Questions, Answers and Comments

Questions, Answers and Comments

Bob Henderson, Alfred A. Brooks 12/7/06

The internal website, "No More Surprises", operated by the Oak Ridge DOE Contractors contains answers to questions submitted about the pension benefit plans (and other topics). The following Q&As have been compiled from several sources and may be of interest to retirees. Others may be added as available. The comments provided are my own. One general comment: Few retirees know of the website's existence.

Table of Contents

1) Question ( NMS15809 - 10/18/2006): Benefit reduction without notice.

2) Question ( NMS15865 - 10/23/2006): Current value/surplus of pension trust fund.

3) Question ( NMS15908 - 10/25/2006): Re:NMS15809 Payments stopped without notice

4) Question ( NMS15913 - 10/25/2006): Additional answers to NSM15809

5) Question ( NMS16350 - 12/04/2006):The COLA Question

6) Question ( NMS16353 - 12/04/2006): Re: Response to 15865

7) Question ( NMS16420 - 12/11/2006): Re: More on NMS 16350

8) Question ( NMS16432 - 12/12/2006): Re: Y-12 Reyirements and COLAs

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1) Question ( NMS15809 - Submitted 10/18/2006):

A coworker recently went through the retirement process. Reportedly, he was asked to sign a form that documented the fact that he understood his retirement pension could change or even be eliminated. Is signing this form truly part of the process? I thought our pension, being a government fund, was guaranteed. Could one refuse to sign this form? Please clarify.

Comment: By omission, it would appear that the current employees' benefits can be stopped/reduced without notice but the benefits of retirees cannot be stopped and are subject to the requirements/constraints provided by law. (see answer to NMS15908).

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2) Question ( NMS15865 - Submitted 10/23/2006):

Regarding the Oak Ridge Pension Plan, please answer the following questions: What is the current value of the pension fund? What is the current value of the surplus over that required by law to be maintained? Are there now or have there been in the past any discussions or plans to use the Oak Ridge Pension Plan surplus to fund other DOE/NNSA site's under-funded pension plans? Is there any DOE Order, Directive, federal or state law that would prevent DOE/NNSA from using the Oak Ridge surplus to fund other DOE/NNSA pension plans?

Answer (Posted 12/4/2006): Based upon the stock market, the value of the pension plan assets change every day. As of Nov. 24, 2006 the value of the pension assets was approximately $3 billion. The last actuarial calculation we have is as of January 1, 2006. At that time, the assets exceeded the liabilities by 24% (approximately $600 million). No, there are no current plans, nor do I know of any discussions in the past to use the Oak Ridge pension assets to fund other DOE/NNSA contractor under-funded pension plans. We are not aware of any legislation or directive which would permit the DOE/NNSA to withdraw surplus dollars from one active pension plan and fund another unrelated pension plan's liability.

Comment: The answer does not address the question of 420 Transfers by which trust monies can be transferred to other uses such as operation accounts nor does it mention the two previous attempts to do so with the Oak Ridge Pension Trust Fund.

Further, there is no mention of the fact that the Oak Ridge Pension Trust fund rises above the 120% legal limit is due to DOE keeping any improvements for the retirees and any corrections for inflation to a minimum since 1984. DOE's contributions to the fund since 1984 have been zero.

Furthermore, the last sentence of the answer is not an answer to the question asked and Oak Ridge funds were (quite reasonably) used to fund Paducah pension plan.

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3) Question (NMS15908 – Submitted 10/25/2006): re:NMS15809

Does this indicate the pension plan payments to retirees can be stopped at any time without notice.

Answer (Posted 11/30/20060; Once a retiree starts receiving his/her monthly pension benefit, the benefit cannot stop without notice. Numerous agencies including the Department of Labor, the IRS, and the Pension Benefit Guarantee Corporation (PBGC), as well as federal legislation such as the Employee Retirement Income Security Act (ERISA) and associated case law govern the process of terminating a pension plan and providing benefits which have been accrued to its participants.

Comment: Current employees seem to be omitted from this answer. Are they subject to cancellation without notice?

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4) Question ( NMS15913 - Submitted 10/25/2006):

Note: The previous question on unilateral termination of benefit plans by the Company prompted additional questioning that has been answered and posted.

