An equitable adjustment (averaging 15 percent) in pension benefits for Tennessee retirees in 2003;
	Minimum monthly pension benefits for older retirees and surviving spouses in 2003; and
	Representation for retirees on the BWXT Y-12/UT-Battelle Pension Fund Advisory Boards.

We are particularly disturbed, and frankly offended, that the Department of Energy continues to maintain and perpetuate a discriminatory posture regarding retiree pension benefits across the DOE Complex to the detriment of Tennessee employees and retirees. Here is an example of the differences. If 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. In addition, employee B in California gets an annual adjustment for cost-of-living increases, while A in Tennessee does not, thus making the treatment by DOE even more inequitable. 

DOE has made a conscious decision to maintain these dramatically inequitable pension benefits for Tennessee contractor employees through a succession of contractors over several decades. DOE has dictated pension policy in the requests for proposal and in the contracts. Rather than "leave it to the contractors" as stated in letters to two members of Congress from Tennessee, DOE has "dictated it to the contractors." The consequence for Tennessee retirees from DOE facilities in Oak Ridge is a dramatically reduced initial pension and no cost-of-living adjustment to compensate for inflation. How can DOE justify the dramatically greater benefits in California or New Mexico relative to Tennessee, Kentucky, Ohio, South Carolina, or other sites?

DOE, through its Oak Ridge contractors, has not made any payments into the Oak Ridge pension trust fund since 1984, even though DOE and the contractors have continued to add liabilities to the fund year after year, including a major increase in pension benefits for current employees. Even so, we understand the fund balance of the pension trust fund still contains a sufficient surplus of assets over liabilities to underwrite the actuarial cost of the CORRE proposal. No new funds would be required to fund the CORRE proposal for adjustments in 2003. However, it would be prudent, in our judgment, for DOE and its contractors to resume payments into the trust fund each year, at least sufficient to cover the new liabilities that they are adding during the period.

We recognize that this problem did not occur under your leadership. We trust that it will be addressed under your leadership.

Any member of our staffs is available to you or your staff for consultation on the issue. CORRE representatives are also available to you.

Sincerely,

To be signed by Tennessee Congressional Delegation

cc/att: Mr. Gerald G. Boyd, Manager, Oak Ridge Operations

Mr. William J. Brumley, Manager, NNSA, Y-12 Site Office

Dr. William J. Madia, Director, Oak Ridge National Laboratory

Mr. Dennis R. Ruddy, President and General Manager, BWXT Y-12

Text of letter sent to Congressman Duncan in reply to letters regarding pensions sent by Mr. Hoft of DOE to Rep. Duncan and Senator Thompson.  Following CORRE's letter are copies of the two letters of Mr. Hoft.

January 21, 2002

The Honorable John J. Duncan (sent via email to Dean Rice)

United States House of Representatives

2400 Rayburn House Office Building
Washington, DC 20515-1202

Dear Representative Duncan:

Reference: Your Letter of December 23, 2002 attaching the December 10, 2002 letter of Mr. Richard Hoft, Director, Office of Procurement and Assistance Management, OMBE, Department of Energy.

Thank you for your inquiry to the Department of Energy regarding issues of concern to the Coalition of Oak Ridge Retired Employees (CORRE). With this letter, we are addressing the answer given to you by DOE in the referenced letter of December 10 of Mr. Hoft. For your information, Mr. Hoft sent a similar letter to Senator Thompson. We have supplied a copy of that correspondence to Mr. Dean Rice of your staff.

We are disheartened to see the Department of Energy’s response to the issues raised by CORRE, as their response is nothing more than a reiteration of what DOE and its contractors do. Mr. Hoft’s letter did not address the concerns raised by CORRE on behalf of the over 13,000 retirees from DOE contractors in Oak Ridge. The letter shows that DOE continues to tolerate inconsistencies in pension programs among its prime contractors to the disadvantage of Tennessee retirees relative to those retiring in New Mexico or California, for example.

