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Home Goals and Policies CORRE 2005 Position Paper CORRE 2004 Position Paper CORRE 2002 Position Paper CORRE 2001 Position Paper 2004 POSITION PAPER A STATEMENT OF PROPOSED CHANGES IN PENSION BENEFITS FOR 2004 AND GOALS FOR FUTURE ACTION by THE COALITION OF OAK RIDGE RETIRED EMPLOYEES Approved 03-17-04 The Coalition of Oak Ridge Retired Employees (CORRE) was formed in 2000 to represent the interests of the approximately 12,500 employees (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), and the Y-12 Plant (Y-12). 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.
BACKGROUND 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. 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. 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. This position paper focuses on a specific proposal by CORRE for a pension adjustment in 2004 to partially address the loss of purchasing power by Oak Ridge retirees. This proposed increase in pension benefits 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. 2004 PROPOSAL CORRE is exclusively focused on only one specific proposal in 2004: An Ad Hoc Increase in pension benefits for all early and normal retirees that will restore 75 percent of the loss in value of their pensions that occurred due to the increased cost of living since their retirement. (The increases should be based on year of retirement, ranging from about 3 percent for 2003 retirees to 40 percent for 1969 retirees, and averaging about 17 percent overall.) This adjustment, which will restore 75 percent of the loss in value of retiree pensions that has occurred due to the increased cost of living since their retirement, is NOT an unreasonable proposal. It represents only a small fraction of the value of the Pension Trust Fund. As a matter of fact, the value of the Pension Trust Fund is sufficient to support the CORRE proposed adjustment for 2004 to restore 75 percent of the loss in value of retiree pensions, and still have a balance of assets about $500M greater than liabilities. This proposed action is generally in line with, but less than, the pension adjustments approved at Sandia and with adjustments provided on an annual basis by the DOE contractor for LBNL, LANL, and LLNL retirees. This increase is proposed for all early and normal 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 retirees since 1998, all vested retirees, and arbitrarily capped the pension benefit for many other retirees. Likewise, the recent adjustment 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 with less than 20 years’ service from this adjustment. 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! GOALS FOR FUTURE ACTION In addition to the specific proposal for 2004, 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: Biennial adjustment of pensions. 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 would like the DOE Oak Ridge Field Office to 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. Equitable criteria should be applied in making adjustments for all retirees covered by DOE-funded pension plans at contractor-operated facilities across the DOE complex. 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 National Laboratories and 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 seems to CORRE that DOE has a moral obligation to pursue a policy of equity across the DOE complex. The Pension Trust Fund should be used only to meet current and future actuarial pension benefit liabilities for retirees from DOE Oak Ridge facilities. CORRE believes that the transfer of money out of this Pension Trust Fund for any other purpose should not be permitted. CORRE will vigorously oppose 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. The BWXT Y-12 and UT-Battelle Pension Benefits Advisory Boards each should include participation of a retiree member. The retiree member would be acceptable to both the management (BWXT Y-12 and UT-Battelle, respectively) and CORRE. BWXT Y-12 and UT-Battelle have a need to understand the interests of these retirees, both as managers of the Pension Trust Fund and as major DOE contractors in a community where these 12,500 retirees and surviving spouses have a significant economic and public-opinion influence. Effective communication leads to better understanding. CORRE seeks the cooperation and support of BWXT Y-12 and UT-Battelle management and, in turn, are very willing to lend our support in a mutually beneficial environment. We sincerely believe retiree representation on these Boards will be mutually beneficial. No reduction in other benefits for retirees. There should be no reduction in other appropriate employee benefits for retirees. Specifically, the supplemental drug coverage for retirees should not be diminished by implementation of the new Medicare drug supplement. Retirees should be allowed to continue (or to reactivate) insurance benefits such as dental and vision, plus any others that are provided and appropriate. Additional financial allocations should be committed to the Pension Trust Fund for enhanced pension benefits for current employees as needed. Since 1984 no funding of any kind has been put into the Pension 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 Pension 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 Pension Trust Fund surplus again exceeds $500M and continues to grow. Allocation of additional funds should not be necessary to support biennial cost-of-living adjustments to recover 75 percent of inflationary losses. However, in principle, DOE and DOE contractors should be allocating a small portion of the operating budget for current employees to the Pension Trust Fund to support their future pension benefits. Pension benefits for current employees and planned pension benefit improvements should be funded by contributions to the Pension Trust Fund from the current operating budget as is the established practice at other DOE facilities. Home Goals and Policies CORRE 2005 Position Paper CORRE 2004 Position Paper CORRE 2002 Position Paper CORRE 2001 Position Paper |
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February 2006 |
