DOE won't force pension changes on contractors
Published Saturday, June 16th, 2007By Annette Cary, Herald staff writer
The Department of Energy is dropping a plan that would have bumped all new employees of DOE contractors nationwide from traditional pension and medical plans.
It made the announcement Friday under more pressure from Congress.
However, DOE still may continue to impose benefit changes case by case, including under the award of new contracts at Hanford.
In April 2006, DOE said it no longer would reimburse contractors for providing traditional pensions to new employees, including those at Hanford and Pacific Northwest National Laboratory. But after the House appropriations bill for the Department of Energy prohibited spending money to implement the new pension policy, DOE announced it would delay changes for a year.
The House does not appear to have changed its mind.
In language attached to the 2008 DOE budget bill released last week in the House, the Appropriations Committee again mandated no spending on the benefit change.
"To date, the department has not provided adequate justification for such a sweeping and ill-defined change of existing policy," the committee said.
If the bill passes, the committee language requires the Government Accountability Office to assess the adequacy of DOE's analysis of pension and medical benefits by the end of the year.
DOE released a statement Friday saying it would not re-issue the suspended policy that would have imposed broad-based changes to contractor pension and medical benefits. It would have required contractors to replace traditional pension plans for new workers with 401(k)-style plans, in which workers would be responsible for investing contributions rather than receiving a predetermined payment each month in retirement. Medical benefits also would have been switched to a "market-based" program.
The announcement of changes a year ago "brought increased visibility to the challenges the department faces due to increases in costs and liabilities associated with these benefits," according to DOE's statement.
In 2006, DOE reimbursed 46 contractors more than $1 billion for contractor employee pension and medical benefits, a 226 percent increase since 2000, according to DOE. In addition, DOE says it owes $11.9 billion in future medical and pension costs that money is not set aside for, a 68 percent increase since 2000.
DOE already has chipped away at its traditional pension plan at Hanford. About 500 workers who were transferred to so-called "enterprise companies" more than a decade ago continue to do Hanford work but are not accruing benefits in the Hanford pension plan.
New workers for the Hanford river corridor cleanup are offered an enhanced 401(k)-style program. DOE also does not allow new workers to sign up for the traditional pension plan under new contracts that will replace those now held by Fluor Hanford and CH2M Hill Hanford Group.
Rep. Doc Hastings, R-Wash., said last year after DOE announced plans to adopt a new pension policy nationwide that existing pension plans must be fully protected. There has been concern that current workers might be bumped from pension plans as they switch jobs at the Hanford nuclear reservation.
DOE will continue to discuss benefit issues with stakeholders such as Congress, labor unions and contractors, said Megan Barnett, DOE spokeswoman.
The House Appropriations Committee suggested that one place to consider cuts might be in the benefits offered by the nation's three nuclear weapons design laboratories. Contracts at Sandia, Los Alamos and Lawrence Livermore national laboratories have benefits far outpacing the DOE work force, it said.
We have received many emails about this report (15.6 MB PDF) from congressman Visclosky of the Committee on Appropriations, Subcommittee on Energy and Water Development. Quoting from page 91:
The Committee notes that the three DOE contracts with dis-
proportionate retiree benefits far outpacing the Federal DOE work-
force are the three nuclear weapons design laboratories—Sandia
National Laboratory, Los Alamos National Laboratory, and Law-
rence Livermore National Laboratory. The Department is directed
to assess reducing the government’s liabilities and normalizing the
pension benefits across the DOE complex by reducing the dis-
proportionately generous pension plans at the NNSA national lab-
oratories. The Committee recommendation includes a request for
the Government Accountability Office (GAO) report assessing the
adequacy of the Department’s analysis of pension and medical li-
abilities. The Committee requests a preliminary report by October
1, 2007 and a final report due by December 31, 2007.
"The Department is directed
ReplyDeleteto assess reducing the government’s liabilities and normalizing the
pension benefits across the DOE complex by reducing the dis-
proportionately generous pension plans at the NNSA national lab-
oratories."
Ahh. Someone with a suspicious mind might say that transfer of LANL and LLNL out of UC was solely for this purpose and not for placing the Labs under "new" management.
