Background Information on Oak Ridge Retiree Pensions

Prepared by Oak Ridge Coalition of Retired Employees

1. Oak Ridge retirees pension fund- the fund covers approximately 12000 retirees from ORNL, Y-12, and past K-25 and covers all current employees of ORNL and Y-12.
2. Infrequent and inadequate adjustments of pensions
- Since 1984, retirees of operating contractors in Oak Ridge have had only two adjustments of their pensions to compensate for inflation. These adjustments only partially compensated for the losses in value of the pensions due to inflation.
3. Sinking value of Oak Ridge pensions
- The average value of Oak Ridge retiree pensions have sunk to around 50 percent of their original values. Pensions of older retirees have retained less value than more recent retirees.
4. No contributions to Pension Fund by DOE since 1984
- DOE has not contributed to the pension fund for retirees since 1984.
5. Disparate and inequitable treatment of retirees by DOE
- DOE treats retirees of it various facilities differently, setting up serious inequities in treatment. Tennessee retirees receive very poor treatment in terms of policy for granting pensions and maintenance of the value of pensions after retirement.
6. Discrimination in original pensions
- Serious disparities exist in the arrangement for original pensions. As an example, if the DOE contractor employees A and B have retired after 30 years of service at 60 years of age, for example, contractor employee B in California will have earned a pension of 2.5 times 30 years times his or her base salary or 75 percent of the base salary while the comparable contractor employee A in Tennessee will have earned a pension of only 1.2 times 30 years times his or her base salary or 36 percent of the base salary. (Recently, the Oak Ridge contractors raised the multiplier to nominally 1.3 for current employees--it was not retroactive for past employees who have retired.) The multiplier at Sandia National Laboratory is 2.0 for persons 60 years of age when they retire. The differences between these laboratories reduce to some degree for earlier retirement, as the California and New Mexico labs have age factors in their multipliers.
7. Discrimination in adjustments after retirement
- In addition to the above starting differences, the pension of contractor employee B in California will be adjusted annually to compensate for the increasing cost of living over time, while the pension of contractor employee A in Tennessee will receive no annual adjustment (two ad hoc adjustments have been granted in the last 20 years). California laboratories of DOE follow a policy identical to that in California for retirees of Los Alamos National Laboratory in New Mexico. Sandia National Laboratory retirees, which operates in California and New Mexico, also receive treatment superior to the retirees of Tennessee facilities.
8. Cost of Living Differences
- There are cost-of-living differences across the country resulting in the justification for different salary levels for comparable jobs. Our concerns have nothing to do with these differences. If, for example, the cost-of-living in Tennessee is 80 percent of the cost-of-living in California, then it is perfectly reasonable for contractor employee A in Tennessee to earn only 80 percent as much as a comparable contractor employee B in California. However, this fact does not justify discrimination in pension treatment regarding multipliers to determine original pensions and adjustments for inflation. Since the salaries are higher for employees doing similar jobs, the pensions will be commensurately higher already.
9. Pension and other benefits are separate
- DOE tends to treat the pension benefits and the other benefits, such as medical insurance, as one total package. Thus, DOE managers express the desire to keep the total cost of adjustments a zero-sum game. (Therefore, an increase in out-of-pocket cost of medical insurance accompanied the 2001 adjustment.) The pension fund is completely separate from operating funds which pay the DOE cost of medical insurance out of current funds. Commingling the funds in policy when evaluating proposed changes, as practiced by DOE managers, is very detrimental to retirees. (In essence, it amounts to a transfer of funds from the pension fund to fund medical insurance.) The effect of this is to place its contractors in the posture of working against the interests of retirees.
10. Lack of Validity of DOE Statements on Pension Policy
- DOE's previous statement to members of Congress from Tennessee that their policy is to "leave it to the contractors" to decide on the pension benefit package would be blatantly discriminatory, if it were true. These benefits are all paid directly and solely out of taxpayer dollars. How can DOE justify the dramatically greater benefits in California or New Mexico relative to Tennessee, Kentucky, Ohio, South Carolina, or other sites?

The fact is that the stated policy was true for AEC in the early years, but has not been true for DOE for many years. These current Oak Ridge contractors had no prior benefit package or history. They accepted a pension benefit package dictated by DOE. DOE has in fact made a conscious decision to maintain these dramatically inequitable pension benefits for Tennessee contractor employees through a succession of contractors over several decades. Rather than "leave it to the contractors" as advertised, DOE has "dictated it to the contractors."

11. Some history of operating companies
- During World War II and the early Cold War period, the Atomic Energy Commission (DOE's predecessor organization) selected leading technology companies and universities to manage key sites. These were large, well-established organizations, such as DuPont, Union Carbide, University of Chicago, University of California, etc. To gain their support, the AEC accepted whatever benefit package these organizations had established for their other employees, which was a reasonable thing to do at that time of crisis and under those circumstances.

As the missions for DOE (AEC) sites continued well beyond the early crisis period (and expanded in many cases), DOE has often sought new managing contractors for its sites or for specific facilities. In most cases, these are no longer traditional technology companies or universities, but limited liability companies (LLCs) formed specifically to solicit work for DOE. In Oak Ridge, for example, the Y-12 Complex is managed by BWXT Y-12, LLC; ORNL is managed by UT-Battelle, LLC; and East Tennessee Technology Park (K-25) is managed by Bechtel Jacobs, LLC. Each of these limited partnerships was established specifically to bid on the DOE contracts.

The consequence for Tennessee retirees from DOE facilities in Oak Ridge is a dramatically reduced initial pension and no regular cost-of-living adjustment to compensate for inflation.

12. Effect of non-representation of retiree interests
- Many organizations would welcome the opportunity to include retiree representatives on their pension benefits advisory boards. CORRE feels that improved communication, better understanding of the needs of the retirement community, and a greater appreciation of overall problems in administering the pension fund would be achieved if official representation were permitted. The negative effect of non-representation is distrust, lack of mutual understanding, and design changes that are made without much thought to retiree needs.
13. CORRE Proposal for 2003
- For 2002, CORRE is requesting: