2008 POSITION PAPER
A STATEMENT OF PROPOSED CHANGES
IN PENSION BENEFITS FOR 2008
by
THE COALITION OF OAK RIDGE
RETIRED EMPLOYEES
Approved April 16, 2008
The Coalition of
Oak Ridge Retired Employees (CORRE) was formed in 2000 to represent the
interests of the approximately 12,000 retirees (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 pension plan at
Bechtel-Jacobs and its subcontractors, 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.
Officers
Dave Reichle, President
Joe Setaro, First Vice President
Bob Keil, Second Vice President
Mary Helen Rose, Secretary
Paula Wright, Treasurer
Marty Goolsby, Communications
Charlie Kuykendall, Past President
| Board Members |
Advisors |
| Mike Bradshaw |
Bob Henderson |
| Joyce Conner |
Judy Kibbe |
| Sandy Dean |
Charles Landguth |
| Lou Dunlap |
Fred Postma |
| Keith Kibbe |
Gary Riser |
| Tom Lemons |
Harriet Westmoreland |
| Pete Lotts |
|
| David Mason |
|
| Ed Mee |
|
| Ken Moore |
|
| Pete Peterson |
|
| Dub Shults |
|
| Don Wood |
|
| Bob Worrell |
|
EXECUTIVE SUMMARY
The increased cost of living for DOE Contractor retirees and surviving
spouses is becoming more and more damaging to them each year that goes
by, particularly because of the skyrocketing costs of energy, food, and
medical care.
CORRE represents approximately 12,000 retirees of the Oak Ridge DOE
Contractors. The average (median) length of retirement (in 2007)
for these retirees is 11.4 years. Of these, 834 have been retired
over 25 years. Since most of these 834 are now around 90
years old, they have been the most seriously impacted by inflation.
Based upon the Department of Labor’s inflation data, the cost of
living has increased 14.7% for those retiring in 2003 (5 years ago),
and over 100% for those retiring in 1983 (25 years ago). Those
retiring in 1970 or earlier have seen their cost of living increase
over 400%.
While there have been a few adjustments to pensions by the Contractors
over the past 35 years, these increases have not come close to
replacing the eroded buying power of retirees’
pensions.
As CORRE has proposed in the past, we again urge that the Contractors
propose a fair, equitable, and reasonable pension adjustment that will
restore at least 75% of the lost value of retirees’
pensions. The proposed increases should be graduated,
meaning an individual retiring in 2000 would get an increase of
approximately 17%, while a 1990 retiree would get approximately 29%,
and so on. As mentioned above, there have been some adjustments
in the past and these have been taken into account when calculating the
needed adjustment.
CORRE also urges that the Contractors propose that the flat 2%
reduction factor for the Surviving Spouse Option be extended to those
who retired prior to July of 2004. This reduction was granted to
active employees at that time, but no adjustment was given to existing
retirees.
CORRE realizes that Bechtel Jacobs and Wackenhut are not part of the
Multiple Employer Pension Plan and may need additional funding to grant
these increases.
2008 PROPOSAL
This position paper focuses on two specific goals,
which CORRE would like to achieve in 2008 (see page 4 for Background
Information):
1. An Ad Hoc Increase
in pension benefits for all retirees that will restore approximately 75
percent of the lost buying power of their pensions that occurred due to
the increased cost of living since their retirement. An overall
adjustment averaging about 2.0 percent per year since retirement would
accomplish this. The increase should be spread across the board, so
that all retirees would achieve about the same level of recovery since
retirement.
2. A flat-rate reduction factor of 2 percent for retirees who have
chosen the surviving spouse option effective July 2004 (same benefit
that was extended to active employees in July 2004).
Ad Hoc Increase.
The proposed Ad Hoc Increase is NOT an unreasonable proposal. It
represents only a small fraction of the value of the Multiple Employer
Pension Plan (MEPP) Trust Fund of B&W Y-12 and UT/Battelle.
As a matter of fact, the current value of the MEPP Trust Fund
“surplus” is sufficient to support CORRE’s
proposed adjustments for 2008, and still have a significant surplus far
in excess of liabilities.
This proposed action is patterned after the pension
adjustments approved at Sandia National Laboratories, January 1, 2002,
except that we propose a graduated level of recovery for all retirees,
rather than giving all retirees the same percent of increase.
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
March, 1998, all vested retirees, and arbitrarily capped the pension
benefit for many other retirees. Additionally, the recent
adjustment of extremely low pensions 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 and we
believe they should end.
Two (2) Percent Pension Reduction Factor.
As a result of union negotiations in early 2004, the pension 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
previous retirees of 8 percent. This improved benefit was
extended in July 2004 to all active employees of UT-Battelle at ORNL
and B&W Y-12 at Y-12. It was not extended to Grandfathered
employees at Bechtel Jacobs nor to employees at Wackenhut. The
change in the spousal reduction factor should be extended to retirees
at ORNL and Y-12, and Wackenhut, as well as to Grandfathered employees
and retirees of Bechtel Jacobs.