It is surprising that DOE and its prime contractors in Oak Ridge feel that the Plan provides "adequately for retirement", when representatives of the same contractors have been asked by CORRE and have agreed that our requests in the COORE 2003 Position Paper are not unreasonable. If pension benefits are adequate, why were adjustments made to the pension program of current employees in 2002? Why are older retirees with a minimum of 20 years service, or their surviving spouses, in desperate need with some on food stamps? Why have the contractors not acted upon CORRE’s request for a minimum pension benefit of $400/month surviving spouse ($600/ month joint survivors), which would cost the Pension Fund (with an estimated current surplus of $500 million) only approximately $7 million per year? And why have the contractors balked at CORRE’s request to represent retiree’s interests on the Pension Fund Advisory Board in Oak Ridge?

Why does DOE state that the Oak Ridge "…Plan has a history of ad hoc retiree benefit increases…" when there have been only two (2) pension adjustments in twenty years affecting those retiring after 1982? These two adjustments were equivalent to a compounded adjustment of 36.5% during this 20-year period while the Consumer Price Index will have risen 91.8% by January 2003.

The DOE states that it "does not direct its facilities management contractors to provide their employees a unified set of benefits," but that is exactly what CORRE proposes should be done to ensure fair and equitable treatment of all these employees. With an increasing number of successful DOE contractors bidding on facilities operations, and especially DOE’s National Laboratories, being Limited Liability Corporations established exclusively for this purpose,

is it not now appropriate and opportune for DOE to achieve consistency in contractor pension benefits?

Regarding pension plan differences across DOE prime contractors, CORRE agrees that national differences in workforce and regional costs of living exist. However, these differences are addressed by DOE contractors through salary differentials for employees across the laboratory complex. Consequently, they do not need to be adjusted again in different pension equations; i.e., the pension should be the same percentage of (salary times years of service) regardless of geographic location. To do otherwise is discriminatory and unfair.

The letter states that it is possible that pension contributions will restart in the near future due to a reduction in value of the assets (presumably attributed to current market conditions), but fails to acknowledge that no pension contributions have been made since 1984. Such pension contributions, if they had been made earlier, could have avoided the serious deterioration in the value of pension benefits of retirees that has occurred in the interim.

In addition, the reference to increased medical costs in the letter confounds the issue, since the Pension Fund and medical benefits are separately funded. Promises were made to employees concerning continuance of medical benefits upon service sufficient to qualify for pension benefits. The contractor companies should not co-mingle the pension and medical benefits and funds.

We believe that the issues with DOE can be boiled down to two requests at this time:  CORRE wants for Oak Ridge retirees: 1) a reasonable increase of the pension in 2003 (reasonable in our view being 15 percent distributed by the need to make up deficiencies- not across the board to each retiree.) and 2) minimum pensions for the low end pensions in 2003. We realize that, in order to do this, the government may have to contribute for the first time since 1984.

We would appreciate the opportunity to discuss these pension matters with you. We hope that you will agree that it is the duty of the government to uphold reasonably level of pensions against deterioration due to inflation and to treat retirees from Tennessee with as much fairness as it exhibits to those who retire from facilities in California and New Mexico. We trust that you will convey our continuing concerns to DOE.

Again, we appreciate your assistance to the Oak Ridge retirees.

Best wishes to you in the New Year and for this session of Congress.

Sincerely,

A. L. (Pete) Lotts

Chairman

Legislative Committee

Coalition of Oak Ridge Retired Employees

cc: Senator Bill Frist (email to Carolyn Jensen)

Senator Lamar Alexander (by US Mail)

Representative Zach Wamp (email to Linda Ponce)

Representative Bill Jenkins (email to Brenda Otterson)

Text of letter sent to Senator Fred Thompson requesting assistance in getting response from U.S Department of Labor Concerning Pension Plan Actions of the Contractor (February 13, 2002)

11125 Hatteras Drive

Knoxville, Tennessee 37922

865-675-7394 Fax 865-675-7779 allotts@chartertn.net

February 13, 2002

Senator Fred Thompson

800 Market Street

Suite 112

Knoxville, Tennessee 37902

Dear Senator Thompson:

I am writing on behalf of the Coalition of Oak Ridge Retired Employees (CORRE) to seek your assistance in obtaining response from the U.S. Government on issues important to the coalition and to the 13,000 retirees it represents. We have sought the opinion of the Department of Labor on a number of issues related to the management of pension funds of retirees of the Department of Energy operating contractors. We have been trying since last summer to obtain a response from the Department of Labor (DOL). We have received no opinion, and, as far as we can determine, the letter we sent to them is not being addressed.

