April 12, 2007
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| CORRE Letter to Tennessee
Delegation April 12, 2007 |
Coalition of Oak
Ridge Retired Employees (CORRE)
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 April 12, 2007
Senators Lamar Alexander and Bob Corker Representatives Lincoln Davis, John Duncan, and Zach Wamp Request
for Your Assistance in Re-Drafting DOE N351.1
The Coalition of Oak Ridge Retired Employees (CORRE) requests your assistance in obtaining changes to DOE Notice N 351.1, which would implement new DOE policies on the management and administration of pensions when it is finalized and becomes a DOE order. In particular, there is a need to incorporate clarifying and defining language in the notice to provide guidelines for fair treatment of DOE contractor retirees who receive their benefits from defined benefit (DB) pension plans implemented by their contractors. This is extremely important and urgent, as most of the 100,000 retirees of DOE contractors retired under defined benefit plans. CORRE’s comments on DOE N 351.1 are attached to this letter, and provide the changes that are needed to establish criteria and guidelines to be used by DOE in managing and administering DB plans. These criteria would go a long way toward removing the subjectivity and neglect now involved in administering DB plans, and toward implementing a fair system for treatment of retirees across the DOE complex. We will also be providing these comments directly to DOE in response to their recent invitation in the Federal Register for comments on DOE N 351.1. We would remind you of why these criteria are needed in the DOE notice. According to DOE, 45 defined benefit plans and 37 defined contribution plans serve approximately 100,000 retirees and another 100,000 current employees and future retirees of DOE contractors in 20 different states. At best, DOE has a spotty, disinterested, and blemished record in managing these plans in a consistent and prudent manner that recognizes the history, implied promises to retirees, and underlying premises of the contractors who put these plans in place for "their" employees. Surely, a consensus should be sought among the representatives and senators of these states (and their colleagues) to see that appropriate changes are made. The current situation requires a Congressional solution, and we are asking members of our Tennessee delegation to take the lead to get this accomplished and to get closure on an issue so important to so many people in Tennessee and the other 19 states. Please let us know what you will do to have these criteria and guidelines implemented in DOE Notice 351.1 and in DOE and among its contractors. We appreciate your support and look forward to an early reply. By copy of this letter, we are requesting the managers of operating contractors for DOE in Oak Ridge to support these changes, as they are in the interest of both retirees and employees of their operations.
Sincerely,
David E.
Reichle
President,
CORRE
DER:MHR Attachment - Comments on DOE Notice N 351.1 Copies to: Mr. Gerald G. Boyd, Manager, DOE-ORO Dr. Jeffrey Wadsworth, Director, ORNL Mr. George Dials, President and General Manager, BWXT Y-12 Mr. John Burleson, General Manager, Wackenhut Mr. Mike Hughes, President and General Manager, Bechtel Jacobs COMMENTS ON DOE
Notice N 351.1
Provided by COALITION of OAK RIDGE RETIRED EMPLOYEES (CORRE) April 12, 2007 CORRE recognizes that DOE Notice N 351.1, as drafted, is primarily about the transition from Defined Benefit (DB) plans to Defined Contribution (DC) plans for future DOE contractor retirees. However, the document is inadequate in the manner in which it addresses the problem of administering fairly the existing defined benefit plans under which most of DOE contractor retirees now receive benefits and which is still a prevalent methodology used by many contractors for the DOE. The document should address comprehensively all primary issues related to the administration of the defined benefit plans, especially since there is no other document that addresses properly how defined benefit plans will be administered to give fair treatment to retirees whose pensions are provided by these plans. Therefore, CORRE is making the major recommendation that detailed methodology for administration of defined benefit plans also be incorporated in N 351.1. It is not sufficient to say simply that changes in DB plan benefits must be approved by the Secretary of the Department of Energy. DOE has 45 defined benefit plans in use across its operations in some 20 states. These plans were established by a variety of corporate entities at different times under conditions of a world war as well as more peaceful times, and with considerations that span some of the most turbulent times from a sociological and political perspective in our nation’s history. Stewardship, management, and performance of these 45 different plans have varied dramatically. Some contractors have an exemplary record of managing costs, while periodically augmenting plans to help mitigate lost purchasing power due to the ravages of inflation. Others have apparently failed in this responsibility as indicated by a current deficit of pension assets to liabilities of some $2 billion, according to DOE representatives. It is the position of the Coalition of Oak Ridge Retired Employees that those plans with an exemplary record of responsible management NOT be lumped together with those less successful or under-funded. We believe and advocate that successful DB plans should be allowed to augment their plans in accordance with their ability to fund the augmentation, and also in special circumstances where additional funding is required by DOE. CORRE recommends that DOE modify N 351.1 by incorporating guidelines for governance of the method of augmenting benefits for retirees of DB plans. CORRE recommends that the following criteria be used to implement and manage such augmentation, and that these criteria and provisions be incorporated into N 351.1: A) DOE shall separate considerations for
Defined Contribution (DC) plans and Defined Benefit (DB) plans.