The Contractors have implemented a discriminatory
policy of using the Pension Trust Fund to increase the benefits for
active employees while ignoring retirees. This level of unfair
treatment of retirees has never happened before in the entire history
of the Pension Trust Fund.
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 lower, but has increased
dramatically over the past five decades.
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 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.
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 since 1984. The Oak Ridge Pension
Trust Fund surplus has also been the target of attempts to divert funds
for purposes other than pension benefits. Twice the Contractors
proposed IRS 420 transfers of funds from the Pension Fund in order to
reduce overhead expenses. CORRE resisted these proposals and the
transfers were stopped in both instances. 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.
The actions requested 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 2008, 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 review of pensions.
- CORRE has requested that the DOE Oak Ridge
Field Office 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.
- Consistency of benefits for Oak Ridge retirees
Former Y-12, ORNL and
ORGDP employees who transferred to Bechtel Jacobs and Wackenhut were
all participants in the same Pension Plan prior to their transfers and
were, therefore, eligible for identical retirement benefits.
Since then, Bechtel Jacobs and Wackenhut have established their own
Pension Plans, separate and apart from Y-12 and ORNL (MEPP), with
benefits different and less favorable than the MEPP. CORRE strongly
believes that Grandfathered employees and retirees at Bechtel Jacobs
and employees and retirees at Wackenhut should be treated comparably to
Y-12 and ORNL.
- 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 vigorously opposes any attempt
to raid the Pension Trust Fund directly through IRS 420 transfers or
indirectly through any other means.
- B&W Y-12,
Bechtel Jacobs, and Wackenhut each should include participation of a
retiree as a member of a Pension Fund/Benefits Advisory Committee, as
UT-Battelle has done.
B&W 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 Group comprised of employees, and CORRE provides a
representative who now serves as a member of this group. B&W
Y-12, Bechtel Jacobs, and Wackenhut should do the same. We
sincerely believe retiree representation on such Boards will be
mutually beneficial.
Effective
communication leads to better understanding. CORRE appreciates the
cooperation and support of Contractor management and, in turn, is very
willing to lend our support in a mutually beneficial environment.
- No reduction in other benefits for retirees.
There should be no
reduction in other benefits for retirees Retirees expect
that the historic 50-50 cost share between the companies and the
retirees for health care will not be changed. Retirees from Y-12
and ORNL have now been offered the option to purchase dental/vision
insurance, but the same offer has not been made to Bechtel Jacobs and
Wackenhut retirees.
- Contributions to the Oak Ridge pension plans should be made if needed to provide fair and equitable retiree pension adjustments
Since 1984, no
Contractor contributions have been made to the MEPP. Thanks to
effective management of Trust Fund assets, investment returns have
consistently accumulated a large Fund surplus over the intervening
years, resulting in a large surplus. However, while acknowledging
good management of the Fund, CORRE faults DOE and its Contractors for
failing to provide fair and badly needed retiree adjustments to at
least partially offset inflationary increases. Over the 15 years prior
to the last contribution in 1984, five retiree adjustments were
approved. In the 16 years between 1984 and when CORRE was formed in
2000, only two adjustments were approved. And the last adjustment
in 2001 applied only to those who retired prior to April 1998, over ten
years ago.
It is clear that the failure to grant CORRE's requested adjustments
stems from an unwillingness to consider the needs of retirees while
concentrating on how to provide active employees improved benefits
without ever having to budget a single dime for the added
liabilities. Given the historical financial performance of the
Fund as well as the current funding level, there is no economic
justification for not granting retirees a much needed pension increase
now. And, even if future contributions become necessary, retirees
should not be denied a fair and reasonable increase.
CORRE maintains that Bechtel Jacobs and Wackenhut owe their retirees
the same consideration as B&W Y-12 and UT-Battelle. All
retirees are heavily impacted by dramatic increases in cost of living
and deserve equal treatment.
- Communications with Retirees must be maintained
It has come to
CORRE's attention that B&W Technical Services management decided in
December 2007 to discontinue publishing Retirement News -- the only
routine communication mechanism between the employer and retiree. CORRE
believes that this is a serious mistake. B&W Technical
Services and UT-Battelle need a mechanism to communicate important
information to all retirees. Only the contractors have privileged
access to retirees' mailing addresses. Such a communication mechanism
was promised to retirees by BWXT Manager, John Mitchell, in 2000.
- The current cap on the Medicare Major Medical Supplement must be increased
It is essential that
the $75,000 cap on medical claims by retirees be raised, and that the
Company routinely monitor how many retirees are approaching this
limit. It should not be a surprise event. The $75,000 cap per
individual on the retirees' medical coverage is inadequate. This
cap has not been changed in many years, while medical costs,
particularly for specialty drugs and new medical procedures, have
increased significantly.
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