November 14, 2005
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| Manager Y-12 Site Office
Letter to CORRE, page 2 November 14, 2005 |
Enclosure
BWXTY-12.
L.L.C. Pension Plan Information
1. Proposed Ad Hoc IncreaseCORRE requests an ad hoc adjustment to restore 75 percent of the value of pensions as represented in constant dollars to the year of the employee's retirement In 2001. an adjustment was made to the pension plan for retirees prior to 1998. This adjustment was made on the basis that those retirees after 1998 had received the benefits of salary increases and/or collective bargaining increases that approximated the costs of inflation. Since the defined benefit formula calculation uses the average of the highest earnings for three years during the last ten years of employment prior to retirement, it was determined that a cost of living adjustment was not justified for this group of retirees> The pension plan for this contract has been constructed and intended to be a fixed pension annuity. Towers Perrin, the pten actuaries, estimates that to effect a restoration of 75 percent of the constant dollars at the time of retirement effective on January 1,2006, an accrual of $ 57.6 million in additional pension liabilities would occur. 2. Two Percent Reduction Factor for Survivor Annuitants In July 2004 all active employees were granted a standard two percent reduction of pension for surviving spouse selection. This change was made for active employees only and reflected other concessions made by employees in bargaining agreement negotiations. The retired employees did not change any of their prior conditions of employment as did the current employees in these negotiations. Therefore, the change in the reduction factor is applicable only to current employees. Towers Perrin estimates that applying the two percent reduction factor to retired employees as of January 1.2006, woutd accrue a liability of $ 29.6 million. If the two percent reduction were applied to retirees retroactively to the individual’s retirement date, the liability accrued would increase to $ 69.4 million. 3. Other Related Information The design of the BWXT Y-12 Penston Plan was never Intended to be a "cost of living adjustment” type of retirement plan. The history of the plan does recordnumerous equitable types of adjustments from as early as 1969 up to 2004. The assets accrued within the pension plan are for the benefit of future retirees as wall as retired employees. BWXT Y-12 has an obligation to maintain adequate pension funding for future retirees as well as to past retirees. The lolal compensation retirement package provided to retirees, which includes a 401 (k) savings plan, retiree medical benefits, and a pension which employees do not contribute to in addition to Social Security, is generous particularly in the current business environment of eliminating defined benefit plans and post retirement health benefits. It should be noted that only about twenty percent of United States employees are now covered by defined benefit pension plans with post retirement medical benefits and that number is decreasing every year. The surplus in the pension plan fluctuates daily with the value of its investments. As of January 1, 2005, the surplus for BWXT Y-12 was $342 million. The FY 2005 decrease in pension funding for retiree payments is estimated to be $90 million plus an additional $10 million ofr one year increase in service pay. To page 1 |
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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: 17
March 2007 |