June 28, 2006
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| CORRE Letter to Congress
Concerning DOE Meeting with Retirees June 28, 2006 |
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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 June 28, 2006
Senators Lamar Alexander and Bill Frist Reps. Lincoln Davis, John Duncan, and Zack Wamp Dear Senators/Congressmen: DOE
Meeting with Contractor Employees and Retirees -
Needed Follow-Up Actions This letter is to report on the public meeting describing the policy of DOE for retirement, to tell you our reaction to it, and to request your assistance. An overflow crowd of more than 600 Oak Ridge contractor retirees and employees attended the briefing of DOE held at Pellissippi State Community College, June 22, to describe the policy of DOE relative to pensions and other post-retirement benefits, to answer questions, and to obtain input from employees and retirees. Most of the people in attendance were retirees. We want to state to you, on behalf of 12,000 retirees of Oak Ridge DOE contractors, that we reject categorically the policy of DOE with respect to those provisions of their pension policies dealing with the present defined benefit (DB) plan for retirees of Oak Ridge contractors. Although supposedly DOE has delayed the implementation of the policy for one year, it is clear that DOE has already implemented its policy for no adjustments for defined benefit plans, despite a history of having made adjustments to partially meet the cost-of-living increases in the past. In fact, the principal spokesperson for DOE, Ingrid Kolb, stated emphatically twice at the meeting at Pellissippi State that there will be no adjustments for retirees in Oak Ridge. The most serious, misleading, and erroneous information included: 1. The presentation of DOE was slick and dishonest with respect to much of the data on which they said they based their policy. Specifically, Ms. Kolb emphasized repeatedly that the reason they were implementing the policy was to cap the liabilities for pensions, so that DOE will have more funds to implement its missions of research, cleanup, and other work mandated to them. The costs of defined benefit (DB) plans are miniscule in terms of the overall DOE budget. 2. Implying that the unfunded liability for pensions is $11.6 by lumping medical benefit obligations together with defined-benefit (DB) fund assets. For example, the Oak Ridge MEPP Pension Fund is over-funded by nearly one-half billion dollars. The medical benefits have always come as annual payments from the current operating budgets of the contractors. If these annual medical payments are to be considered as unfunded liabilities, then so are employees’ salaries, annual facility maintenance costs, etc., etc. 3. Presenting an analysis that Oak Ridge retirees receive approximately 95 percent of an employee’s salary in retirement. This is based on erroneous and gross assumptions about length of service (false), average age at retirement (false), level of participation in the 401K plan (false), absence of inflation (false), and that all present retirees have the retirement plan and multiplier that was analyzed (false). 4. DOE talked about escalation of their costs for defined benefit (DB) plans and post-retirement medical benefits as being 63% over the last five years. They were informed at the meeting that retiree payments of their part of the medical costs have gone up much more than that. 5. DOE stated that some DB plans at some DOE sites were under-funded. Why penalize Oak Ridge retirees for management problems at other sites? In addition, DOE again failed to address such critical matters as: 1. The fact that the Oak Ridge MEPP Fund has had a funding surplus sufficient for paying adjustments. No new funding is required! 2. The fact that most retirees in the Oak Ridge plan have one of the worst plans in DOE in terms of benefits. 3. The fact that no attempt has been made in the policy to address the differential benefits available to the retirees from the present plans across the DOE laboratory system. The benefits vary by huge factors and cause serious short-changes to Oak Ridge retirees. 4. The unfairness of a policy where contributions are now made every year by DOE to defined contribution (DC) plans (up to 10% of salary annually), but where DOE plans no future contributions to its defined contribution plans. Why the inconsistency? 5. The fact that DOE apparently had no concerns about “meeting future commitments” from the Multi-Employer Pension Plan (MEPP) fund in Oak Ridge when they improved retirement benefits for current workers in July 2004, including reducing the spousal option to 2% while excluding retirees. 6. The fact that DOE has not contributed to the MEPP DB plan in Oak Ridge since 1984, and that all new employees since then, and into the foreseeable future, have received pension benefits from investment earnings while retirees get short-changed. 