B) DOE shall separate considerations for DB plans that are fully funded from those that are not fully funded. C) DB plans that are under-funded shall be funded in accordance with the Pension Protection Act (PPA) requirements. D) Retiree benefits from fully funded DB plans (i.e., assets/liabilities=100%) may be augmented at the contractor’s request and with the advanced approval of the Secretary of Energy (Secretary), provided the funds are available and the augmentation is based on sound management practices as regards that individual DB plan fund. E) Under no conditions shall the contractor propose or DOE approve a transfer of funds from the DB plan surplus. F) Under all circumstances, any change or augmentation of DB plan benefits for future retirees (present employees) shall be granted immediately and in full to existing retirees or their qualified survivors. Where such augmentation has not been allowed for any reason, the contractor shall now propose this augmentation, and the Secretary shall approve it for immediate implementation, provided the funds are available as herein specified. G) At least biennially (every two years), the contractor shall review lost purchasing power of existing retirees and qualified survivors and propose appropriate augmentation of pensions as follows: 1) At a minimum, the goal shall be to
maintain pensions at 75% of lost purchasing power calculated as follows
and using the U.S. Department of Labor, Bureau of Labor Statistics,
Inflation Calculator on their website or it’s successor methodology:
For each $100 of pension : (example =1985 retiree) a. Inflation calculator
1985-2006=
$ 187.36
b. Pension plus previous adjustments. = $ 130.38 c. Lost purchasing power (a-b) = $ 56.98 d. 75% of lost purchasing power(c x .75) = $ 42.74 e. After adjustment per $100 (b+d) = $173.12 f. After adjustment % of original pension in inflation-adjusted dollars (e/a) 92% Note 1: In the case of Oak Ridge Multi-Employer Pension Program (MEPP), these adjustments could result in retirees being up to 16% behind inflation (lost purchasing power), and the average would be 8% behind inflation. Note 2: In the case of the Oak Ridge MEPP covering over 11,000 current retirees, the cost of fully implementing this proposal plus the 2% spousal option (separate proposal) would require less than 1/2 of the current surplus and cost DOE or the taxpayer nothing! 2) Any lost purchasing power adjustments shall be made for all then retired employees and qualified survivors regardless of salary level or year of retirement without exclusions or setbacks of any kind. H) The Secretary of Energy or their designate shall approve contractor proposals for augmentation of existing DB plans provided: 1) The plan is fully funded before and
will be fully funded after the requested augmentation, and
2) After augmentation, plan assets shall not fall below 100 % of plan liabilities using PPA guidelines and requirements. Should the biennial review of lost purchasing power on two consecutive reviews (4 years maximum) result in the need to make an adjustment for which pension funds are not available (assets/ liabilities would fall below 100%), the Secretary shall in that year reallocate operational funds as may be required to fully fund the lost purchasing power adjustment as indicated and as herein specified. I) Contractors shall be cognizant of historical practices at the locations managed and provisions for augmentation of DB plans for retirees and covered employees at such locations, and 1) Conduct biennial reviews of lost
purchasing power as herein specified, and
2) Propose to DOE Elements augmentation of such plans in accordance with these provisions, provided the plan meets the specified funding requirements for augmentation. J) DOE Elements shall review contractor proposals for DB plan augmentation as herein described, and 1) Ensure that all provisions of this
policy/order are met, and
2) Submit the proposal to the Secretary for approval and authorization to implement. K) The contractor shall implement approved augmentations as soon as practicable. CORRE April 12, 2007 |
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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: 25 April 2007 |