It had nothing to do with transferring the labs under new management to save money. It was for two reasons and two reasons only. One was that DOE has always been jealous of the UC retirement plan and wanted to tap into those funds because they felt that they deserved it even though it was UC intelligence that got the fund to 110%, not the DOE clown. The second reason was that UC saw an opportunity to get rid of us and reduce all past, current and future obligations, while at the same time show a shortage in the retirement fund in order to get DOE off their back. From this day forward the UCRP will show that the UCRP fund is under funded and will need help from the very same people who bitched about it being over funded. Again, another smart move on UC parts. Gee, when will DOE ever learn. It is also for this reason that I firmly believe that the new 11% NNSA / 5% Employee contributions will transition quickly from NNSA to DOE at 1% per year until eventually the employees are paying it all.
ReplyDeleteBut that is not my real question. Since I am sure some corporate lawyer can see right through these ulterior motives can they take UC and DOE to court, dissolve the privatization and reinstate all of us back into the UCRP with all credit of back pay and time in service from the day LANL and LLNL were taken over.
May I suggest to all of those who haven't gotten their acceptance letters at LLNL, make sure that make a note that says "I ______, under stressful conditions hereby accept these terms and conditions am retiring, but not by my own free will; but under terms that I consider on the verge of being extortion. Upon a court hearing of this case and winning, I expect to be reimbursed for all lost pay, time in serve,age, benefits and back pay along with a reasonable 5% pay raise for every year of lost service with UC while under the new contractor.
I this is what you are looking for. This is the firm that took on the case for the womens discrmination law suite. They have done good for many people.
ReplyDeleteGwilliam, Ivary, Chiosso, Cavalli & Brewer
1999 HARRISON ST.
SUITE 1600
OAKLAND, CALIFORNIA
94612
510-832-5411
510-832-1918 FAX
E-MAIL:
webinfo@GICCB.com
Sandy Jonas sjonas@giccb.com
People, people, people. I am telling you all right now. The only way you are ever going to get back at these two institutions is to hit them where it hurts and do it swiftly. All of those who can retire should immediately take a lump sum or start drawing your UC pension NOW !!. The sooner you can deplete the UCRP fund the more they will feel the crunch on their dividends, putting them between the rock and the hard place. Three can play this game if we do it in unison. Lets have approximately 10,000 people start drawing on the pension plan starting Oct 2nd, 2007 and see what happens. The more of you that can actually afford to lump sum the better, because that takes away large chunks of money fast, leaving them even less to make dividend on in short order. Do any of you at either LANL or LLNL have any backbone? They screwed you, now it time to screw them. How much simpler does it get. This is your last chance.
ReplyDelete(1) "DOE says it owes $11.9 billion in future medical and pension costs that money is not set aside for.."
ReplyDelete(2) "The House Appropriations Committee suggested that one place to consider cuts might be in the **benefits** offered by the nation's three nuclear weapons design laboratories."
Within the next few years you are going to see the Retirement Medical benefit at the weapons labs taken away. That will then be followed by a freeze of TCP1 and conversion of it into a hybrid pension (i.e., no further growth of the pension side, and conversion to a 401k for future benefits). These pension "freeze-outs" are something that has happened all through corporate America in the last 5 years. Also, when the shortfalls to the TCP1 payouts hit in the next few decades, don't plan on Congress or DOE coming to bailout the $12 billion (and growing) shortfall.
If you're hanging on to your job at LANL due to the generous benefits, then you had better find another reason why you want to continue working at a place with such dismal morale and poor management. Using benefits for the mea culpa won't cut it much longer.
I hope some LLNL people are reading this but I'll bet they are all brain-dead and haven't a clue. I only wish I knew that they were going to cut medical for retirees, I'd lump sum in a minute but unfortunately I haven't a clue nor a crystal ball. I do however see the handwriting on the wall. I suspect that starting Oct 1st, 2007 after they have roped the mass majority of the people at LLNL into TCP-1 we will see the employees picking up more and more of the premiums until the state brings in socialized medicine. At that time DOE / NNSA will dump us so quick you won't believe it.
ReplyDeleteYes, 11:51 am, you've got that right. Once the other states follow the model of Vermont in offering Universal policies for state residents at high and growing premium costs, the lab LLCs will quickly drop any further medical coverage for their current and future retirees. That time is only a couple of years away at most. It will be similar to the scenario that occurred when Medicare issued their drug coverage and most of corporate America then dropped drug coverage for their retirees. You'll be turning over your nice silk purse for a cheap purse made of rotten leather. Enjoy.
ReplyDeleteCongress no longer gives a damn about nuclear weapons or the people who design them. Thus, the attacks on the rich pensions and benefits that the weapons labs offer their workforce. I don't think Congress would care if most of the weapon scientists were laid off and the complex was cut in half. They probably think these scientists are easily replaceable or that the work can be handed out to any engineering contractor. Our glory days are long over. Guys like Stupak and Dingell now rule Congress and they are working to bring about a huge reduction in the size of the weapons labs.
