 percent (versus an average value for present retirees of 8 percent). This improved benefit was extended in July 2004 to all active employees of UT-Battelle at ORNL and BWXT at Y-12. (Grandfathered employees at Wackenhut and Bechtel Jacobs and its subcontractor Work Force Transition employees have not yet received this benefit). Is it now DOE’s policy to have contractor employees in Oak Ridge under essentially the same Pension Plan receiving different pension benefits? The change in the spousal reduction factor should also be extended to retirees at ORNL and Y-12, as well as to active employees and retirees of Bechtel Jacobs and Wackenhut. The contractors have implemented a discriminatory policy of using the Pension Trust Fund to pay for the benefits of one part of the Fund’s participants (employees) while ignoring the other part of the Fund’s participants (the retirees). This level of unfair treatment of retirees has never happened before in the entire history of the Retirement Trust Fund, although it was attempted twice when the contractors proposed 420 transfers of Trust Funds. CORRE resisted these proposals, and the transfers were stopped in both instances. BACKGROUND
INFORMATION
The present pension benefit system is an outgrowth of the retirement-pension program established over 50 years ago by the Union Carbide Nuclear Division, managing contractor for the DOE predecessor Atomic Energy Commission, as a portion of their employee compensation program. At that time inflation was minimal. Average life expectancy after retirement was very low, but has increased dramatically over the past five decades. Times have changed! Retirees should be able to retain quality of life. While the Oak Ridge pension benefit program was competitive when it was established many years ago, it has not kept up with the times and currently lags behind the pension benefits provided by DOE contractors at many other sites. While the defined benefit pension program does not include any obligation to make adjustments, past precedent of such adjustments (in Oak Ridge and elsewhere) acknowledges that it was not the intent to allow the value of retiree pensions to erode so drastically due to inflation. Today, Oak Ridge workers who have been retired for several years have seen more than 50% of their pension value lost due to inflation. The retirement-pension program is not an entitlement program imposing a burden on taxpayers. It was from the beginning and is today an earned compensation program drawing resources from a Pension Trust Fund set aside for this purpose as a part of the compensation for employees. Beginning with the Manhattan Project and continuing until today, the Oak Ridge contributions to nuclear deterrence, nuclear medicine, science, and energy have had a profound effect on the lives of every American. Every Oak Ridge retiree can be proud of having made a contribution to these achievements. Even so, Oak Ridge retirees have not been treated equitably relative to other large groups of DOE contractor employees. Lawrence Berkeley National Laboratory (LBNL), Los Alamos National Laboratory (LANL), and Lawrence Livermore National Laboratory (LLNL) retirement benefits are dramatically superior. Sandia National Laboratories retirees received another 15 percent ad hoc increase in their pensions, effective January 1, 2002. This followed on the heels of a 3 percent to 18 percent graduated increase in October 2000 to a pension program already superior to that of Oak Ridge. Oak Ridge retirees, on the other hand, have seen the purchasing power from their pensions dwindle year after year, while costs for medical health insurance, prescription drugs, and dental care have increased far faster than inflation. As a matter of fact, in recent years the contractors have shifted more of the cost of medical insurance to retirees. The Oak Ridge Pension Trust Fund has received no new funds from DOE contractor budgets for current employees since 1984. The Oak Ridge Pension Trust Fund surplus (assets minus liabilities) has also been the target of attempts to divert funds for purposes other than pension benefits. In 2004, ORNL and Y-12 settled their union contract negotiations (2% flat rate reduction for the spousal option and the 30-year cap removal) using the pension trust fund assets. The 2% flat rate was immediately extended to salaried employees, but the 2% flat rate was not offered to retirees. Why not? Doesn’t this seem unfair? The actions requested for 2006 can be funded entirely from the Pension Trust Fund surplus. We have also presented herein the future goals of CORRE, consistent with our statement of Principles for Administration of the Oak Ridge Pension Fund posted on the CORRE web site, http://www.corre.info. GOALS
FOR
FUTURE ACTION
In addition to the specific proposals for 2006, we have drawn on the CORRE Bylaws, the statement of Principles for Administration of the Oak Ridge Pension Fund, and our direct interaction with hundreds of Oak Ridge retirees to develop the following long-term goals:
An automatic pension
adjustment
on an every-other-year basis is necessary to compensate for inflation
and maintain some semblance of a stable standard of living for
retirees. An annual cost-of-living adjustment is the norm for social
security, civil service, military, and railroad retirees. An annual
cost-of-living adjustment is the norm for Lawrence Berkeley, Los
Alamos, and Livermore retirees. Pacific Northwest Laboratory had
adjustments in 1982, 1989, and 1998. Argonne and Brookhaven
Laboratories have defined contribution pension plans, but the
contractors pay into them annually and annual investment earnings go to
the pensioner. Without a formal cost-of-living adjustment policy, only
three ad hoc adjustments have occurred in Oak Ridge in over two
decades, resulting in an adverse financial impact on retirees, and the
local East Tennessee economy. Equitable economic consideration for
retirees should not be solely dependent on ad hoc, retiree-organized
campaigns.
CORRE has requested that the DOE Oak Ridge Field Office require Oak Ridge contractors, in their upcoming contract renewals, to implement a biennial review of the benefits of retirees, just as they now do for benefits of active employees. The objective should be an immediate adjustment to restore at least 75 percent of pension purchasing value lost to inflation.