In response to the following: Question ( NMS15809 - Submitted 10/18/2006): A coworker recently went through the retirement process. Reportedly, he was asked to sign a form that documented the fact that he understood his retirement pension could change or even be eliminated. Is signing this form truly part of the process? I thought our pension, being a government fund, was guaranteed. Could one refuse to sign this form? Please clarify.

Answer (Posted 10/25/2006): I believe the document you are referring to is the "Retiree Benefit Summary." It doesn't cover just the Pension Plan. It summarizes what happens to all of your benefits upon and after retirement. The statement you refer to is standard benefits language. It is included in the "Retiree Benefit Summary, ""Book of Benefits," and several other enrollment forms. It states: The Company expects and intends to continue the plans in the benefits program indefinitely, but reserves the right to end each of the plans without notice, if necessary. The Company also reserves the right to amend each of the plans at any time without notice. The Company may also increase or decrease its contributions to the plans. The establishment of the plans does not impose on the Company any contractual obligations to continue them in the future. Your signature on the form simply certifies that you have received your copy of the "Retiree Benefit Summary" and that all applicable provisions have been explained to you. You may refuse to sign the form. However, your refusal to sign would not nullify the Company's rights. Whom is the "Company" referred to in this answer? If it is the present "Management and Operating Contractor", why do they have control of the funds? No additional money has been put into the pension pay for nearly 20 years. Where in the contract does it state that the "Company" has all these rights? If and when this information reaches the general population here at Y-12, there should be great uneasiness. I assume that I have been brainwashed to believe that the pension plan would be there when I retired based on the present level of funds. Now it appears that all of our benefits could disappear at any time without cause or explanation. Should Y-12 employees be surprised or alarmed?

Answer (Posted 11/28/2006): As stated in the previous response, the language referenced is included in many Y-12 benefit plans communications and is quite common among other companies. Regardless of whether a company chooses to publish this information to its plan participants, it still has the right to terminate benefit plans. The provisions are outlined in ERISA (Employee Retirement Income Security Act) and vary based upon the plan type such as defined benefit or health and welfare. In response to your particular question, the "Company" would refer to BWXT Y-12, with approval from NNSA/DOE. There is no cause for Y-12 employees to be alarmed. As previously stated, the Company expects and intends to continue the plans in the benefits program indefinitely. The remainder of the language is included should some extreme event occur which could necessitate the termination of the plans.

Comment: This answer makes no mention of the DOE Notice 351.1 which effectively cancels the current Defined Benefits Pension Plan for current non-vested employees and prohibits by non-reimbursement all improvements to the existing plan unless requires by law or contract.

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5) Question ( NMS16350 - Submitted 12/4/2006):

Annual cost-of-living adjustments have been included in the pension plans for retirees of the DOE contractors for LBNL, LANL, and LLNL for a number of years. Regular cost-of-living adjustments are included in the pension plans for DOE employees. Please explain why and how BWXT Y-12 and DOE ORO, managing a pension fund with a current excess of $600 million, cannot provide regular, periodic cost-of-living adjustments to Y-12's current and future retirees.

Answer (Posted 12/11/2006): As plan administrator for the pension plan covering both BWXT Y-12 and the Oak Ridge National Laboratory, we take very seriously the responsibility of maintaining a pension plan that will be sufficient in meeting all obligations to current retirees, as well as obligations to current employees who have earned a future pension benefit. In addition to fulfilling our obligations, we want to make proper business decisions that allow the pension plan to remain fully funded and compliant with all aspects of the recently enacted Pension Protection Act. The case for cost of living adjustments have been analyzed thoroughly and, given the objectives stated above, no business case can be made to grant any enhancements.

Comment: What about a humanitarian justification? Or is human sacrifice on the altar of political success permitted by compassionate conservatism? The answer is also none responsive.

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6) Question ( NMS16353 - Submitted 12/4/2006): Regarding the response in NMS15865 concerning the Oak Ridge Pension Plan:

I must be misinterpreting something in the answer. If the last actuarial calculation resulted in assets that exceeded the liabilities by 24% (approximately $600 million), that sounds like the total value of the plan on 01/01/2006 was approximately $3.1 Billion. The response stated that the assets of the plan on 11/24/2006 was approximately $3 Billion. I'm not sure how the plan is invested, but, I know my 401K has done pretty well this year. I'd think the plan would have gained in value, not lost. So, my question is, what have I missed?