ReplyDeleteIf you have marketable skills, then now would be an excellent time to think about finding a better place to work than at a weapons lab. All three are going to to be hit with large reductions in their workforce over the next few years. One of the two design labs, either LANL or LLNL, will cease to do any more design work and be heavily downsized. LANL looks like the likely candidate to get hit the hardest. Most of the staff at these labs are in total denial about what is occuring around them. Nevertheless, reality will soon hit them very hard. Only those at the very top of the management chain will profit in this messy new world.
ReplyDeleteThis comment has been removed by a blog administrator.
ReplyDeleteHow much is Iran/North Korea/China "contributing" to him to demolish Los Alamos?
ReplyDeleteOnly those at the very top of the management chain will profit in this messy new world.
ReplyDelete6/17/07 12:23 PM
Is this like the directors who get massive increase in pay for doing the same job as they did before. Please publicized these guys evals for public scrutiny so that we can see what SKA's they acquire in the last year that justifies such a large increase in wages. I am sure these guys are laughing all the way to the bank at your expense, but then again that's politics at its finest and typical of corporate America.
DOE has compiled and posted a dozen pdf files with the comments that they received on N 351.1 and its proposed changes to DOE contractor pensions. People might want to look at the hundreds of comments (all negative from my scanning of them).
ReplyDeletehttp://management.energy.gov/request_for_comments.htm
Especially interesting is the very detailed 13 page letter by Mercer (the firm that developed the HR/pension plan for LANS/LANL), it begins on page 17 of the May 10-11 comments. It's a large file (4.2MB).
http://management.energy.gov/FRCommentsMay10112007.pdf
Too bad all the comments about the negative impact of implementing 351.1 pension requirements on contractors at DOE sites didn't stop NNSA from forcing basically the same requirements on LANL and LLNL.
Still Glad you took TCP1?
ReplyDeleteOh Dear, what will we do if LAN's goes Belly Up...this is now a reality....
You must be kidding me. They were told not to do it and they did it anyway. Please read this starting on page 17 and you will see just how stupid DOE, NNSA and UC are CLICK ME
ReplyDeleteThis document confirms that everything I have ever said about why we were dumped from the UC pension plan and boned by DOE is absolute but adds one more twist to the story.
It tells me that DOE, NNSA and UC know that the nuclear weapons program is over and there's no need for these facilities in the future, well, at least not for the next 84 years; and by that time it will be someone else problem. So again I will ask all of you at LLNL and LANL, why are you staying. If you think that you're going to be working on something you have a passion for and that the weapons program will somehow be resurrected, think again no matter what Mikey says. The party is over and you sincerely need to think about bailing out while the going is good and definitely before the UCRP pot is depleted. For those who need more time, I guess you'll just have to milk that cow for as long as they will let you. Good luck and God speed.
OK you Double Dippers...hoped you saved your $$$$..cause your gonna need it to cover the "Train Wreck" heading your way...Better wake up your fellow co-worker from the "coma" the've been in and retire or........
ReplyDeleteTalk about an entitlement mentality! Republicans are such hypocrits. It's never enough, is it?
ReplyDeleteOMG, poster 7:07 pm is right! Start reading the Mercer Consulting letter at page 17. Yet, still DOE and NNSA press on with this lunacy. It's time to rip the weapons labs out of the hands of these nitwits and put it under DOD. Follow that with a swift reduction in staff at both DOE and NNSA, since they will no longer be managing the weapons labs. The sooner the better.
ReplyDeleteRead this report, keeping in mind all the benefit reductions that just took place with the RFPs at LANL and LLNL. See if your blood doesn't boil when you realize the DOE/NNSA have effectively implemented a N351.1 type policy at both of these labs through the recent RFP process. Even the US Chamber of Commerce weighs in on the side of keeping pensions for all employees, both new and old. Still, the DOE persisted on destroying the pensions for the two premier weapon labs.
ReplyDeleteThe bozos at DOE and NNSA have done enough damage. It's time to replace them as managers of the weapons complex. I doubt DOD would have been as clueless as NNSA in selling Complex 2030 to Congress. We're being managed by blundering idiots! Throw the rascals out.
It's apparent that Congress doesn't realize that DOE/NNSA has already moved to cut and reduce pensions at both Los Alamos and Livermore.
