The pension plans at DOE facilities differ from one contractor to another, and comparisons are difficult to make. Adjustments for active employees (the change in the multiplier from 1.2 to 1.4, the removal of the 30-year cap, and the flat 2% surviving spouse reduction) have brought Oak Ridge contractor practices into more of a competitive position with other sites. Even with these improvements, the ORNL’s position is still behind comparable DOE facilities. The situation for pensioners, however, has not improved since there are no regular cost-of-living adjustments as occur at some other laboratories.

The reason regular adjustments are so important, and necessary, is that the average length of retirement (in 2005) will be 14.7 years – far longer than when defined benefit pension plans were first established. The average impact of inflation on our 12,000 pensioners has been that prices have gone up 64.3%, ranging from 11% for those retiring 5 years ago to a huge 394% for the 56 individuals who retired in 1970. The combined average of adjustments in Oak Ridge by Contractors over the past 35 years has only been 19.3%.

In July 2004, UT-Battelle and BWXT offered two pension improvements to employees. The reduction for the spousal option (which averages about 8% for current retirees) was reduced to a flat rate of 2% for employees (hence future retirees). Also the 30-year cap on the pension calculation was removed, thereby applying the1.4 multiplier to all the years of company service. They obviously did this because this was the right thing to do. If it was fair and needed by employees, then think about the retirees who are in even worse shape. This was the first time in history that the Oak Ridge Pension Fund’s assets were accessed to benefit employees without concurrent consideration of retirees.

Retirees do not understand how they can be treated so differently, especially with regards to the spousal option since a precedent was set previously with the "pop up" on the spousal option and another DOE contractor (Sandia) provided a reduced flat rate to both active employees and retirees at the same time over two years ago. Was Sandia acting prudent and fair when they made the decision to treat employees and retirees equally?

Why did Sandia National Lab provide their retirees the same flat rate for the Surviving Spouse Option on the same date the improvement became effective for active employees? Could it have been out of a sense of fairness?  In Oak Ridge the reduction in pension value was improved to a flat 2% for those employees choosing a surviving spouse option but retirees were not included in the improvement. Retirees continue to pay about an 8% penalty above the 2% flat rate to be enjoyed by current employees.  Is this fair? How long should we tolerate such obvious inequity before we search out someone willing to stand up for our rights and take on the DOE for tolerating this kind of unfairness? Can we count on you to get this corrected?

The Pension Trust Fund’s investments have been managed well. Retirees see a surplus accumulating in the Pension Trust Fund (BWXT – UT-Battelle), due to not only a good investment strategy but also meager benefit adjustments. In June 2004, before the Pension Fund was used to improve retirement benefits for current employees, the Pension Fund had a surplus of approximately $581 million. Even after the increase in liabilities of $113.5 million incurred with the 2% flat rate for the spousal option and removal of the 30-year cap, the surplus had grown to $620 million by April 2005. Retirees simply do not understand why the Laboratory feels that the Fund cannot support additional obligations – especially since the 2% flat rate for retirees is estimated to cost less than $59 million in additional liabilities.

No contributions have been made to the Pension Fund since 1984. The Pension Fund was funded during the working years of most retirees. Retirees, when employed at ORNL, competed with other national laboratories and universities for research grants carrying an overhead rate that included a pension fund contribution. Retirees feel that they worked hard for, and earned, the funding of their pensions. Can you help ensure that a proportionate part of the value of the fund be provided as adjustments to pensioners?

I am concerned about the lack of consideration of adjustments for retirees by the present contractor management and DOE. UT-Battelle and BWXT seem to have no concern about the reduction of the vale of pensions, which now average less than 50% of their original value.

We all understand defined benefit pension plans. They were established many years ago, and the absence of a COLA is not surprising, since average life span after retirement at age 65 was not long – averaging less than 2 years in the early times in Oak Ridge. This is no longer sufficient, and some mechanism must be implemented to protect the value of pensions from the ravages of inflation. This is why there has been a history of periodic adjustments to pensions in Oak Ridge.

