Pension changes challenge for Lawrence Livermore

Article Last Updated: 05/13/2007 08:19:54 AM PDT

FOR DECADES, Lawrence Livermore National Laboratory has been a unique place to work.

During the decades of the Cold War with the former Soviet Union, it offered challenging work at competitive compensation that was clearly in the national interest. During that time, work centered on nuclear weapons, a focus that still is central to the lab, but challenges and opportunities have broadened.

As the work world changed dramatically in the last 15 years, one of the labs huge competitive advantages was its amazingly rich, defined-benefit contribution system. Work there long enough, and you could retire at virtually the same pay as your final working check and receive annual cost-of-living increases, along with lifetime health care to supplement Medicare.

The golden handcuffs provided by that system allowed the lab to offer career employment, a term that is foreign to private sector companies today.

Come Oct. 1, it also will be a term that no longer will be used at the lab.

The Department of Energy announced last week the results of its competitive-bidding process for management of the lab. Management of all three Energy Department facilities formerly managed by the University of California was put out to bid after a series of security and management breaches, particularly at Los Alamos National Laboratory in New Mexico, got too much for the feds to bear.

Perhaps ironically, UC retained the contract in all three instances, but has partners in the two national weapons labs.

The primary partners in the group that will run Lawrence Livermore include Bechtel National Inc., BMX Technologies Inc. and the Washington Group International Inc. Also involved are Battelle Memorial Institute, four small business subcontractors and Texas A&M University.

Only time will tell whether bringing private partners into the mix will improve laboratory performance, particularly in the security and business areas.

It will cost much more: The maximum management fee went from $7.1 million for UC in the fiscal year that ends this September to $45.5 million for the next year.

Perhaps the bigger challenge will be the work force issues. Veteran Livermore employees now must figure out what to do to retain their UC pensions even though theyre grandfathered into the new system that is supposed to provide equivalent benefits.

Its the newcomers who no longer will have the golden handcuffs of defined benefits. The new plan, by Energy Department fiat, was required to be a defined-benefit plan similar to a 401(k) in the private sector. Theres a world of difference.

Notably, the UC pension system has benefited from both good management of invested funds and the rising stock markets, so that neither the government nor the employees have had to contribute to the plan for more than a decade. Thats a great deal compared to others with defined-benefit plans who routinely see 8 percent or more of their paycheck withheld for their pension.

Come Oct. 1, the retirement plan will stand by itself with just the single new entity from just one lab, instead of the immense UC system.

From a work force recruitment and retention standpoint, it will become much more challenging for lab managers to bring in talented people and hold them with the lure of the private sector and its stock option potential.

This is particularly likely in the hot areas of bioscience, which holds much promise, both in private companies and for government-funded labs that will need to focus on homeland security issues.

Part of the strength of the labs has been the capability to bring experienced people from varied disciplines together to work on a big issue. If the labs can no longer retain key people at the working science level, the challenge will be much greater than it already is.

Heres hoping the politically driven decision actually proves to be in the national interest. The mixture of the private sector management expertise with the science skill from the university could result in much superior results, but the jury is still out and will be for a number of years.

Tim Hunt is the former editor and associate publisher of the Tri-Valley Herald. He is the principal with Hunt Enterprises, a communications and government affairs firm. He can be reached at HuntEnterprises1@comcast.net.