ReplyDelete"The House Appropriations Committee suggested that one place to consider cuts might be in the benefits offered by the nation's three nuclear weapons design laboratories. Contracts at Sandia, Los Alamos and Lawrence Livermore national laboratories have benefits far outpacing the DOE work force, it said."
Also it seems to me that they are comparing apples to bowling balls... A work force with a larger percentage of scientists and engineers with advance degrees (higher salaries) is going to have higher pensions than one with more office workers and support job types... unless you apply a sliding scale to retirement pensions based on salaries in addition to years of service, something that I've never heard of before, nor do I think is fair.
Now that there is a full year's worth of data, I hope they (GAO?) compare the cost of pension plan administration under LANS at LANL vs UC at LLNL.
I'm positive that taxpayers would have saved a significant amount of money by keeping lab employees in the UC retirement system, even if with a LLC running the labs. This is what Mercer indicated, and they have studied the issue more than anyone else.
This whole process would ill thought out by the idiots in NNSA.
The report mentions the dangers of having a closed off pension (i.e., where no new employees come into the pool). That's exactly what we now have with TCP1, and it will make this pension unstable in the later years. Don't count on DOE being good on their word and willing to help bail it out. I suspect that TCP1 is going to be a heartache for many LANL employees about 20 years down the road. By that point, Tyler Przybylek's promise he gave us at the NNSA's RFP townhall meetings will be long forgotten.
ReplyDelete9:47, where did you get that 10,000 figure?
ReplyDeleteWhen the transition occurred at LANL, I think there were about 9200 LANL regulars. Use that for an estimate.
ReplyDeleteAccording to HR, about 70% went to TCP1. That would leave about 2800 that went to TCP2. Assume they all have a pension benefit with UCRS.
Estimates are that about 600-700 people still work at LANL while getting UC retirement. That leaves maybe 2100-2200 that are not taking UC retirement.
Assume that maybe 1000-1500 of those 2100-2200 are not 50 yet. That gives 600-1200 more that might be eligible to draw their UC retirement.
A little short of 10,000, and hopefully not a burden on UCRS with about >120k active members.
Please read pages 60 - 67 at this URL. Just a few more reasons to bail now and go TCP-2 for the LLNL folks. Those that don't will regret it.
ReplyDeletehttp://management.energy.gov/FRCommentsMay10112007.pdf
Opps, if that URL doesn't work try this CLICK ME to get the document. This is very informative and I only wish that all 8000 employees at LLNL could read this before they accept their new positions. It really could make a difference on wether you chose TCP-1 or TCP-2 and start taking what is rightfully yours. Basically if you do not, there will be nothing left. The party is over and as you can see after reading these seven pages , they don't care.
ReplyDelete6:29, my recollection is that some 40%+ of LANL employees (>4000) were not vested in UC at the time of transition. Presumably, most of them went to TCP1 as they were not vested, and therefore were not entitled to any benefit from UCRS.
ReplyDeleteThat's just my recollection though. Since I did not fall into that category and did not go to TCP1, I did not pay close attention to those figures. Someone should be able to find exact numbers (or not).
I knew many people who were vested in UC and went to TCP1. Most of them were in their 30s and some of them in their 40s. I also knew a bunch in their 40s who went to TCP2 even though they cannot start to draw retirement until they they turn 50. Most of them had >10 years at LANL. Again, data are floating somewhere. Whether you can obtain it or not is another question.
No need to guess the numbers in the Los Alamos transition, UC has them posted here:
ReplyDeletehttp://
www.universityofcalifornia.edu
/regents/
regmeet/mar07/c11attach1.pdf
Quoting from them:
The LANL transfer elections showed the following:
There were 6,532 active members who elected to transfer to LANS. As described earlier, we have continued
to value these members as active UCRP members.
There were 1,239 active members who elected inactive status and were eligible to retire in UCRP. Consistent
with current practice, we have assumed a July 1, 2006 commencement date for their retirement benefits.
There were 580 active members who elected inactive status and were vested in UCRP, but not yet eligible to
retire. These members were valued as terminated vested members in this valuation.
There were 1,219 active members who were not vested in UCRP and did not elect to transfer to the LANS
defined benefit plan. They are only eligible for a refund of member contributions and CAP balance payment.
These members were valued as terminated nonvested members in this valuation due a refund of member
contributions and CAP balance payment, if applicable.
Note that the analysis is done from UC's perspective. If you elected TCP1, then you remain "active" for the calculation of what to transfer to LANS. If you chose TCP2, then you became "inactive", since you were choosing to remain in the UCRS system, either retiring now or later.