Retirees all remember being told (especially when being explained why the DOE Contractor’s goals were to have salaries that were to match the average of their competitors, while their performance was always expected to be the best) that they should consider their salary, health and medical benefits as a compensation package. We understood that our pension was a commitment by the Contractor. We also knew from past practice that the Contractors partially protected the pension benefit from inflationary deterioration through periodic adjustments.

But, now these practices are not remembered by companies that only exist to run the present DOE facilities. UT-Battelle and BWXT were organized as LLCs and came into existence to run ORNL and Y-12, respectively. Those companies and most of their top executives have no memory whatsoever of the Oak Ridge culture or experience, as would similar executives of Union Carbide, for example.

You are invested with the responsibility to see that the DOE is fair in its dealings and that the government remembers those who built ORNL and Y-12. Can we count on you to restore corporate memory and respect and fairness for former employees?

Present contractor management, DOE, and even some congressional staff have expressed concern about having to start contributing to the pension fund. (No contributions have been made to the fund since 1984, despite all of the increases in pensions benefits and increases in salaries of present employees.) This concern is even used as a reason to do nothing about the need for pension adjustments of retirees.

Yet, the contractors and DOE did not appear to be concerned in 2004 about the possibility of additional contributions to the fund in the near future when employee pension enhancements were enacted. With a $620 million Pension Fund surplus that has now grown by $70 million (by over $180 million if recent employee pension enhancements are considered) during the past year, it is difficult to understand why there is a concern about the Fund balance this year but not last year, nor how extending the 2% flat rate option to retirees would substantially alter things.

The net assets of the Pension Fund (Assets – liabilities = net assets or surplus) are at 123% of liabilities. In the past, some at ORNL have stated that, should this number drop below 120%, contributions would need to begin again. This is incorrect. Federal regulations currently require pension funds to be funded at least at 90% of liabilities – not 120%. The 120% figure is the current upper limit above which the IRS will not allow further company contributions (to avoid companies taking tax advantage by stashing profits in pension plans).

There are sufficient funds to adjust retiree pensions now, without requiring an appropriation. Can we count on you to support the adjustment being requested?

Pursuit of defined contribution plan by ORNL contradicts their concern that they may have to contribute to the present plan. It seems ironic that the Laboratory is considering a defined contribution pension program for new employees, which would require annual contributions however small initially, but is immobilized from considering retirees’ benefits at even the slightest prospect of beginning again contributions to the existing defined benefit pension plan. The defined contribution plan would no doubt be paid for by the government as it is, for example at Argonne National Lab (9% of employee’s salary) and Brookhaven National Lab (10% of employee’s salary).

Overall, CORRE sees no potential future concerns about the Pension Fund assets and their management -- other than the continued incremental increase to the liabilities due to salary increases, pension enhancements of employees, and splurges in hiring highly compensated senior people, without commensurate offsetting contributions to the fund by the current contractors, or the highly unlikely collapse of the U.S. economy and the stock market. One of our prime concerns is that the present plan will be totally neglected, should the defined contribution plan be implemented. We need your vigilance to see that present plan is managed to benefit retirees, and not present employees exclusively.

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Pension adjustments in recent years

This general adjustment for retirees that was announced in March 2001 applied to longer-term employees who retired before April 1, 1998. No one who retired after this date has received any adjustment. Hence, some retirees have now gone over 7 years without an adjustment.

The subsequent "minimum" pension adjustment that BWXT and UT-Battelle announced in March 2004 had been urged by CORRE for several years. Effective January 1, 2004 a pension benefit of $600/month for a retiree, or $400/month for a surviving spouse, was established following a similar program already in effect at Sandia. This enabled some pensioners to pay their insurance premiums and others to come off food stamps! However, for the record, DOE insisted that only retirees (or their spouses) with 20-year service would qualify.

This minimum pension was necessary to rescue some 10% of the older retirees even after the previous adjustment in 2001. This illustrates the plight of the retirees from the DOE Contractors in Oak Ridge, who now, on average, have lost over 50% of the value of their pensions due to inflation. Your support for this adjustment was greatly appreciated, since it aided those retirees who were most in need. However, your support for the adjustment requested now to restore lost value is essential.

