Editor's Note: This letter plus the story by Frank Munger give a reasonably good description of the DOE/Contractor opinion of the Pension Plan and what is their intent for future adjustments. The problem is not going away without persistent action on the part of retirees. As other information becomes available in machine readable form, it will be posted. AAB

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Department of Energy

Washington, DC 20585

{Scanned and encoded}. RECEIVED

RECORD COPY December 23, 2005 OFFICE OF THE MANAGER

1/10/06

Mr. David E. Reichle, President

Coalition of Oak Ridge Retired Employees

Post Office Box 4266

Oak Ridge, Tennessee 37831‑4266

Dear Mr. Reichle:

I am writing in response to a letter dated July 14, 2005, from Congressman John J. Duncan, Jr. to Secretary of Energy Samuel W. Bodman on behalf of the Coalition of Oak Ridge Retired Employees (CORRE). The Congressman requested that I reply directly to you. I apologize for the delay in answering this letter.

I understand that your organization basically is seeking two adjustments to pension benefits for retired employees of the Department of Energy's Oak Ridge contractors, with a focus on retirees from the Oak Ridge National Laboratory (ORNL) and the Y‑ 12 plant (Y‑12)^1. Specifically, you seek a substantial ad hoc increase to restore to 75 percent the pension benefits for ORNL retirees, and a flat‑rate reduction factor of only two percent for retirees who elect surviving spouse coverage.

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1 The formal name of the pension plan is the Retirement Program Plan for Employees of Certain Employers at the U.S. Department of Energy Facilities at Oak Ridge, Tennessee. It covers employees and retirees of the Oak Ridge National Laboratory, now managed for the Department by UT‑Battelle, LLC (UT‑Battelle), and the Y‑ 12 plant, now managed for the Department by BWXT Y‑ 12, LLC (BWXT).

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By letter dated November 14, 2005, William J. Brumley, Manager for the Y‑1 2 Site Office, provided you with information from Towers Perrin, BWXT's consulting actuary, concerning the impact of the changes proposed by CORRE with respect to the Y‑ 12 portion of the plan. With regard to the impact on the ORNL portion of the plan, according to Towers Perrin, who also serves as UT‑Battelle's consulting actuary, to restore the pension benefits of retirees to 75 percent for ORNL retirees would increase DOE's long‑term liabilities for reimbursement of contractor payments to this pension plan by approximately $37.8 million. To provide the flat rate reduction factor of two percent prospectively for retirees who elect surviving spouse coverage would increase long‑term liabilities to DOE for reimbursement of contractor payments to this pension plan by approximately $21.7 million.

Enclosed are two charts (Salaried Chart - Hourly Chart) that show estimates of retirement pension income for retired contractor salaried and hourly employees across the DOE complex as a result of a retiree's final salary based on the 2003 plan benefit formula. Out of 28 DOE contractor pension plans for salaried employees, Y‑12 ranks ninth and ORNL ranks 11-th in providing pension benefits, i.e., Y‑12 and ORNL provide the 9th and 11-th most generous benefits, respectively, in the DOE facility management contractor system. Out of 31 DOE contractor pension plans for hourly employees, Y‑ 12 provides the ninth and ORNL provides the 10th most generous pension benefits in the DOE contractor system. The benefit provided by retirement plans (defined benefit and defined contribution), when combined with Social Security payments, on average replace in excess of 90 percent of a retiree's final salary for retirees who take full advantage of the retirement plans, have a career of at least 35 years, and retire at age 65. This compares favorably with comparative benefits in the private sector according to a survey of Fortune 100 companies by World at Work (a professional organization of compensation and benefits specialists). In addition to these benefits, ORNL and Y‑12 retirees receive very generous retiree medical benefits at a time when many employers are terminating these benefits for their retirees.

I hope this information is helpful to you and your organization. Should you have further questions, please contact me at (202) 586‑5440, or Gerald Boyd, Manager, Oak Ridge Office, at (865) 576‑4444.

Sincerely,

Orig. signed: Donald R. Erbschloe

Donald R. Erbschloe

Acting Chief Operating Officer

Office of Science

Enclosures

cc w/Enclosures:

The Honorable John J. Duncan, Jr.

U.S. House of Representatives

800 Market Street, Suite 110

Knoxville.. TN 37902

Dr. Jeffrey Wadsworth, Director

Oak Ridge National Laboratory

UT‑Battelle, LLC

P.O. Box 2008

Oak Ridge, TN 37831‑6255

Mr. Steven Leidle

Acting President and General Manager

BWXT Y‑12, LLC

P.O. Box 2009

Oak Ridge, TN 37831‑8001

Gerald G. Boyd, M‑1, DOE SC‑OR

George J. Malosh, M‑2, DOE SC‑OR

Robert J. Brown, M‑3, DOE SC‑OR