Disinformation Regarding Oak Ridge Contractor Pensions
Prepared by
Coalition of Oak Ridge Retired Employees
July 26, 2007
The Coalition of Oak Ridge Retired Employees (CORRE) believes that the Department of Energy (DOE) and/or its contractors have disseminated inaccurate information about the pensions of retirees of contractors in Oak Ridge. CORRE wants to correct and document these inaccuracies. A detailed version of this material, with references to DOE statements, may be found at www.CORRE.info.
1. The DOE Contractors say that they have given the retirees all the pension benefits that were promised to them.
-This statement seems to be true, but is misleading.
-It may be argued that the contractors do provide all that is legally required.
-The intent of the pension program, however, was to preserve the post-work purchasing power of contractor employees, i.e., to preserve their lifestyle.
-This intent is evidenced by the fact that six pension adjustments were made between 1969 and 1984 to counter increases in the cost of living under Union Carbide Corporation and another in 1991 under Martin Marietta Energy Systems.
-The fact is that retirees were led to believe that ad hoc pension adjustments were promised in lieu of regular cost-of-living adjustments.
2. Retirees from DOE Contractors in Oak Ridge retire with an equivalent of over 99% of their working salary as retirement income.
-This statement is false. It is based on faulty assumptions and misrepresented data that maximize income estimates.
-The DOE comparison used the current Oak Ridge multiplier (1.4) although that multiplier applies only to retirees that retired after July, 2001. All other retirees must utilize a smaller multiplier (1.2).
-DOE included a maximum Social Security benefit as income, based on retirement at age 65. In 2005, 85% of the national workforce that retired did so at age 62. The additional three years increases the benefit by approximately 25%.
-DOE assumed 100% participation in and maximum contribution to a 401(k) plan, beginning with its inception in 1984. 401(k) plans are voluntary. National data indicate that only 70% of the eligible workforce participates in a 401(k) plan and only 23% of the participants max out their contribution in any one year.
-The truth is that, after 35 years of service, a pre-2001 retiree receives a pension equivalent to 42% of his or her largest salary (3 year average).
3. DOE’s Benefits Programs for Contractor Retirees are $11.6B under-funded, and with such liabilities, DOE cannot afford any pension adjustments in Oak Ridge.
-This statement is sophistic and obscures the true issues. The statement is based on a 2004 GAO report that combines both health and pension benefits.
-DOE’s pension plans and health benefit plans are funded separately.
-Total under-funding for pension plans at 33 contractor organizations across the country was only $784M in 2006.
-The Multi-Employer Pension Plan Trust Fund (MEPP) in Oak Ridge was over-funded to the extent of ~$811M as of June 12, 2007.
-In reality, the pension adjustments requested by CORRE can be funded from the Trust Fund surplus without need for additional funding from contractors or appropriations from Congress. No new money is needed.
4. The Contractor’s Pensions are better than those of the Department of Energy and Other Federal Employees.
-This statement is false and deceptive. It is based on a comparison that minimizes Federal pensions and maximizes contractor pensions.
-The comparison used DOE pension data derived from the Civil Service Retirement System (CSRS), which was replaced in 1987 by the Federal Employees Retirement System (FERS).
-Both CSRS and FERS provide an annual cost-of-living adjustment (COLA) indexed to the annual Social Security COLA benefit.
-After three years of retirement, the Federal defined-benefit pension with COLA surpasses the contractor defined-benefit pension which has no COLA. Federal pensions are sustained; contractor pensions erode.
-The fact is that after twenty years of retirement, the Oak Ridge contractor retirees lose approximately 50% of the purchasing power of their pensions.
5. The Multi-Employer Pension Fund in Oak Ridge cannot afford adjustments to retiree’s pension and remain healthy.
-This statement is inaccurate. It ignores past history, current data, and recent actions that increased the benefits that accrue to active employees.
-No contributions have been made to the MEPP Trust Fund in since 1984.
-The Fund surplus has grown steadily during that time period.
-As of June 12, 2007:
-Fund assets = $3,180M (126% of liabilities)
-Fund liabilities = $2,369M
-Fund surplus = $811M
-After implementation of CORRE’s requested adjustments:
-Fund liabilities = $2,515M (121% of liabilities)
-Fund surplus = $665M
-Recent actions decry the belief that increasing Trust Fund liabilities adversely affect the Fund’s health:
-In 2000 and 2001, attempts were made to remove monies from the Fund surplus and use them for non-pension purposes. With congressional assistance, these attempts were thwarted.
-In 2004, active employees were granted a reduction in the cost of the spousal option. The cost was reduced from 8% to 2% of pension. This constituted an increase in Trust Fund liability of $66M.
-In 2004, the 30-year cap on pensions was removed, resulting in a one-time cost to the Trust Fund of $48M.
-Recent actions and the magnitude of the Trust Fund surplus clearly show that the adjustments requested by CORRE do not constitute a threat to the health of the MEPP.
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CORRE’s objectives are to obtain fair and equitable pension treatment for approximately 12,000 DOE contractor retirees and their spouses. These objectives are supported by State, City, and County governmental bodies
CORRE has two primary requests:
1. Restoration of 75% of the lost purchasing power of the pensions of all retirees of the Oak Ridge contractors of the DOE. The local economic impact of this request is estimated to be $65M
.
2. Extension of the flat 2% spousal option deduction to all DOE contractor retirees in Oak Ridge, as has been done for active employees. The local economic impact of this request is estimated to be $13.4M.
CORRE has the following two other recommendations:
1. That a review of the three Oak Ridge pension plans be conducted biennially by DOE and NNSA contractors to assess the status of each plan and determine the need for corrective action when warranted.
2. That grand-fathered employees and retirees of all four Oak Ridge contractors --- Bechtel Jacobs, BWXT, UT-Battelle, and Wackenhut — be granted comparable retirement benefits.
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