Note: This is a copy of the original letter sent to several federal and state legislators and includes the references which, because of space limitations, were not included in the version published in The Oak Ridger April ??, 2006.

Subject: DOE Pension Plan Characterization Unsupported by Evidence

Summary: Briefly, the information provided by DOE on the quality of the Oak Ridge pension plans, upon close examination is ill-defined, largely hypothetical in its assumptions, and any adjustments to meet the increasing cost of living are not required leaving the 20-year retiree's pension at 50% of its original buying power which (including social security) was only about 75% of the final wages). The available evidence does not support DOE statements that the plans are "generous", 37% is not enough.

I wish to thank you for your interest in the Oak Ridge contractor pension problem and your determination to do something about it. I should also like to apprise you of information that has surfaced since I last wrote. In the interest of brevity, I have included only brief arguments and have appended Internet references [n] to supporting discussions and data.

The Erbschloe letter [1] and charts [2] on which DOE bases its claim to a "generous" Oak Ridge pension plan are clearly based on the following:

1) the Percent Replacement of Final Salary which is computed, immediately upon retirement, as the total of: a) the social security benefit, b) the Oak Ridge pension plan benefit (defined benefit), and c) the DOE contribution of the Savings Plan benefit (defined contribution) assuming 35 years continual service and maximum participation in the Savings Plan. (The Medical plan, which is quite good, apparently is not included.) It is not clear how the DOE converts the lump sum Savings Benefit into a monthly income. This total also has the unspoken assumption that the employee has no other demands on their savings, such as, educating one's children, buying a house, helping an unfortunate parent or sibling or dealing with one's own misfortunes. Many of these assumptions are not true for the average retiree and to characterize a program based on how it treats a select few is misleading. Such a comparison also in no way sheds any light on the absolute "generosity" of the pension payments as both the pension benefit and final salary can be very low and the resulting percentage, very high. Furthermore, the failure to compare pensions after several years covers up the slow erosion of their buying power; infrequent and restricted adjustments do not maintain a pensions "generosity", if it ever existed.

2) an inter-site comparison of the Percent Replacement of Final Salary to approximately thirty DOE contractors not including some of those who are obvious peers of the Oak Ridge site [3]. To pre-select a comparison group is a time honored method for biasing results. It is also difficult from the badly copied charts to determine if all of the contractors' plans conform to the above model and in fact the most reasonable conclusion is that they do not. Indeed, this lack of definition with the resulting lack of understanding asks retirees to accept DOE's characterization of the Oak Ridge pension plan as "generous" on blind faith when they know full well that some DOE sites have pensions with much more favorable parameters [4] and at least three that have COLAs [5]. The claim that Oak Ridge is 9-th to 11-th in the comparison also belies the claim of "generous" as this position is barely above average as an inspection of the charts will reveal.

3) Likewise, this comparison, made at retirement, does not address the urgent problems of the increasing cost-of-living nor can it do so in its present form. For 20-30 year retirees, inflation is a truly important factor which some DOE sites address by automatic Cost-of-Living adjustments (COLAs; adopted by Social Security in 1975 [6]) and by ad hoc adjustments for others. Examination of the Oak Ridge record [7] of ad hoc adjustments makes it abundantly clear that Union Carbide Corporation (who initiated the OR pension plan) recognized the need for adjustments and implemented several. After Carbide left in 1984 there have been only three adjustments and only one of these was clearly initiated by the contractor. Many of the adjustments had caps and/or exclusions imposed by DOE that served to seriously limit their stated purpose: correction for inflation. Briefly put, including all adjustments a 1985 retiree has had their pension reduced to 74% of its original buying power and a 1975 retiree has been reduced to about 57%. Sadly, DOE and the contractors have declared [8] the plan to be Non-COLA and have expressed the lack of responsibility to the retirees except for the minimal legal commitments. If this is to be the extent of employer responsibility and the future practice, then the DOE and its contractors should be required to so state to new employees and stop being misleading. Without any adjustments the future retirees under the defined benefits plan will see their buying power reduced to about half these levels; how will they survive?

Given the above and other information [9] it is easy to see why Oak Ridge retirees feel disenfranchised and abandoned by their past employers, the Agency and the government. I ask that you continue to work toward some equitable solution to these problems of the 13,000 retirees in the Oak Ridge area alone that are dependent on these pensions. If I can help in any way, please call on me.

Sincerely,

_________________

Alfred Brooks, OR Contractor retiree

Appendix – Internet References in Support of above Discussions

[1] – Letter: DOE (Erbschloe) to CORRE (Reichle) - http://home.comcast.net/~brooks50/DOErbs2Dave.htm

[2] – DOE has not been forthcoming with details of these charts - Salaried Chart - Hourly Chart

[3] – Excluded Peers of the Oak Ridge Sites -http://home.comcast.net/~brooks50/PensionQandA.htm

[4] – Site Pension Plan Parameter Comparisons – Multipliers and Adjustments http://home.comcast.net/~brooks50/PensionCompar.htm

[5] - DOE Does Support Some Automatic COLAs - http://atyourservice.ucop.edu/forms_pubs/spd/ucrpspdwss.pdf See page 18 of the PDF file

[6] – COLAs and Social Security –

http://www.ssa.gov/cola/automatic-cola.htm

[7] – The Oak Ridge Ad Hoc Pension Adjustment Record - http://home.comcast.net/~brooks50/BoxScore.htm

[8] – DOE/Contractors Disclaim Responsibility for Pension Adjustments –http://home.comcast.net/~brooks50/MailCamp.htm#LtrToEditorKnoxNews01 (Click on item #5)

The pension article by Frank Munger resides in the Knoxville News Sentinel archives.

[9] Discussions of Oak Ridge Pension Plans - http://home.comcast.net/~brooks50/PensionPlanInformer.htm