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Home Goals and Policies CORRE 2005 Position Paper CORRE 2004 Position Paper CORRE 2002 Position Paper CORRE 2001 Position Paper 2005 POSITION PAPER A STATEMENT OF PROPOSED CHANGES IN PENSION BENEFITS FOR 2005 by THE COALITION OF OAK RIDGE RETIRED EMPLOYEES Approved by Board 04-20-05 (Corrections 06-13-05) The Coalition of Oak Ridge Retired Employees (CORRE) was formed in 2000 to represent the interests of the approximately 12,000 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), the Y-12 Plant (Y-12), grandfathered employees under the same pension plan at Bechtel-Jacobs and its subcontractors with Work Force Transition employees, and Wackenhut. 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.
PREAMBLE
The increased cost of living for our 12,000 retirees and surviving spouses is becoming more and more damaging to them each year that goes by, particularly because of the skyrocketing costs of prescription drugs and medical care. The average length of retirement (in 2005) for our 12,000 is 14.7 years; we represent 941 who have been retired over 25 years! They have really been hurt badly and, being over 87 years old, many have exhausted their resources. The average impact of inflation (CPI) on our 12,000 pensioners is that they have seen prices go up 64.3%, and for individuals it ranges from 11% inflation for those retiring 5 years ago to a whopping 394% for the 56 individuals who retired in the year 1970! (BLS: Inflation Calculator) Yes, there have been a few adjustments by "the Company" to increase pensions over the past 35 years. Their combined average is a pitiful 19.3%, and the last couple of increases were "capped" (limited by income or years of service), so many retirees did not get anywhere close to the stated increase. CORRE for the last two years has been urging, and now redoubles our urging, that the Contractors permit retirees to have a fair, equitable, reasonable pension adjustment that will restore at least 75% of the lost value of their pension. The proposed increases of course would be graduated, meaning a 2000 retiree would get an increase say of 9%, a 1990 retiree would get 15%, and so on. The recovery of inflation for everyone would therefore work out to be the same, at least 75%. Still not up to what Government employees get with their COLAs, but much better than where our 12,000 stand today. (BLS: CPI-U) This average increase we are urging be allowed amounts to less than 1.3% for each year for each of our 12,000 pension recipients! Here’s what makes this easy. At the present time, no new money needs to be appropriated by Congress to grant this increase. No new money needs to be added to the Pension Trust Fund by the Contractors or by DOE or by Congress. There will be no increase in Contractor overhead dollars. All the money to cover the out-of-pocket increase as well as future liabilities is available in the Pension Trust Fund set up years ago, and the surplus of assets over liabilities is more than enough to cover this cost.
2005 PROPOSAL This position paper focuses on two specific goals, which CORRE would like to achieve in 2005 (see page 4 for Background Information): An Ad Hoc Increase in pension benefits for all retirees that will restore at least 75 percent of the loss in value of their pensions that occurred due to the increased cost of living since their retirement. An overall adjustment averaging less than 1.3 percent per year since retirement would accomplish this. The resulting funds from this increase would be spread across the board, so that all retirees would achieve the same level of increase since retirement. A flat-rate reduction factor of 2 percent for retirees who have chosen the surviving spouse option (same benefit that was extended to active employees in July 2004). |
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Ad Hoc Increase. The proposed Ad Hoc Increase 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 current value of the Pension Trust Fund "surplus" of $620M is currently sufficient to support CORRE’s proposed adjustments for 2005, and still have a surplus of about $350M in excess of liabilities.
This proposed action is patterned after the pension adjustments approved at Sandia, January 1, 2002. Adjustments are provided on an annual basis for retirees of the DOE contractors for LBNL, LANL, and LLNL.
This Ad Hoc Increase is proposed for all 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 individuals who have retired since 1998, all vested retirees, and arbitrarily capped the pension benefit for many other retirees. Additionally, the recent adjustment of extremely low pensions (some at poverty level) 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 retirees with less than 20 years’ service. 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!
Two (2) Percent Reduction Factor. As a result of union negotiations in early 2004, the reduction factor for those retirees who elect the surviving spouse option was decreased to a flat rate of 2 percent (versus an average value for present retirees of 8 percent). This improved benefit was extended in July 2004 to all active employees of UT-Battelle at ORNL and BWXT at Y-12. (Grandfathered employees at Wackenhut and Bechtel-Jacobs and its subcontractor Work Force Transition employees have not yet received this benefit). Is it now DOE’s policy to have contractor employees in Oak Ridge under the same Pension Plan receiving different pension benefits? The change in the spousal reduction factor should also be extended to retirees at ORNL and Y-12. The contractors have implemented a discriminatory policy of using the Pension Trust Fund to pay for the benefits of one part of the Fund’s participants (employees) while ignoring the other part of the Fund’s participants (the retirees). This level of unfair treatment of retirees has never happened before in the entire history of the Retirement Trust Fund except once, when the contractors proposed a 420 transfer of Trust Funds. CORRE resisted this proposal, and the transfer was stopped.
BACKGROUND INFORMATION
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. At that time inflation was minimal. Average life expectancy after retirement was very low, but has increased dramatically over the past five decades. Times have changed! Retirees should be able to retain quality of life.
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. While the defined benefit pension program does not include any obligation to make cost-of-living adjustments, past precedent of such adjustments (in Oak Ridge and elsewhere) acknowledges that it was not the intent to allow the value of retiree pensions to erode so drastically due to inflation. Today, Oak Ridge workers who have been retired for several years have been able to make up less than 50% of their pension value lost due to inflation.
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. In 2004, ORNL and Y-12 settled their union contract negotiations (2% flat rate reduction for the spousal option and the 30-year cap removal) using the pension trust fund assets. The 2% flat rate was immediately extended to salaried employees, but the 2% flat rate was not offered to retirees. Why not? Doesn’t this seem unfair?
The actions requested for 2005 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.
GOALS FOR FUTURE ACTION
In addition to the specific proposals for 2005, 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 will request 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 DOE National Laboratories and National Nuclear Safety Administration (NNSA) Production 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 is CORRE’s position 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.
BWXT Y-12 should include participation of a retiree as a member of a Pension Fund/Benefits Advisory Committee, as UT-Battelle has done.
BWXT Y-12 has a need to understand the interests of retirees, both as a manager of the Pension Trust Fund and as major DOE contractor in a community where these 12,000 retirees and surviving spouses have a significant economic and public-opinion influence. UT-Battelle has now established a Benefits Advisory Committee comprised of employees, and CORRE has been asked to provide a representative who now serves on this committee. BWXT Y-12 should do the same.
Effective communication leads to better understanding. CORRE seeks the cooperation and support of BWXT Y-12 management and, in turn, is very willing to lend our support in a mutually beneficial environment. We sincerely believe retiree representation on such 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 is in excess of $600M and continues to grow. Allocation of additional funds should not be necessary to support biennial cost-of-living adjustments to recover 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 when the need arises.
Home Goals and Policies CORRE 2005 Position Paper CORRE 2004 Position Paper CORRE 2002 Position Paper CORRE 2001 Position Paper
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| Date Modified: 31 January 2006 |