7. The fact that retirees from the different DOE contractors in Oak Ridge are treated differently. On the matter of extending the reduction of the spousal benefit penalty to retirees, as was done at Sandia National Laboratories but not in Oak Ridge, Ms. Kolb answered that DOE does not control individual plans, so different adjustments can be enacted at different locations. It was pointed out to Ms. Kolb that DOE Headquarters had to approve the SNL adjustment. DOE switched back and forth between themselves and contractors, as to who has overall control over pension plan policy and benefit approvals, to suit the convenience of whatever argument DOE was making at the time. It is clear that the DOE policy is to avoid any future pension payments for their old DB plans when they implement new DC plans. There has been no contribution from DOE’s budget since 1984 into the Oak Ridge MEPP pension fund. All new employee benefits and enhancements have been paid for by fund investment returns. Now DOE says that it will extend its research and development and cleanup activities by avoiding any necessity of paying into DB plan funds—essentially by not meeting its obligations that employees understood before they retired. What this really means is that DOE is paying for its programmatic activities on backs of retirees. This is their policy, and we cannot believe that it would be the intent of the Congress or the citizens of this country. Despite the fact that DOE has apparently already implemented a part of the policy that is very detrimental to the interests of retirees in Oak Ridge, and probably in other places that are on DB plans, we took DOE management at its word that they wanted input and suggestions. We gave them a set of suggested amendments to the policy N 351.1, amendments that protect the value of pensions of DOE contractor employees and will financially impact DOE. We enclose these amendments for your information. In addition, we enclose questions that we gave to the DOE representative at the meeting—these questions seek explanations of DOE policy and its basis. We do not believe that DOE is prepared to give any ground relative to the pension issues unless it is forced to do so. DOE management is arrogant, disrespectful of persons who have defended the country through technology and science, and unsympathetic to retirees’ views. DOE has delayed action years while they “studied” what to do. It is telling that never in the development of their new policy did the DOE headquarters people have a discussion with any representative of retirees in Oak Ridge. DOE Notice 351.1 attempts to control increasing medical costs and create a “level playing field” of similar DC pension plans for contractors across the DOE system. CORRE has argued for fair treatment of current retirees from Oak Ridge contractors. But, while DOE Notice 351.1 not only does nothing to correct the historic discrepancies in retirees’ pensions at the different sites, it also actually prohibits contractors from taking initiative to correct injustices at specific sites. If Congress wants integrity in the policy for DOE contractor retirees, it will have to be mandated by Congress. We urge your prompt attention to these matters. This is a complex issue, and it is very disappointing that DOE cannot present the facts to the public in an unbiased and truthful manner. CORRE intends to implement a public information campaign to expose this duplicity and to seek support for necessary action. We are available to discuss any questions that you may have. Sincerely, David E. Reichle, President Attachments (2) Coalition of Oak Ridge Retired Employees Copies to: Gerald Boyd, Manager, DOE-ORO Jeff Wadsworth, Director, ORNL George Dials, President, BWXT Y-12 Mike Hughes, President, Bechtel Jacobs Co. John Burleson, General Manager, Wackenhut Proposed Amendments
to DOE N 351.1
Proposed to DOE by Coalition of Oak Ridge Retired Employees Oak Ridge, Tennessee June 22, 2006 Amendment Number 1 On Page 2, Section 4. Background---- add the following paragraph to the existing paragraph: DOE and contractors have historically granted adjustments to pensions for defined benefit plans when the pensions of those plans reached levels that seriously impaired the values of pensions because of inflations. This has given rise to reasonable expectations and planning on the part of retirees that such adjustments would continue, since this had been the practice in the past. Accordingly, DOE must have a policy that manages the total outlay for pensions, but is fair in allocating its resources to not only future employees but also present employees and retirees who are on historical defined benefit plans. Amendment Number 2 On Page 4, Section 5a. (6): Delete in first sentence: “Absent a compelling reason (e.g. required by law and then” and “not approve”. Add the phrase “shall approve” so that the first sentence shall read of this sections reads as follows, as amended: Only with the written approval of the Secretary of Energy, Departmental Elements shall approve costs for reimbursement of any amendments to an Existing DB Pension Plan(s)(as defined in this Notice) that augment or potentially augment in any way the benefit for any plan participant, including any early retirement incentive. Amendment Number 3 Following Page 4- Section 5 a. (9) dated 4-27-06, add the following amendment to the document Section 5 a. (10) The Secretary of Energy shall consider the approval of changes to existing historical defined benefit when a plan is submitted meeting the following criteria: 1. The average value of the retiree pensions has fallen below 75% of the original average value of the pensions, as determined by application of the appropriate cost of living index of the Department of Labor. 2. The plan for which a change is submitted is one which has had historical adjustments in the pension benefits of the plan during its operation. 3. The plan for which a change is submitted is a defined benefit plan for which adjustments have been planned and provisions made for financing such adjustments. Section 5 a. (11). Revisions to plans submitted under the provisions of Section 5a.(10) above shall meet the following requirements: 1. As a minimum, the adjustments to individual pensions in the plan shall be restored to 75% of their original purchasing power, as determined by the appropriate multipliers for cost of living of the Department of Labor. 2. Benefits for retirees from defined benefit plans should not yield benefits that have decreased purchasing power values significantly lower than what would be imputed to them for their period of service if they had been working under the market based defined contribution plans for the duration of their service. Significantly lower is any value exceeding 10% of the monthly pension. 3. The above adjustments shall be determined based on actuarial analysis by a qualified actuary using the best available data and statistics for the market-based plans and the defined benefit plans still in operation. Amendment Number 4 Page 2, Section 7. Definitions---- add the following definition to the existing section: Historical Defined Benefit Plan- a defined benefit plan operated for employees and retirees prior to the change date (March 1, 2007) for implementation of the market-based plans. Amendments
