Dr. Jeff Wadsworth
Via E-mail
Dear Dr. Wadsworth:
Appended/attached is a copy of a rebuttal to the article, Retirement reality: Fill financial gaps with savings now, by Kathryn Cogar appearing in the ORNL Reporter, July 2006. The rebuttal states my concerns more completely than I was able to do at our brief encounter after the recent State of the Laboratory meeting. I ask only that you keep these points in mind as the new DOE pension plans are developed as I believe they now have a very serious deficiency.
Sincerely,
Al Brooks
Cc: Bill Cabage
Representative Zach Wamp
Senator Lamar Alexander
Senator Bill Frist
Samuel Bodman
Gerald Boyd
Mark Keck
Kathryn Cogar
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An Old Timer's Reality
Alfred A. Brooks –
The article, Retirement reality: Fill financial Gaps with savings now written by Kathryn Cogar in the July 2006 issue of the ORNL Reporter(1); does not describe the reality experienced by this and other old retirees.
My reality goes back to 1929 and the market crash; I remember most the suicides, the bread lines and the poor classmates. In 1934, I was paid a dollar per day for a long Saturday. There were no deductions until 1936, when I lost one cent per week to Old Age Benefits and got four shiny pennies in my pay envelope. Since then a lot of changes have occurred to provide a more certain, then distant future; now we seem to be going backwards by introducing uncertainty again. Strange that we could afford these things when the country was poor but can not when we are rich.
In a format of {Report Statement, Retiree's Comments}, the following is a partial list of the deviations of the report's realities from my reality (2):
1) The report states, "On June 22, hundred[s] of retirees attended a public meeting originally scheduled to explain DOE's proposed changes in pension and medical plans". My distinct recollection was that, at the urgent request of CORRE, Congressman Zach Wamp prevailed upon DOE to hold a public meeting to discuss the concerns of the retirees about pension plans and the lack of adjustments. Only after the meeting was requested did the DOE N 351.1 appear and it was not proposed, it was not a draft, it was issued effective immediately. The inclusion of new DOE plans and policies only served to divert attention from the original concerns and to remove one of the real problems from discussion.
2) The report states, "The employer's legal obligation is to pay this fixed amount over the life of the employee,(and a spouse benefit if spousal option is elected.) There is no requirement for the employer to provide periodic adjustments or modifications to the pension benefit. Private employers rarely make adjustments". The validity or applicability of these claims is dubious. In addition to the legal obligation of a binding contract (I don't recollect getting my copy.) there exist the principles of the "common practice" and "precedent" which govern relationships.
a) The principle of common practice is made evident by cost of living adjustments (COLA) found in the Federal Employees Retirement System, the Civil Service Retirement System, the Social Security Act, TVA and the military retirement programs. Even DOE (a part of the FERS) has COLAs. There is a lot of common practice in the federal government alone.
a) On the matter of precedent is the action of Union Carbide in initiating six ad hoc increases in seventeen years (one in 1987 was after they left). Any one who retired in the 1980s had reason to believe there would be adjustments for inflation. The precedent was broken for Oak Ridgers starting in the 1990s.although some DOE contractors still provide COLAs.
b) The DOE Contractor had no legal requirement to make the flat 2% spousal option improvement or the multiplier improvement (1.2 to 1.4) or to make cost of living adjustments to wages for current employees but they did. Why not retirees?
c) I do not recollect when DOE became a private employer (with a budget approved by congress). The moral obligation of a private company to its employees may be debatable but certainly the moral obligation of a federal entity is not; remember "… of the people, by the people and for the people …". No, the DOE is not a private corporation; it has no profit or loss. It is not motivated by the market place nor should it appeal to the marketplace practices for justification of its actions.
3) The report also states: "So, while medical costs increase, the cost of gas skyrockets and the overall cost of living goes up, the amount of income from the pension plan will be the same 20 years from now as it is on day one of retirement. And therein lies [sic] a need for a change in retirement strategy." Something's wrong here; when Union Carbide left, DOE about stopped granting ad hoc increases (only one (1991) initiated by the Contractor and one (2001) initiated by CORRE). Now under DOE N351.1, ad hoc increases won't be granted so we (the retirees) need to make a "change in retirement strategy". So DOE stops paying me the increases they used to pay (under UCC) and I have to make up the difference at the age of 85 with a bad heart, bad back and bad legs (my reality). How in hell do I do that, Mr. Bodman? Why didn't you explain this to me years ago when I could have adapted to the new reality you have brought about to my disadvantage?
4) It is stated in the report: "Coupled with the uncertainty around the future of Social Security, it is obvious that a company pension can meet only a portion of total retirement needs". The uncertainty of Social Security seems to be caused by the same factors that affect the DOE Contractor pensions; decisions made by the political system. No, it is not obvious that a defined benefit plan must decay into a worthless pittance as inflation occurs: In 1985 when I retired the pension plan plus social security provided a modest but adequate standard of living. The trouble started in 1990s when the system ceased granting modest but helpful ad hoc increases even though less than the cost of living which continued to rise. Now, by DOE Notice 351.1, the future is almost guaranteed to be devoid of increases for the current retirees.
5) The report states: "ORNL encourages saving by offering a 401(k) savings program to all employees. … The single most effective strategy available to employees is to save as much as possible, as soon as possible in the 401(k)." This is undoubtedly good advice for current employees but it is not a reality for the current retirees; where is the advice for them? Please recall that the same advice won't work for them; it must be a different solution. Further the report neglects to list the uncertainties of the 401(k); remember the large market loses of the recent years.
There are more differences but the foregoing will suffice to establish that something is not right in the pension plans.
There is a group of current retirees and also current employees, who did or will retire without automatic COLAs under the current defined-benefit plans, which I will designate as the "DB Retirees". I pose the following questions about them.
In Reality, the Treatment of the DB Retirees is Age
Discrimination
References:
1) ORNL Reporter; July 06; http://www.ornl.gov/info/reporter/no79/july06_dw.htm
2) More details on http://home.comcast.net/~brooks50/PensionPlanInformer.htm