More ominous is this quote:
There are 6,532 active members who elected to transfer to the LANS defined benefit plan. Their actuarial accrued liability
as of June 1, 2006 is approximately $1.4 billion, excluding the liability for their CAP benefits that will be retained by
UCRP. This liability is reflected in our valuation results and included with the UCRP active member liabilities. This
liability is based on the current UCRP actuarial assumptions, methods and plan provisions. The liability for these members
as determined for the LANS defined benefit plan will almost certainly be different, as it will be based on the LANS benefit
provisions and the actuarial assumptions and methods used by the LANS actuary.
UCRS transferred only $1.28B to TCP1, so by their own calculations, we were already at least $120M short a year ago. The intent of the transfer was to ensure that the inactive and retired employees in UCRS remained 100% covered. LANS simply got the remainder, hence the shortfall in the transfer. A year later, we are still waiting for LANS to do their own calculation as to how bad the shortfall is.
Much better info.
ReplyDeleteYes, LANS TCP1 employees got nothing but 'sloppy seconds' from UC. But, seeing as LANS has a big UC component, the conflict of interest in these negotiations was hardly suprising.
ReplyDeleteWhat? You thought LANS was actually working on your behalf?
I'm suprised lawyers haven't been looking at this obvious conflict of interest issue as it pertains to the TCP1 pension asset negotiations between TCP1 and URCP. It stinks!
Using the data in Sec 2, Exh B on pg 3 (reflects data before transfer elections) I calculate the following:
ReplyDeleteTotal Active – 9570
<5 yrs Svc Credit (Nonvested) – 4077 (42.6%)
5+ yrs Svc Credit (Vested) - 5493 (57.4%)
Using that data and the Transfer Election Summary on pg iii:
Total Elections - 9570
Total to TCP1 – 6532 (68.3%)
TCP1 (Vested) - 3674
TCP1 (Nonvested) – 2858
Total to TCP2 - 3038 (31.7%)
TCP2 (Vested and Eligible to Retire, UCRP Inactive) - 1239
TCP2 (Vested and Ineligible to Retire, UCRP Inactive) – 580
TCP2 (Nonvested, UCRP Terminated) – 1219
I find it interesting that 30% of the nonvested employees went to TCP2.
Also interesting from the data, about 43% had been employed by LANL for <5 yrs, and about 61% had been employed by LANL for <10 yrs.
"I find it interesting that 30% of the nonvested employees went to TCP2."
ReplyDeleteI'm one of those people, but I don't know why you would find this unusual. I had only 3 years of service at time of transition, and ~30 years to go until retirement. I had no faith in TCP1 being able to pay me 30 years from now, felt certain that mandatory employee contributions would be coming, and knew that the 401(k) was portable for when I leave LANL. I didn't want to be one of the last people trying to draw on the TCP1 pension, and didn't want to be tied to LANL for the rest of my career, so the 401(k) was an easy choice for me.
I wonder how many people at LLNL don't realize that the retirement tables for TCP_1 will be much different than the current UCRP table. I would bet that you will not at age 60 get the same percentage as you would have gotten.
ReplyDelete"The liability for these members
as determined for the LANS defined benefit plan will almost certainly be different, as it will be based on the LANS benefit
provisions and the actuarial assumptions and methods used by the LANS actuary."
SMART PERSON:
"I had no faith in TCP1 being able to pay me 30 years from now, felt certain that mandatory employee contributions would be coming, and knew that the 401(k) was portable for when I leave LANL. I didn't want to be one of the last people trying to draw on the TCP1 pension, and didn't want to be tied to LANL for the rest of my career, so the 401(k) was an easy choice for me."
And now finally that we know the MERCER report is telling UC , LANS and LLNS to cut as many of the benefits as they can will start cutting "survivors benefits" based on the very same reason that the military uses when it comes to bennies. There answer is, we didn't hire you spouse, so why is he or she entitled to anything. Want to bet that disappears shorty after they get their claws into LLNL clan?
My advise is to retire now if you can and lock as much as you can up tight.
6/19/07 6:25 PM You forgot one more thing. Lump sums are coming to an end very soon, maybe right after Oct 1st, 2007. They have been found to drain the pot to fast and with the UCRP only 80% funded with 16% contributions they need to keep as much green as they can. So for those who are on the edge of making a decision you had better think quick. You only have until July 15th, 2007.