If the Laboratory’s concern is based upon the uncertainty associated with updating the actuarial tables used by the Pension Fund, acknowledge and proceed with the updating and let us see where things stand. It seems ironic that the Laboratory is considering a defined contribution pension program for new employees, which would require annual contributions however small initially, but is immobilized from considering retirees’ benefits at even the slightest prospect of beginning again contributions to the existing defined benefit pension plan. If there are other concerns, can the Laboratory be more specific? CORRE sees no potential future concerns about the Pension Fund assets and their management -- other than the continued incremental increase to the liabilities due to salary increases and pension enhancements of employees without commensurate offsetting contributions to the Fund by the current Contractors, or the highly unlikely collapse of the U.S. economy and the stock market.

Consider the economics of the situation. My pension benefits have lost purchasing power due to inflation -- on the average we retirees are 50% worse off than when we retired. I know the Pension Fund is large enough to restore 75% of our loss in value as well as a spousal adjustment without additional government spending -- hundreds of millions of dollars of surplus will remain in the Pension Fund even with these changes. This is not fair treatment. We are supported in seeking fair treatment in resolutions passed by the Tennessee State Assembly and by local governments. The proposed increases in pension benefits would result in an annual economic input of more than $72 million statewide, a significant number as the State seeks economic stability and support for TennCare recipients. This is no doubt equivalent to several thousand jobs. Can we count on you to stand up for the retirees and Tennessee in this important issue?

I have the best interests of the Laboratory and DOE facilities in Oak Ridge, as well as retirees, in mind. I do not ask for what I feel is unreasonable – certainly not by standards elsewhere in the DOE complex. Nor would I wish undue hardship on the Laboratory. The Laboratory obviously recognized the weaknesses in the pension plan in Oak Ridge and is attempting to rectify the situation. It is a prudent business decision and the right thing to do for employees. I simply seek fair and equitable treatment of retirees who receive no annual salary adjustments and who retired earlier under an even poorer pension benefit. Retirees have been dedicated and supportive of the Laboratory in many ways and wish only the prospect of retaining our pride in the Laboratory to whose success we had committed our professional careers.

Employees should be able to expect that their Companies have the philosophical commitment to develop and implement policies, procedures, and systems to provide fair and equitable salaries and benefits for their welfare as well as the welfare of their families - both regular and retired employees.

Employees (current and retired) should be able to expect that the fair and equitable treatment of salaries, benefits and pensions is a primary oversight responsibility of DOE particularly in view of their established policy of transitory, multiple Company managements for DOE-ORO Operations.

Employees (current and retired) should be able to expect that fair and equitable treatment of benefits, salaries, and pensions are earned and agreed to by Companies and employees in the employment process and is a responsibility of the Company, and should be exercised without the need for lobbying organization(s) and without the concomitant erosion of Company image and reputation.

Employees should be able to expect that the philosophical commitment as well as policies, procedures and delivery systems are critically reviewed and evaluated on a periodic basis to insure that fair and equitable goals are accomplished for the equitable treatment of salaries and benefits for current and retired employees.

Employees should be able to expect that their Companies conduct periodic reviews of policies and procedures for salaries and benefits for current and retired employees as an integral part of the overall business plan and includes: (1) Consideration of external equity with other relevant companies and organizations. (2) Analyses of increased life expectancies of employees and its impact on pension values and (3) Increases in cost-of-living and income erosion and (4) the treatment of current and retired employees as a single group in decision making on these issues.

Employees (current) should be able to expect continued fair and equitable treatment of salaries and benefits in their retirement years for a healthy and productive retirement period.

Employees (current and retired) should be able to expect that their Companies’ policy discussions and actions on pension and benefit improvements are based on the needs of all employees and general equity considerations, and apply to both current and retired employees— or else creates second-class Corporate citizens in retirement years and seriously erodes the quality of life for many of their retired employees.