During my visit last fall to your office in Knoxville to discuss the concerns of CORRE and to acquaint your staff with our work, I mentioned to Ms. Cindi Lemmons that we were corresponding with the Department of Labor about some pension issues, but that we had not been successful. At that time, we were still attempting to obtain response by calling contacts in the DOL, so we did not request your assistance. Since it now appears that we cannot get opinions from the DOL, we would appreciate your assistance in obtaining DOL opinions in response to our questions.

The opinion of the DOL is important because the questions that we are raising deal with issues of whether the administration of the fund by DOE and its contractors is fair, equitable, and non-discriminatory. Without our having full knowledge of the law, but applying common sense, it would appear to us that some pension administrative practices of the operating contractors in Oak Ridge and in the DOE complex are highly suspect, with some resulting effects that are discriminatory to various classes of former employees. This is a US government issue for two reasons: 1) we are questioning the fairness of administration of a pension funds of DOE held in trust for retirees of the principal operating contractors (past and present) of DOE, which fund is administered now under contract by the one of the operating contractors (BWXT); and 2) we are questioning whether the standards of ERISA law are being met by DOE and its contractors.

--------------------------
Attachment 1-

Chronology of events related to correspondence with the Department of Labor
regarding our request for an Advisory Opinion:

·   July 18, 2001 - Original letter forwarded to:
Atlanta Regional Office
U.S. Department of Labor
Pension and Welfare Benefits Administration
61 Forsyth Street, SW, Suite 7854
Atlanta, GA 30303
Attn:  Howard Marsh, Regional Director

·   August 3, 2001 - Received response advising us to forward request to:
U.S. Department of Labor
Division of Regulations and Interpretations
200 Constitution Avenue, NW
Room N-5669
Washington, DC 20210

·   August 9, 2001 - Forwarded new letter (slightly revised to acknowledge
response from Pension and Welfare Benefits Administration advising us to send
request to Division of Regulations and Interpretations) requesting Advisory
Opinion.

·   Mid October, 2001 - Mary Helen Owen-Rose called DOL to request status of
our letter.  She was advised that they had no record of our letter.  She
faxed an additional copy of our letter that day.

·   October 29, 2001 - Mary Helen Owen-Rose received a call from Fred Long,
Department of Labor, Washington (202-693-8510).  Mr. Long was familiar with
our letter, which was faxed to them a few days earlier.  They did not know
what happened to the original letter.  He advised Mary Helen that he is not
the lawyer assigned to handle the request, but that he is one of the lawyers
that handle requests, and he has looked at our letter.  He said he thinks
most of the issues we talk about in our letter are related to IRS tax
requirements and might have to be referred to the IRS for an opinion.  [Note:
 This doesn't make sense to me.  Our request relates to how DOL interprets
and applies ERISA, which has nothing to do with IRS in my opinion.]  Mary
Helen asked whether it would be all right for me to call him to discuss our
request for Advisory Opinion, and he said yes.

·   Early November, 2001 - I called the DOL number he gave Mary Helen, which
is an answering machine, a couple or three times and left messages.

·   November 8, 2001 - Received a message that Mr. Fred Wong [Note:  I'm not
sure whether it is Long or Wong] of DOL had returned my call when I was out
of the office.  I returned the call and left messages another six to eight
times over the next few weeks, but never received a response.

·   January 17, 2002 - As of this date we still have not received a response
from DOL.  When we call we get an answering machine, so we cannot talk to a
live person.

