According to the Social Security Administration, the cost of living has risen 39.6% since 1988 – the last year any pension adjustment was made – and 2001. Persons who retired in 1989 are getting Social Security checks today that are 39.6% higher than those they received in 1989, but their pension checks are just the same as they were in 1989. The purchasing power of a 1989 retiree’s pension check has now dropped in value to a worth of only 60.4 cents for each dollar they received originally.

What CORRE is proposing in this area:

Amount. A pension adjustment should be given to retirees and eligible surviving spouses on a sliding scale. This adjustment should be applicable to all those retiring before January 2000, with a 3% increase in the annual pension for those retiring in 1999, 4% for those retiring in 1998, with the increase percentage rising about 1% for each year of earlier retirement. The specific increase percentage for each year is one that will recover for them 40% of the cumulative cost-of-living increase they have experienced since their retirement. (See the table on the next page that covers retirement years back to 1981, prior years should get the same 40% of cuml. inflation).

Minimum. The resulting minimum monthly pension should be $600 for retirees who have at least 20 years of service ($400 for surviving spouses). The minimum pension for covered retirees and annuitants with less than 20 years of service should be pro-rated based on their actual whole years of service. These adjustments will be a significant help for folks having the greatest need.

The "Cap". There should be no "Cap" (pension level above which no increase is given). In the 1992 adjustment, the increases that restored at most a quarter of the inflation were applied only to the first $15,000 of a pension. This meant that for professional, technical, and managerial retired employees the adjustment given amounted to only a few percent of inflation. We are asking that this deficit be figured into the base for each impacted retiree before the 2001 adjustment is calculated.

Timing. The increases should be effective January 1, 2001.

 

*Note: People who retired before 1989 received an increase as the result of the adjustments announced in 1992 and 1987. The 1992 action announced: an increase of 3% in pensions for those who retired in 1988, 4% for 1987, 5% for 1986, 6% for 1985, 7% for 1984, 9% for 1983, and 11% for 1982. Those retiring in 1981 received 12.5% from the 1992 action, and 2.5% from the 1987 action. However the percentages of the 1992 action, it should be noted, are the maximum increases a retiree might have received because all those increases were "capped", i.e. only applied to the first $15,000 of a person’s pension.

POINT 2. –CHANGE THE Policy for adjustments

With retirees living longer, with continued annual inflation reducing the purchasing power of retirees’ pensions, and with out-of-pocket costs for health care rising faster than the cost of living, there must be a change in the timing of future adjustments to pension plan benefits. For the contractor and DOE, it would mean less risk to the surplus projection because of smaller total payouts being made more often. From the retirees’ standpoint, a more frequent adjustment would of course be much more desirable. Many retirees, especially older ones, no longer have sources of income other than Social Security to help them compensate for inflation and for the increased costs of energy, taxes, etc. Retirees, probably in contrast to benefit planners, naturally develop an acute awareness of their fragility and mortality, and become very concerned about how to manage for themselves and their loved ones in the years they have left. For many of us, this next adjustment may be the last one we’ll see if were to have to wait another decade.

What CORRE is proposing in this area:

COLA (Cost of Living Adjustment). It is very apparent from our studies that a great many of our retirees need an annual adjustment of their pension for increases in cost of living like that they get with Social Security. They all deserve it. Many retirees from other DOE operations enjoy such a benefit. Our organization is committed to begin working over the longer-term future to bring about changes that will accomplish this objective.

Frequency. However, in the shorter-term we propose that a pension adjustment for inflation be given at least every two years rather than with the inconsistent timing of past adjustments – it has been 9 years since the last announcement (1992), before that one it had been 5 years (1987), and before that it had been 7 years (1980).

Support. In order to improve the understanding and enlist the support of the Coalition of Oak Ridge Retired Employees, representatives of the Coalition should be invited to attend meetings of the contractor committee responsible for considering retiree benefit changes. Further, the responsible contractor should officially communicate the outcomes of pension considerations to retirees.

 

POINT 3. – The "Pop-Up" SHOULD APPLY TO ALL

Retiring single persons receive pensions equal to a multiplier (1.2%) times their average salaries for the last three years they worked times their years of service. Married employees who choose the surviving-spouse options (i.e. if the retiree dies, the spouse gets ½ the retiree’s pension) will have their pensions reduced by 10% to 15%, depending on the spouse’s age. This reduction is calculated on an actuarial basis since the cost of this kind of pension will be higher to provide for the surviving spouse. When pension benefits changes were announced in 1992, a feature was introduced known to retirees informally as the "Pop-Up". This feature provides that in those instances where the surviving spouse predeceases the retiree, the pension reverts ("pops-up") to what it would have been without the surviving-spouse option.

