Coalition of Oak Ridge Retired Employees (CORRE)
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2009 PROGRAM
IMPROVING PENSION BENEFITS
Background Information
Plight of Retirees
Principles, Issues, and Program for 2009
Issued: January 21, 2009
The Coalition of
Oak Ridge Retired Employees (CORRE) was formed in 2000 to represent the
interests of approximately 12,000 retirees (and surviving spouses) from
the contractor-managed facilities of the Department of Energy (DOE) in
Oak Ridge, Tennessee. These facilities include the Oak Ridge
National Laboratory (ORNL), the Gaseous Diffusion Plant (K-25), and the
Y-12 Plant (Y-12). CORRE also represents grandfathered employees
of Bechtel Jacobs and its subcontractors and Wackenhut. The
primary objectives of CORRE are: (1) to secure retirement benefits that
are fair and equitable in comparison with those of other major DOE
contractors in the technical field, (2) to safeguard the Pension Trust
Fund from which these benefits derive, and (3) to maintain good
relations with and support for the institutions from which we retired.
Officers
Wilbur (Dub) Shults, President
Keith Kibbe, First Vice President
Bob Keil, Second Vice President
Mary Helen Rose, Secretary
Paula Wright, Treasurer
Judy Kibbe, Communications
David Reichle, Past President
Board Members
| Mike Bradshaw |
Phyllis Green |
Ken Moore |
| Joyce Conner |
Ron Honeycutt |
John Napier |
| Sandra Dean |
A. L. (Pete) Lotts |
C. H. (Pete) Peterson |
| Julie Dorsey |
David Mason |
Don Wood |
| Louise Dunlap |
Ed Mee |
Bob Worrell |
Advisors
| Bob Henderson |
| Charlie Kuykendall |
| Fred Postma |
| Joe Setaro |
Background Information
The operation of all three major nuclear facilities in Oak Ridge
— K-25, Y-12, and X-10 — was contracted to Union Carbide
Chemicals Corporation on March 1, 1948. As part of their earned
compensation package, contractor employees were provided with a pension
plan that later (1960) was replaced with a defined-benefit plan.
As was common practice within the chemical industry at the time, Union
Carbide made periodic, not annual, adjustments to pension values to
offset increases in the cost of living encountered by retirees.
The program was financed through a Pension Trust Fund, which
accumulated funding via annual (reimbursable) payments from the
contractor. This program continued until April 1, 1984, at which
time Martin Marietta Energy Systems replaced Union Carbide as the
operating contractor.
This change in contractor brought two major changes in policy for
retirees: periodic adjustments to pension values slowed to a
stop, and payments into the Pension Trust were discontinued. Five
adjustments were made to retiree pensions prior to the 1984 departure
of Union Caribide. Two were given between 1984 and 2000, and one
was given in 2001 to those who retired prior to April 1, 1998. No
adjustments have been granted since 2001. To put this in context,
retirees have received only three adjustments in the past 25 years, and
no adjustment has been given to anyone that retired after April 1,
1998. Meanwhile, because of sparse pension adjustments and
fortuitous management of investments, funding in the Pension Trust Fund
grew to an all-time high. In 2007, the Fund attained a surplus of
assets over liabilities of more than $800 million. Because of the
current economic decline, however, that surplus is depleted, and it may
be necessary to resume the practice of adding funds to the Trust to
maintain the required ratio of assets to liabilities.
In 1998, Bechtel Jacobs was selected to be DOE’s contractor
organization in Oak Ridge for the former gaseous diffusion plant.
Then, in 2000, DOE selected BWXT to manage the National Security
Complex, UT-Battelle to operate Oak Ridge National Laboratory, and
Wackenhut to provide security services. The original Pension
Trust Fund was proportioned into three funds: the Multiple
Employer Pension Program (MEPP) for retirees from Y-12 and ORNL and two
separate trusts, one for grandfathered retirees of Bechtel Jacobs and
another for Wackenhut employees and retirees. Creation of
separate trusts resulted in on-going inequities in the retirement
benefits of those who formerly were employed by a single contractor.
In 2000 and again in 2001, attempts were made to divert funds from the
Pension Trust Fund for purposes other than retirement benefits, i.e.,
to utilize IRS 420 transfers from the Trust Fund to reduce overhead
expenses. CORRE was formed as a result of these attempts to raid
the Pension Trust Fund. CORRE enlisted the support of Congressman
Wamp and succeeded in stopping this proposed diversion of pension funds.
In 2004, active employees of BWXT and ORNL received an improvement in
retirement benefits in the form of a reduced cost of the
“Surviving Spouse Option.” When elected, this option
provides a reduced pension for the spouse of a retiree upon his or her
death and is costed as a percentage deduction from the retiree’s
normal pension. The improvement consisted of a decrease in
deduction factor from approximately 8%, on average, to a flat 2%.
This improvement in benefits was not extended to active employees of
Bechtel Jacobs or Wackenhut. They and all MEPP retirees who
retired prior to 2004 continue to pay 8% for the Option, on
average. This inequity is doubly unjust because the improved
benefit for employees and recent retirees is enabled by funds that were
placed in trust for older retirees, yet the older retirees continue to
pay the higher cost.