John Jones
-----------------------------

Attachment 2-- Email of Mary Helen Rose to Lotts Attached Letter of John Jones to DOL, which is contained in the next section of this page.

Text of letter sent to U.S Department of Labor Concerning Pension Plan Actions of the Contractor (August 9, 2001)

Coalition of Oak Ridge Retired Employees

Working for Fair, Equitable, and Competitive Benefits

For Former K-25, Y-12 and ORNL Employees

107 Antioch Drive

Oak Ridge, Tennessee 37830

August 9, 2001

U.S. Department of Labor

Divison of Regulations and Interpretations

200 Constitution Avenue, N.W.

Room N-5669

Washington, DC 20210

Dear Sir/Madam:

Subject: Request for Advisory Opinion of Whether Certain Actions by the Oak Ridge Contractor Employee Pension Plan Administrator Comply With ERISA

I recently forwarded this request to the Pension and Welfare Benefits Administration on behalf of the Coalition of Oak Ridge Retired Employees. In response, Ms. Julia S. Todd, Supervisory Benefits Advisor, of the Pension and Welfare Benefits Administration advised me that our request for advisory opinion should be directed to your office. We respectfully request your advisory opinion on several questions.

Background

The Coalition of Oak Ridge Retired Employees (CORRE) was formed in Calendar Year 2000 to represent the interests of and speak out for the approximately 13,000 employees who have retired from Department of Energy (DOE) contractor-managed facilities at Oak Ridge, Tennessee. These facilities are: Oak Ridge National Laboratory (ORNL), K-25 Gaseous Diffusion Plant (K-25), and the Y-12 Plant (Y-12). The primary objectives of CORRE are: 1) to obtain and maintain pension and other benefits that are fair and equitable and competitive compared with other major DOE federal and private contractors in the technical field; and 2) to safeguard the pension fund from which these benefits are derived.

The Pension Trust Fund set aside for these retirees was recently reported to have over $1 Billion surplus after all liabilities for current employees and retirees were conservatively estimated. This pension plan is required to fully comply with ERISA by DOE Order 350.1.

CORRE was instrumental in influencing the Department of Energy and BWXT Y-12, contract manager for the Y-12 Plant and prime contractor administering the major contractor pension plan for DOE in Oak Ridge, to make some adjustments in the pension plan effective April 1, 2001. However, several deficiencies and issues remain that appear to conflict with ERISA regulations related to vesting, participation and nondiscrimination.

Request for Advisory Opinion

CORRE respectfully requests an advisory opinion regarding whether or not the following inequities represent a violation of the spirit and regulations of ERISA:

1. No adjustment for vested retirees. The pension adjustment authorized in April 2001 by BWXT Y-12 and UT Battelle, contract manager for ORNL, excluded vested retirees from any pension adjustment. Approximately 750 of the 13,000 beneficiaries are currently affected by this decision that appears to be arbitrary and discriminatory. In addition, there are currently over 4,000 former employees vested but separated from employment who will be affected. Many of these former employees are in this vested status because they were laid-off during one of the reductions-in-force.
   
   Question: Does ERISA allow the arbitrary exclusion of this group from the pension adjustment?

2. No adjustment for recent retirees. Retirees who have retired within the previous three years (April 1998 thru April 2001) were excluded from receiving any pension adjustment. Civil service, social security, and military retirees participate on a prorated basis in all increases granted to their pension group. This decision appears to be arbitrary and discriminatory.
   
   Question: Does ERISA allow the arbitrary exclusion of this group from the pension adjustment?
   

3. Pension cap - $40,000/yr. The April 2001 pension adjustment excludes any adjustment for that portion of any pension in excess of $40,000/yr. An earlier increase in 1991 had a cap of $15,000/yr. These caps have a compounding effect that results in significant loss of earned benefits for impacted retirees. Higher salaried employees include Distinguished Engineers, Distinguished Scientists, Senior Technical Specialists, and many mid-level and senior managers. These are among the most dedicated and productive employees within the DOE contractor-managed facilities in Oak Ridge. These employees earned higher salaries (approved by both the contractor and DOE) by virtue of their contribution to the DOE mission. To cap the pension benefit adjustment for these employees appears to be arbitrary and discriminatory.
   