Regrettably, however, the only retirees allowed to benefit by that change were those who retired after April 1, 1990. This feature should apply to all retirees. The exact number so affected is not known to us, but is certainly small, and the increased cost is also small. This is a fairness issue.

What CORRE is proposing in this area:

Special features added to the retirement plan at any time should apply to all retirees.

The "Pop-Up" provision should cover all retirees whose spouse predeceased them, and pop-up benefits should be paid to any such retirees who are not now getting them starting January 1, 2001. A reimbursement of the applicable payments back to April 1, 1990 would, of course, be preferred in order to correct the inequity created when people were excluded from this appropriate benefit simply because they had retired before that date.

 

Conclusion

Union Carbide Corporation set up the pension plan many years ago, as part of a package for all their employees under DOE and predecessor agencies contract. The plan is applicable only to people who have worked on these particular federal government projects. The plan has been funded only with federal government funds. The plan can only be modified with the approval of the federal government. The plan has many features of a government pension plan. Ideally, the plan should have the one well-recognized benefit of a government pension plan, namely a 100% cost-of-living adjustment every year (like that provided to DOE employees when they retire after working in these same plants and laboratories). Our organization is planning to work toward that objective.

What we are proposing now is an immediate action to correct some of the inequities of the past caused by having had no adjustment whatsoever to offset the large increase in living costs in the past 12 years. After considering information we have learned about individual retirees’ situations, about competitive plans, and about the status of the Pension Trust Fund and its surplus – it is our conviction that to be fair and equitable all of our retirees should receive an increase in their pension that will allow them to recover at least 40% of the cost-of-living increase since they retired. Again, this is not our long-term goal which is 100%, but is proposed as a means of getting a quick, favorable response needed now to ease the hardship being experienced by so many of our retirees.

We believe the total cost of these proposals is much less than just the earnings of the Pension Trust Fund investments in the past decade. There will be plenty of surplus reserve remaining in the Pension Trust Fund for future improvements of benefits both for the present and for future retirees.

Good corporate citizenship, fairness to present retirees, fairness to active employees planning for their retirement (who see how other employers protect the value of their retirees’ pensions), coupled with the fact that we have new DOE contractors with innovative attitudes along with the responsibility to re-evaluate the way these benefits are administered; all these factors mandate not only an equitable adjustment, but a practice of much more frequent cost-of-living adjustments.

Based on our estimate of the costs, the requested pension benefit increase will not take any money from any Oak Ridge contractor’s operating budget, it will not cost the DOE any new money; nor will it require any action or tax increase by the Congress. It preserves a substantial portion of the Pension Trust Fund surplus as a continuing reserve. Though it only partly restores the losses retirees have suffered, it is the right thing to do right now to increase the value of the pensions so many of these 13,000 worked long years for in DOE’s Oak Ridge facilities contributing to our national defense, to the advance of the frontiers of science and technology, and to our nation’s and the free world’s energy supplies.

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SUMMARY of What CORRE is PROPOSING FOR 2001

1. A sliding-scale pension increase effective Jan. 1, 2001 with no "cap" that starts with 3% for 1999 retirees, 4% for 1998 retirees, and increasing for each earlier year so that all retirees recover at least 40% of the cost-of-living increase since the year of their retirement. Retirees whose 1992 increase was capped should have that deficit figured in before their current increase is calculated.

2. A minimum monthly pension for anyone with 20 years or more service of $600 per month ($400 for surviving spouses). For those with less than 20 years service credit, the minimum pension would be reduced pro-rata using their actual whole years of service.

3. A change in contractor practice to making adjustments for inflation at least every two years rather than delaying them for a decade or more as in the past.

4. A COLA. Our organization is committed to begin working over the longer-term future for changes that will provide Oak Ridge retirees with an annual increase in their pensions to offset increased cost of living.

5. A correction of the "Pop-Up" feature to cover all retirees whose spouses predecease them with payment of new benefits to begin January 1, 2001.

6. An invitation to CORRE to have representatives attend meetings of the Committee that considers pension benefits in order to improve the understanding and the support of the retiree group.

/Rev. 8, Jan. 29, 2001