Coalition of Oak Ridge Retired Employees (CORRE)
Working for Fair, Equitable, and Competitive Benefits
For Former K-25, Y-12, and ORNL Employees
P. O. Box 4266
Oak Ridge , Tennessee 37831-4266
April 16, 2007
Ms. Stephanie Weakley
Office of Procurement and Assistance Management
U.S. Department of Energy
1000 Independence Avenue SW
Washington , D.C. 20585
Sent by email to DOE at contractorpensions@hq.doe.gov
Dear Ms. Weakley:
Comments on DOE Notice N 351.1
In response to the Department of Energy’s invitation given in the Federal Register, I am submitting the attached comments on the document. We had previously supplied amendments to the document shortly after the public meeting at Pellissippi State Community College. This set of comments replaces the amendments for N 351.1 that we supplied to DOE at that time. It does not replace the written questions we addressed to DOE at the meeting. We also supplied copies of those to the DOE delegation at the meeting.
We would emphasize that the draft N 351.1 document, while not primarily addressing the defined benefit plans in effect, does address them by restricting severely how adjustments can be made. The fact that little written guidance is given by present DOE procedures provides a vacuum in which retirees of those plans are easily forgotten. We think that has happened in Oak Ridge with the existing contractor pension plans. The comments we are supplying to you addresses our concerns that there be put in place adequate administrative guidelines to assure that interests of retirees are protected. Adoption of our recommendation, as contained in our comments, will assure that there are guidelines for proper reviews with criteria that all of us can understand.
We would also note that a large percentage of the retirees of DOE contractors rely extensively upon the contractor defined benefit plans, and, thus, it is important that their concerns be addressed in the N 351.1 document, such that when it becomes the order, it is known how the defined benefit plans will be administered.
We appreciate this opportunity to comment and would be pleased to discuss them with DOE management.
Sincerely,
(Original approved by David Reichle and submitted by email)
David E. Reichle, President
Attachment
CC: Gerald G. Boyd, Manager, DOE-ORO
COMMENTS ON DOE Notice N 351.1
Provided by
COALITION of OAK RIDGE RETIRED EMPLOYEES (CORRE) April 12, 2007
CORRE recognizes that DOE Notice N 351.1, as drafted, is primarily about the transition from Defined Benefit (DB) plans to Defined Contribution (DC) plans for future DOE contractor retirees. However, the document is inadequate in the manner in which it addresses the problem of administering fairly the existing defined benefit plans under which most of DOE contractor retirees now receive benefits and which is still a prevalent methodology used by many contractors for the DOE. The document should address comprehensively all primary issues related to the administration of the defined benefit plans, especially since there is no other document that addresses properly how defined benefit plans will be administered to give fair treatment to retirees whose pensions are provided by these plans. Therefore, CORRE is making the major recommendation that detailed methodology for administration of defined benefit plans also be incorporated in N 351.1. It is not sufficient to say simply that changes in DB plan benefits must be approved by the Secretary of the Department of Energy.
DOE has 45 defined benefit plans in use across its operations in some 20 states. These plans were established by a variety of corporate entities at different times under conditions of a world war as well as more peaceful times, and with considerations that span some of the most turbulent times from a sociological and political perspective in our nation’s history. Stewardship, management, and performance of these 45 different plans have varied dramatically. Some contractors have an exemplary record of managing costs, while periodically augmenting plans to help mitigate lost purchasing power due to the ravages of inflation. Others have apparently failed in this responsibility as indicated by a current deficit of pension assets to liabilities of some $2 billion, according to DOE representatives.
It is the position of the Coalition of Oak Ridge Retired Employees that those plans with an exemplary record of responsible management NOT be lumped together with those less successful or under-funded. We believe and advocate that successful DB plans should be allowed to augment their plans in accordance with their ability to fund the augmentation, and also in special circumstances where additional funding is required by DOE. CORRE recommends that DOE modify N 351.1 by incorporating guidelines for governance of the method of augmenting benefits for retirees of DB plans.
CORRE recommends that the following criteria be used to implement and manage such augmentation, and that these criteria and provisions be incorporated into N 351.1:
A) DOE shall separate considerations for Defined Contribution (DC) plans and Defined Benefit (DB) plans.
B) DOE shall separate considerations for DB plans that are fully funded from those that are not fully funded.
C) DB plans that are under-funded shall be funded in accordance with the Pension Protection Act (PPA) requirements.
D) Retiree benefits from fully funded DB plans (i.e., assets/liabilities=100%) may be augmented at the contractor’s request and with the advanced approval of the Secretary of Energy (Secretary), provided the funds are available and the augmentation is based on sound management practices as regards that individual DB plan fund.
E) Under no conditions shall the contractor propose or DOE approve a transfer of funds from the DB plan surplus .
F) Under all circumstances, any change or augmentation of DB plan benefits for future retirees (present employees) shall be granted immediately and in full to existing retirees or their qualified survivors. Where such augmentation has not been allowed for any reason, the contractor shall now propose this augmentation, and the Secretary shall approve it for immediate implementation, provided the funds are available as herein specified.
G) At least biennially (every two years), the contractor shall review lost purchasing power of existing retirees and qualified survivors and propose appropriate augmentation of pensions as follows:
1) At a minimum, the goal shall be to maintain pensions at 75% of lost purchasing power calculated as follows and using the U.S. Department of Labor, Bureau of Labor Statistics, Inflation Calculator on their website or it’s successor methodology:
For each $100 of pension : (example =1985 retiree)
a. Inflation calculator 1985-2006= $ 187.36
b. Pension plus previous adjustments. = $ 130.38
c. Lost purchasing power (a-b) = $ 56.98
d. 75% of lost purchasing power(c x .75) = $ 42.74
e. After adjustment per $100 (b+d) = $173.12
f. After adjustment % of original pension in inflation-adjusted dollars (e/a) 92%
Note 1 : In the case of Oak Ridge Multi-Employer Pension Program (MEPP), these adjustments could result in retirees being up to 16% behind inflation (lost purchasing power), and the average would be 8% behind inflation.
Note 2 : In the case of the Oak Ridge MEPP covering over 11,000 current retirees, the cost of fully implementing this proposal plus the 2% spousal option (separate proposal) would require less than one half of the current surplus and cost DOE or the taxpayer nothing!
2) Any lost purchasing power adjustments shall be made for all then retired employees and qualified survivors regardless of salary level or year of retirement without exclusions or setbacks of any kind.
H) The Secretary of Energy or their designate shall approve contractor proposals for augmentation of existing DB plans provided:
1) The plan is fully funded before and will be fully funded after the requested augmentation, and
2) After augmentation, plan assets shall not fall below 100 % of plan liabilities using PPA guidelines and requirements. Should the biennial review of lost purchasing power on two consecutive reviews (4 years maximum) result in the need to make an adjustment for which pension funds are not available (assets/ liabilities would fall below 100%), the Secretary shall in that year reallocate operational funds as may be required to fully fund the lost purchasing power adjustment as indicated and as herein specified.
I) Contractors shall be cognizant of historical practices at the locations managed and provisions for augmentation of DB plans for retirees and covered employees at such locations, and
1) Conduct biennial reviews of lost purchasing power as herein specified, and
2) Propose to DOE Elements augmentation of such plans in accordance with these provisions, provided the plan meets the specified funding requirements for augmentation.
J) DOE Elements shall review contractor proposals for DB plan augmentation as herein described, and
1) Ensure that all provisions of this policy/order are met, and
2) Submit the proposal to the Secretary for approval and authorization to implement.
K) The contractor shall implement approved augmentations as soon as practicable.
CORRE
April 12, 2007
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