   Question: Does ERISA allow an arbitrary cap on the pension adjustment for this group?
   

4. Pension Spouse Option – "Pop-Up" Clause. For many years the Pension Plan has included a "Spouse Option," which provided the retiree’s spouse 50% of the retirees pension benefit for life after the retiree’s death. The cost of this option is a significant reduction in the retiree’s pension benefit for life. In 1990 a change was initiated in the pension plan spouse option, referred to as the "Pop-Up" Clause. Employees who retired after April 1, 1990 and who elected the spouse option had their future pension benefit automatically restored to full value if the spouse predeceased the retiree. However, the "Pop-Up" Clause was not extended to cover employees who retired prior to 1990 until April 1, 2001.

   These earlier retirees (prior to 1990), who suffered the loss of a spouse, experienced a significant monthly reduction of benefits for the period of 1990 to 2001 compared with employees under the same circumstances who retired after 1990.
   
   Question: Does ERISA provide any guidance regarding this situation? Does this represent an arbitrary discrimination among retirees who have experienced comparable circumstances?
   
   The pension adjustment was approved effective April 1, 2001 and pension increases were included in the June 1 pension checks and were retroactive to April 1. However, the "Pop-Up" Clause adjustment was included in the July 1 pension checks with no retroactive payments for April, May, and June.
   
   Question: Since the adjustment was announced in March 2001 to be effective in April 2001, are retroactive payments for April, May, and June required for the "Pop-Up" Adjustment (retroactive payments were provided for the cost-of-living adjustment).
   

5. Enhancement in pension formula for current employees. An enhancement in the pension formula equaling approximately 15% was included for current employees only.
   
   Question: Since no funds have been added to the Pension Trust Fund since 1984 other than return on investment of the funds assets, are retirees who would benefit from the pension formula enhancement entitled to this enhancement as well?
   

6. Contractor Pension Program Equity Across DOE Complex. Some DOE Contractor Pension Programs have an annual cost-of-living adjustment (for example, the University of California). The most recent previous pension adjustment in Oak Ridge was in 1991.
   
   Pension benefits, for comparable employees status and service, also varies widely across the DOE Complex.
   
   We intend to pursue with DOE a goal of equitable treatment of contractor employees across the DOE Complex. We recognize that this broad issue may extend beyond the Pension and Welfare Benefits Administration oversight. However, we believe there is, or ought to be, an obligation for equitable treatment of employees of DOE-owned, contractor-operated facilities across the DOE Complex.
   
   Question: Is there any precedent within the Pension and Welfare Benefits Administration oversight responsibility for review of discriminatory practices between multiple Pension Plans where there is a single funding agency providing both funding and administrative control of activities at multiple sites?

7. 420 Transfers. As previously noted the Pension Trust Fund contains a surplus of approximately $1 Billion. BWXT Y-12 and UT Battelle have proposed and/or considered use of these surplus funds through a 420 Transfer to enhance current operations, add buildings or facilities to Y-12 and ORNL, or pay various overhead costs. We understand that the most recent 420 Transfer proposal from BWXT Y-12 was not approved by DOE. However, other 420 Transfer proposals are being discussed in BWXT Y-12 and UT Battelle.
   
   Question: We strenuously object to consideration of any 420 Transfer until all the issues and concerns of retirees (and employees), for whom the Pension Trust Fund was established, are addressed! Does the Pension and Welfare Benefits Administration review such proposals for 420 Transfers? If so, may we request that approval for any 420 Transfer proposal related to this Pension Trust Fund be withheld at least until these and other pension fund issues are addressed.

We understand that the Internal Revenue Service has jurisdiction over some parts of ERISA, but we do not understand the division of authority between DOL-PWBA and IRS. If any part of our Request for Advisory Opinion should be directed to the IRS would you please either forward the request or advise us of the appropriate office in IRS.