Answer (Posted 12/11/2006): One factor that you are not considering is that we are making about $15 million in pension payments each month which offsets investment returns.

Comment: Another factor is that the trust fund still uses the old, obsolete actuarial data (circa 1952) to calculate its liability. Anything to keep the fund fictitiously solvent; if it were done correctly they might be required to add more funds after 22 years of no additions. The answer is also non responsive.

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7) Question ( NMS16420 - Submitted 12/11/2006):

NMS16350 - regarding no business case for retirement COLAs at Y-12. That may be the case, however doing the right thing for people, especially retirees usually means making decisions to ensure those that helped Y-12 for many years are helped themselves, which means taking money away from company bottom line. My question is that although DOE sites do have COLAs, why has Y-12 over the years continually decided not to enact one for this particular site? I submit that if a present employee knows they will get a COLA in retirement, that will make them better, more motivated employees for the present. Now that is a good business decision. I think it is too conservative to manage the fund without consideration for COLAs when the other sites funds are managing just fine with them. This goes to the risk-adverse mentality that is pervasive here. This tells me that Y-12 fund managers are more pessimistic, possibly less skilled that the other DOE fund managers, since they are not willing to take on the risk of managing a fund without excess margin. In 2030 I will be retired. I am hoping to be retired with a COLA, having contributed greatly to the NNSA's vision for a streamlined complex. I believe I will be entitled to the same consideration as the other NNSA site retirees for a job well done.

Answer (Posted 1/9/2007): The Oak Ridge pension plan that covers Y-12 was designed as a part of total benefits package. In putting together a market competitive benefits package, the pension plan was designed as it is, without a COLA. We compare the total Y-12 benefits package against comparative companies on a regular basis and the Y-12 total benefit grade is slightly higher than the average of the comparator group.

Comment: The pension plan was "designed" by adopting the Union Carbide private sector pension plan and while it did not include COLAs, Carbide did recommend periodic adjustments to compensate for cost of living increases. To now ignore the several in lieu of COLA adjustments is not only disingenuous or worse. We are being discriminated against because DOE believes we no longer have bargaining power. Whether this is true or not depends upon whether we are willing to enter the political arena and fight for what we believe in.

The DOE comparison of pension plans is rife with improbable assumptions and BXMT denies responsibility for the recent comparison calculation and is NOT informed of the methodology used. The comparisons are made at the time of retirement and in no way addresses the absence of COLAs and the loss of buying power as time passes. This is the current but not the only issue. DOE is simply biased and wrong in their choice of comparison models and their recollection of history.

If a no-COLA plan is so good why does not Mr. Bodman place his DOE employees on one.

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8) Question ( NMS16432 - Submitted 12/12/2006):

Is the fact that Y-12 is staring down the face of making more retirement payouts in the next 5 years a factor in why no COLAs are or will be considered for the foreseeable future? Is it a closed forever deal or could it be possible to address the situation in the near future? What really is the root reason why a COLA isn't currently in our pension plan? Surely consideration of a COLA would deplete the reserve, however it should be noted that this can be made up (3-4%) by taking out some overly conservative investments and replacing it with some growth considerations. Where is it in the fund charter that it must be managed over-cautiously, above and beyond what would be considered desirable risk tolerance and enough performance to incorporate a COLA? By the way, if NNSA says it's ok to incorporate a COLA, would the company consider it? What if NNSA mandates it? Their pensions do include this consideration. It may be one reason why people are going over there too.

Answer (Posted 1/9/2007): The decision on whether or not to grant a COLA is influenced by many complex factors. Expected liabilities are one of those factors. Operating in such a complex environment makes it inappropriate for the company to make any kind of a "forever" statement. The committee appointed by the Board of Directors of BWXT Y-12 and UT Battelle to manage the pension plan is responsible for establishing a Pension Plan investment policy statement. This investment policy includes a diverse coverage of many asset classes. BWXT Y-12 would follow any NNSA requirements.

Comment: DOE also has the option of adding to the pension trust fund every century. How long does DOE intend to go on stripping down pensions to prevent allocating any funds needed adjustments? (If they weren’t needed, why were they given to current employees?) Answer: As long as the White House says to!

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