for Attachment 2
Amendment Number 5 In Attachment 2, page 3, Section 3, add a new paragraph to section b: A Contractor will not be prohibited from proposing and implementing an amendment to an Existing DB Pension Plan, with DOE approval, which may augment or potentially augment the benefit for any plan participant. Any costs resulting from such implementation will be considered allowable costs. Amendment Number 6 In Attachment 2, Page 3, following Section 3 b., add the following amendment as a new section: Section 3 c. Benefits and costs of Historic Defined Benefit plans shall be evaluated in accordance with the provisions of Sections 5 paragraphs 10 and 11. Cost will be reimbursed by DOE for changes in plans that meet those requirements. Questions About DOE N
351
Asked of DOE by Coalition of Oak Ridge Retired Employees Oak Ridge, Tennessee June 22, 2006 General Questions 1. CORRE has had a basic position of: (a) Granting retirees the flat rate 2% Surviving Spouse Reduction Factor that was given to active employees in 2004; (b) Restoring 75% of the lost purchasing power to retirees. How does this notice affect this request? 2. Why is the DOE putting all sites in one basket? You are treating those with a surplus the same as those who are in trouble. Why not fix those in trouble? 3. DOE always had approval authority for any adjustment to pensions. Is this notice merely a message to contractors “Do Not Recommend Any Adjustments”? 4. Medical benefits to retirees are not part of the Pension Plan. This notice treats them as if they were. Why? 5. Historically, adjustments have been made periodically (though not annually as is the case with Federal Employee Pensions), consistent with both need and availability of funds in the Plan. The Oak Ridge plan has been managed very well as evidenced by the fact that no funds have been contributed to it since 1984. Why are we being punished for being so successful? 6. DOE attempted to raid our pension fund through 420 transfers in the past. Is this another attempt to take our surplus for other uses? 7. What is the unfunded liability of the DB Pension Plans across the DOE Complex? 8. What is the “DOE Financial Statement” and does it show the split between the Defined Benefit Pension Plans and the Health Care Plans that are not a part of the Pension Plans? Questions
Specific to the Notice
1. Section 5. Requirements – Reporting by DOE Under the sections about reporting, what is meant by the statement that DOE will no longer report in its annual financial statement Incremental pension liability or costs? See Subsection 5.a.(3) on page 3. 2. Meaning of “compelling” and “required by law” Section 5. Requirements—Page 4 and in numerous other places in the document, including attachments, such as under the section Subsection 5.a. (6), what is meant by “compelling” and “required by law”? Does this mean that for defined benefit plans, there will need to be an act of legislation by Congress to get adjustments considered and granted by the Department of Energy? If such legislation is required, tell us what should be the provisions of the authorizing language. 3. Meaning and intent of Notice relative to adjustments for DB plans Does the Notice mean that DOE will not under any circumstance approve an adjustment in benefits under an Existing DB Pension Plan unless required by law? If DOE will approve adjustments under existing DB Pension Plan, what will be the criteria for such adjustments? 4. Use of Existing DB Plan assets Does DOE intend to use Existing DB Plan assets to, in any way, subsidize the added costs of the newly required Market Based DC Plans? If so, how will the funds be used? 5. Lack of recognition of planning for periodic adjustments of DB plans Where in the document is there any recognition of the fact that some contractors planned and operated their defined benefit plan investments to provide for periodic adjustments? 6. Differences in pension payouts Why has the DOE not taken into account the fact that there are serious differences in the pension payouts of plans in terms of benefits giving rise to some that are not sufficiently funded and some with significant surplus? Why does it not take into account that some of those surpluses morally and ethically belong to retirees of those plans? For example, the Oak Ridge plan. 7. Low benefit ratios Why does DOE not take into account the fact that some plans have very low benefit ratios, thus a greater need to make adjustments, such as the Oak Ridge Plan? 8. Minimal or no adjustments for DB plan Apparently DOE thinking is that DB plans should never be adjusted. How can DOE justify minimal adjustments and now no adjustments for a plan that has so much surplus that it has not made a contribution to it since 1984? |
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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: 13 March 2007 |