Thank you for your assistance in this matter. We found your "Protect Your Pension" reference guide to be very helpful. We sincerely appreciate your help in representing the interests of retired employees.

Sincerely yours,

John E. Jones Jr., Benefit Plans Committee

cc: Charlie Kuykendall, CORRE President
Troy Trotter, Chairman, Benefit Plans Committee

David E. Reichle, Benefit Plans Committee

Joe Dykstra, Benefit Plans Committee

Ed Krieg, Benefit Plans Committee

Mary Helen Rose, Benefit Plans Committee

Text of letter sent to U.S. Representatives Zach Wamp, John Duncan, and Van Hilleary (June 2001)

June 1, 2001

The Honorable Zach Wamp

United States House of Representatives

423 Cannon Building

Washington, D.C. 20515-4203

Dear Representative Wamp:

The Coalition of Oak Ridge Retired Employees (CORRE) appreciates the support that you have provided to us in the past and we wish to apprise you of our progress towards equitable pension treatment of DOE contractor employees in Oak Ridge, as well as those goals yet to be achieved.

CORRE represents some 13,000 families in East Tennessee that include former K-25, Y-12, and ORNL employees. CORRE was formed in CY 2000 to pursue an adjustment in the pension benefit for retirees, since (1) there had been no adjustment for those retiring after 1988, (2) the Pension Trust Fund set aside for these retirees had over a $1 Billion surplus after all liabilities for current employees and retirees were conservatively estimated, and (3) pension benefits for Oak Ridge prime contractors of DOE were among the lowest in the entire DOE system. This was an inequity that should have been an embarrassment to all concerned and a serious economic detriment to Oak Ridge retirees in East Tennessee.

Some progress has been made. Recently BWXT, the prime contractor administering the major contractor pension plan for DOE in Oak Ridge, announced a pension correction effective April 1, 2001. These changes were responsive to the CORRE request and we were pleased with the positive interactions we had with BWXT management and DOE-ORO officials. But these pension changes had some deficiencies and did not address all of the issues raised by CORRE. Ample funds remain in the Pension Trust Fund to address the remaining issues:

1. CORRE vigorously opposes any 420 transfers from the Pension Fund.

2. An annual COLA must be implemented for retirees’ pensions to minimize inflationary inequities.

3. National equity in pension benefits should be the DOE policy for all contractor employees. There should be no regional discrimination.

4. Discriminatory decisions negatively affecting retirees must be corrected

   - Arbitrary exclusion of current retirees in formula adjustments granted to future retirees

   - Arbitrary exclusion of vested retirees in formula adjustment

   - Arbitrary exclusion of recent retirees (last 3 years) from any pension adjustment

   - Arbitrary caps on pensions at $40,000 for calculating adjustments are inequitable and unfair.

5. CORRE should have representation on the contractor Pension Committee and have access to Pension Fund financial records, transactions, and independent audits.

6. A minimum monthly pension of $600 should be established for retirees who have at least 20 years company service credit.

These are serious economic issues for East Tennesseans. Since a significant number of the families impacted by these matters are in your district, we are requesting an opportunity for the CORRE President, and the Legislative Committee of our Board of Directors, to meet with you to discuss our proposal in the near future when you are back home in Tennessee. We need your strong support to reach our objectives which are reasonable, fair, and achievable. Additional details can be found on the CORRE web page, http://www.korrnet.org/corre/

I can be reached at my home address: 237 Mainsail Road, Kingston, TN 37763; telephone: 865-376-2856; and e-mail: drr4der@aol.com

Sincerely yours,

David E. Reichle, Legislative Committee

cc: Charlie Kuykendall, CORRE President

John E. Jones, Jr., Legislative Committee

A. L. (Pete) Lotts, Legislative Committee

Working for Fair, Equitable, and Competitive Benefits for 13,000 Former K-25, Y-12, and ORNL Employees

Coalition of Oak Ridge Retired Employees Oak Ridge, Tennessee

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