All of the
contractor-operated
DOE facilities were established as a part of the Manhattan Project and
continued in support of Atomic Energy Commission/ ERDA/ DOE missions in
energy, science, defense, and environment. Since the entire complex of
DOE National Laboratories and National Nuclear Safety Administration
(NNSA) Production Facilities is funded by DOE and its predecessor
organizations, and since DOE continues to exercise the authority to
approve or disapprove any adjustments in the benefit programs at each
site, it is CORRE’s position that DOE has a moral obligation to pursue
a policy of equity across the DOE complex.
In our dealing with these issues for about five years, the Department of Energy has shown that it is unable and/or unwilling to deal with the problem of inequitable and disparate treatment of the retirees. The issues noted that give rise to a number of CORRE goals for future action may best be solved through the government’s facing the facts and requiring administrators to take into account the interests of retirees in their policies. Also, the fact that DOE has adopted the practice of contracting limited-liability companies (LLCs) with no corporate history or memory of promises to retirees or concern for the retirees makes the development of government policies even more critical. A temporary corporate structure put together for a limited-term contract does not have any significant incentive to take into account the needs of retirees. In fact, there are considerable disincentives in the contracts for the contractors to act on behalf of retirees. That is a problem for both present retirees and future ones, now employees of DOE contractors. Especially egregious is the differential treatment of former Y-12 and ORNL employees transferred to Bechtel Jacobs and Wackenhut, grandfathered under the same original pension plan, but now covered under separate Pension Trust Funds. CORRE is concerned that these grandfathered employees at Bechtel Jacobs and Wackenhut, and their grandfathered employees who have since retired, be treated comparably to those covered under the MEPP. In the near future, the Bechtel Jacobs Company LLC Accelerated Closure Contract will end. Is DOE actively exercising its due diligence for the future steps necessary to administer and act as fiduciary for the pension plans and health-care plans for the Bechtel Jacobs retirees and surviving spouses in light of this important event?
CORRE believes that the
transfer
of money out of this Pension Trust Fund for any other purpose should
not be permitted. CORRE vigorously opposes any attempt to raid the
Pension Trust Fund directly through IRS 420 transfers or indirectly
through shifting a larger share of the medical insurance cost to
retirees.
BWXT Y-12 has a need to
understand the interests of retirees, both as a manager of the Pension
Trust Fund and as major DOE contractor in a community where these
12,000 retirees and surviving spouses have a significant economic and
public-opinion influence. UT-Battelle has now established a
Benefits Advisory Committee comprised of employees, and CORRE has been
asked to provide a representative who now serves on this
committee. BWXT Y-12, Bechtel Jacobs, and Wackenhut should do the
same.
Effective communication leads to better understanding. CORRE seeks the cooperation and support of BWXT Y-12 management and, in turn, is very willing to lend our support in a mutually beneficial environment. We sincerely believe retiree representation on such Boards will be mutually beneficial.
There should be no
reduction in
other appropriate employee benefits for retirees. Specifically, the
supplemental drug coverage for retirees will not be diminished by
implementation of the new Medicare drug supplement. Retirees expect
that the historic 50-50 cost share between the companies and the
retirees for this benefit will not be changed. Retirees also
should have the opportunity to continue (or to reactivate) insurance
benefits such as dental and vision, plus any others that are provided
and appropriate. (Retirees from BWXT and ORNL have now been
offered the option to purchase dental/vision insurance, but the same
offer has not been made to Bechtel Jacobs and Wackenhut retirees.)
Since
1984, no
contractor contributions have been put into the MEPP Trust Fund. Those
employees accruing pension benefits year by year from 1984 through 2004
have been doing so based solely on the growth in value due to interest
and income on funds set aside in trust for Oak Ridge workers employed
from the 1940s through 1984.
There is nothing wrong with that unless DOE and the contractors are denying reasonable inflation adjustments for retiree pensions in order to avoid or delay the requirement to fund the accruing pension benefits for current employees. Unfortunately, that is exactly what has happened. In the 15 years prior to the last contribution to the MEPP Trust Fund in 1984, five pension adjustments were approved. In the 16 years between 1984 and when CORRE was formed in 2000, two pension adjustments were approved. The overall economy is recovering and the MEPP Trust Fund surplus is in excess of $600M and continues to grow. Allocation of additional funds should not be necessary to support biennial cost-of-living adjustments to partially recover inflationary losses. However, in principle, DOE and DOE contractors should be allocating a small portion of the operating budget for new and current employees to the Pension Trust Fund to support their future pension benefits. The pension trust funds covering grandfathered employees at Wackenhut and Bechtel Jacobs should be strengthened to allow these grandfathered employees and retirees the same benefits as those covered under the MEPP. Pension benefits for new and current employees and planned pension benefit improvements for these people should be funded by contributions to the Pension Trust Fund from the current operating budget when the need arises, as is the established practice at other DOE facilities. |
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Working for Fair, Equitable, and Competitive Benefitsfor13,000 Former K-25, Y-12, and ORNL EmployeesCoalition of Oak Ridge Retired Employees P.O. Box 4266, Oak Ridge, Tennessee 37831-4366
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| Date Modified: 11
March 2007 |