In 2006, Prescription Drug Coverage (Part D) was added as an option to
Medicare. Employers that continued to offer such coverage to
retirees as part of their health care benefits program may receive an
“incentive subsidy” against the cost of their drug
program. Because the program cost is normally shared between
company and retiree, it is reasonable to expect that the company would
share its subsidy funds with its retirees in an appropriate
ratio. DOE has approved this practice at some sites here and
elsewhere, but has disapproved it for retirees of the MEPP in Oak
Ridge.
It is important to note that DOE has a long record of discrimination
against employees and retirees of Oak Ridge contractors with regard to
both salaries for active employees and pensions for retirees. The
“multiplier” used to calculate one’s pension income
is lowest at Wackenhut in Oak Ridge (1.2) and highest at the California
laboratories (2.5). The multiplier for MEPP retirees in Oak Ridge
is 1.4, while retirees at other sites have multipliers ranging between
1.6 and 2.0. DOE attributes these wide differences in multipliers
to differences in the cost of living at the various sites, an age-old
excuse.
Plight of the Retirees
Contractor retirees in Oak Ridge have seen the purchasing power of
their pension income erode away in parallel with the demise of the
practice of periodic pension adjustments. The extent of loss is
reflected in the following data, as of January 2008:
| In Retirement Year |
Number of Retirees |
Lost Purchasing Power |
| 1970 |
8 |
58% |
| 1980 |
97 |
42% |
| 1990 |
411 |
28% |
| 2000 |
716 |
18% |
This problem is compounded by several significant considerations.
One is that the cost of living is increasing rapidly, as evidenced by
the current Consumer Price Index of 5.6%, the highest since 1982.
Another, according to a recent study by the Bureau of Labor Statistics,
is that seniors are hurt more by an increased cost of living than are
average citizens. It is well known that the cost of essentials -
food, energy, health care, etc. - has increased much faster than the
Consumer Price Index. Of utmost significance, however, is the
loss of retirement savings during the current economic downturn in the
country. The Dow Jones Industrial Average declined approximately
40% during the recession of 2008, and it is likely that retiree savings
have declined by a similar amount. Hence, retirees are trapped by
both a loss in the amount of their savings (if they have any) and a
loss in the purchasing power of both those savings and their pension
income. Add to these considerations the fact that Oak Ridge
pensions are relatively low compared to others in the DOE system, and
it is clear that many retirees here live in dire circumstances.
CORRE Principles
CORRE strongly opposes any attempt to raid the Pension Trust Fund
directly through IRS 420 transfer or indirectly through any other means.
CORRE believes that to use the Pension Trust Fund to increase benefits
for active employees while ignoring retirees is eminently wrong,
discriminatory, and counter to the original intent of the Oak Ridge
retirement program.
CORRE believes that the Pension Trust Fund should be managed and funded
such that periodic pension adjustments are made to counteract increased
costs of living, which was the original practice. The objective
was then, and should now be, to provide financial security for
deserving retirees.
Issues and Program for 2009
1. Partial Restoration of Loss in Pension Value.
CORRE has worked for several years, and will continue to work, for an
ad hoc increase in pension benefits of retirees. The proposed
adjustment will restore approximately 75 percent of the lost buying
power of their pensions that has occurred since their retirement,
because of increased living costs. An overall adjustment
averaging about 2.0 percent per year since retirement will accomplish
this.
2. Equalize the Cost of the Spousal Option.
CORRE has worked for several years, and will continue to work, for a
decrease in the cost of the surviving spouse option for retirees who
retired prior to July 2004. This benefit was extended to active
employees at that time. The proposed adjustment will assure that
all retirees pay equal costs for the surviving spouse option,
regardless of retirement date.
3. Increase the Cap on the Medicare Major Medical Supplement.
The $75,000 cap per individual on the retirees’ medical coverage
has not been increased in many years, while medical costs have grown
dramatically. CORRE believes that the cap is inadequate and
should be raised.
4. Consistent Benefits for Oak Ridge Retirees.
Former employees of ORNL, Y-12, and ORGDP who transferred to Bechtel
Jacobs and Wackenhut were participants in the same retirement plan
prior to their transfers and were, therefore, eligible for identical
retirement benefits. CORRE strongly believes that these
grandfathered employees and retirees should receive benefits comparable
to those received by retirees of Y-12 and ORNL.
5. Medicare Part D Subsidy.
CORRE recommends implementation of a consistent policy whereby Medicare
Part D incentive subsidies received by the four Oak Ridge contractors
are shared with their respective retirees, in appropriate ratios and
amounts.
6. Review of Retirement Programs.
CORRE recommends biennial review of retirement programs.
UT-Battelle has established a Benefits Advisory Group comprised of
employees plus one representative from CORRE. CORRE believes that
retiree representation on such groups at BWTS-Y-12, Bechtel Jacobs, and
Wackenhut would be mutually beneficial.
7. Contributions to the Oak Ridge Pension Trust Fund.
CORRE understands the fact that no additional funds have been added to
the MEPP Trust since 1984. Neither this precedent nor the lack of
surplus funds within the Trust constitutes justification for denying
much-needed pension adjustments now and in the future.
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