March 4, 2006
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| CORRE Letter to Donald R.
Erbschloe March 4, 2006 |
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Coalition of Oak Ridge Retired Employees Working for Fair, Equitable, and Competitive Benefits For Former K-25, Y-12, and ORNL Employees P. O. Box 4266 Oak Ridge, Tennessee 37831-4266 March 4, 2006 Mr. Donald R. Erbschloe Acting Chief Operating Officer Office of Science U. S. Department of Energy Washington, D. C. 20585 Dear Mr. Erbschloe: Information on Pensions of Oak Ridge Retirees Thank you for your letter of December 23, which responded to a letter dated July 14, 2005, from Congressman John Duncan to Secretary Bodman on behalf of the Coalition of Oak Ridge Retired Employees (CORRE). Your understanding of CORRE’s request is correct. We are seeking two post-retirement adjustments under the Defined Benefit Pension Plan: (1) An ad hoc adjustment to restore to 75 percent the pension benefit; and (2) a flat-rate reduction factor of 2 percent for retirees who elect the surviving spouse option. CORRE seeks these adjustments for retirees covered by the BWXT-UT/Battelle Multi-Employer Pension Plan (MEPP), as well as those grand-fathered retirees under the Bechtel-Jacobs and Wackenhut Pension Plans. We are aware, of course, that each adjustment would create an increase in long-term liability in the Pension Plan. But the increased liability for the ORNL portion which you cite in your letter, $37.8 million for the general adjustment and $21.7 million for the spouse reduction, would not require reimbursement of contractor payments to the plan. The valuation of the MEPP by Towers Perrin effective January 1, 2005, disclosed a total surplus of $519 million. Mr. Brumley, in his letter to CORRE, identified the Y-12 portion of the surplus at $342 million. Your letter, by contrast, clearly infers that the ORNL portion of the Plan has no surplus at all, when in fact the ORNL portion of the Plan enjoyed a surplus of $177 million under the valuation. Further, because of investment gains since then, we estimate the current total MEPP surplus to be in the neighborhood of $600 million. There have been no contractor contributions to the MEPP since 1984. In our response to Mr. Brumley, we pointed out the confusion caused by providing members of Congress with information related only to a portion of the Plan. Your letter heightens our concern in this regard. We believe any potential misunderstanding could be easily avoided by answering Congressional inquiries with complete MEPP information. With regard to your enclosed charts, we respectfully submit that the data are not relevant to CORRE’s request. The charts show percent of salary replacement at the time of retirement, whereas our request concerns only post-retirement pension adjustments. And our request is not related to defined contribution plans or Social Security benefits. Even if the charts were relevant, pension benefits for current employees include significant enhancements which are not received by retirees. Also, we question the assumptions used to calculate the value of the three components. The average contractor employee does not retire at age 65 with 35 years of service, does not participate fully in the defined contribution plan, and does not retire with maximum Social Security benefits (nor would these assumptions be valid for the U.S. workforce). In short, we believe the component values are unrealistic and misleading and have little practical utility. Oak Ridge retirees are indeed appreciative of the medical benefits provided by the contractors. But we note that the cost to retirees has steadily and substantially increased by virtue of cost shifting and increased premiums, which only adds to the need for a pension adjustment. It is true that some private-sector employers have terminated retiree medical coverage, but we are not aware of any DOE contractor that has done so. We ask that the Office of Science and its contractor address CORRE’s request. BWXT and ORNL granted substantial pension enhancements to all active employees in 2004, including the surviving-spouse option, without giving any consideration to extending the option to retirees. The last general adjustment occurred in 2001, but applied only to those who retired prior to April, 1998. We estimate that even with the added liability, the total remaining surplus in the MEPP would be approximately $450 million. We look forward to your response. Sincerely, David E. Reichle President, CORRE Copies to: Samuel W. Bodman, Secretary of Energy Gerald G. Boyd, DOE-ORO George J. Malosh, DOE-ORO William J. Brumley, NNSA-OR Steve Leidle, BWXT Y-12 Jeff Wadsworth, ORNL Congressman John J. Duncan, Jr. Congressman Lincoln Davis Congressman Zach Wamp Senator Lamar Alexander Senator Bill Frist |
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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: 19 March 2007 |