ReplyDeleteMy plan is to take Option (A) when I retire in a few month which will entitle my wife to 100% of my base pay for the rest of here life. KNowing that she is going to live at least 30-40 years more than me I'd say that the screwwing I got by the UC / NNSA is the screwing they are going to get. That boils down to $1.44M not including what I am going to draw between age 54 and 72. Paybacks a bitch. I would advise everyone to do the same immediately. Do I feel like I've been violated? You bet !
ReplyDeleteDoes anyone know who is
ReplyDeletemanaging the LANL TCP1
pension plan ?
I don't know but this may be a good place to write and find out.
ReplyDeletehttp://www.ig.energy.gov/documents/CalendarYear1996/IG-0394.txt
5:58, I found it interesting that 30% of those who weren't vested seem to share your view. I assume many were younger employees such as yourself and the lack of faith is telling. You're in good company though, as the Director apparently needed a guarantee that he would not lose UCRP level benefits.
ReplyDeleteSome of my younger coworkers did the same. It is clear many do not plan to spend their entire career at LANL. I am one of those 580 that went inactive with UCRP who is too young to retire. We'll see how it works out.
Here's who is managing your pension. Got any further questions please call
ReplyDeleteDear Mr. Sir,
Hewitt Associates is handling the LANL TCP 1 and medical, dental and legal coverage.
No decision has been made as to who the administrator will be for the LLNL plan yet. When a decision has been made it will be prominently posted ont he LLNL transition website.
Please let us know how we may further assist you.
UC Customer Service
1-800-888-8267 Option 4
Fax: 1-800-792-5178
Read all about them here:
ReplyDeletehttp://www.hewittassociates.com/Intl/NA/en-US/Default.aspx
Hewitt Associates . Anyone want to translate this for me into how much we will get if the LANS,LLC pension plan folds
ReplyDeletePBGC Issues Proposed Variable Rate Premium Rules under PPA
2007-06-13
On May 31, 2007, the PBGC issued proposed rules for the calculation of variable rate premiums reflecting the requirements of the Pension Protection Act of 2006.
The proposed rules provide the requirements for calculation of unfunded vested benefits (UVBs), change premium due dates and penalties, and define "vested" benefits. In addition, these proposed rules provide additional audit and record keeping requirements to reflect current PBGC practice and provide additional information relating to electronic premium filing.
PPA Changes to the Variable Rate Premium
As a result of the Pension Protection Act of 2006 (PPA), the calculation of the PBGC variable rate premium will change. The variable rate premium will still be determined as .9% of the plan's UVBs. However, effective for plan years beginning after 2007, the PPA changed the calculation of unfunded vested benefits to conform with changes in the funding rules. As a result, UVBs will be determined as the excess (if any) of the funding target for the plan year, taking into account only vested benefits, over the fair market value of plan assets on the valuation date.
As defined in the PPA, the funding target for determining UVBs differs from the calculation for funding purposes:
It is determined using a "spot rate" version of the new segmented yield curve rates rather than being based on a 24-month average. (However, the PBGC has proposed an alternative calculation method that can reflect the funding rates, as described below.)
It includes only vested benefits.
The assets must be the market value of assets; an average cannot be used.
In addition, PPA eliminated the full funding limitation exemption from the PBGC variable rate premium and added a cap on the variable rate premium for very small employers.
The following describes the proposed rules in more detail.
Measurement Date for Unfunded Vested Benefits and Assets
Under rules prior to the PPA changes, UVBs were determined as of the last day of the month preceding the premium payment year (e.g., December 31 for calendar year plans) for most, but not all plans.
The proposed rules issued by the PBGC require that UVBs be measured as of the valuation date in the premium payment year rather than a date in the prior plan year. This new date is referred to as the "UVB valuation date." Thus, for plans with more than 100 participants (on a controlled group basis), the calculation of UVBs will be as of January 1 for the premium payment year, rather than a day earlier and must reflect the plan's population and provisions as of that date. This eliminates the need for a "roll forward" approach such as the Alternative Calculation Method allowed for calculations of UVBs prior to PPA. However, because some plans may not have completed a funding valuation for the current year by the premium filing due date, the PBGC has proposed changes in premium due dates and penalties, as described below.
The change in the premium measurement date does not change the date as of which participant counts are determined for purposes of determining the flat rate premium and the cap on the variable rate premium for small plans. Participant counts are still determined as of the close of the preceding plan year. The proposed regulations distinguish this as the "participant count date." However, the participant count date for new and newly covered plans and for mergers and spinoffs is proposed to be the first plan year that begins on the plan's effective date. This change eliminates the ability to choose between the effective date or the adoption date as the first day of the plan year for premium filing purposes.
Calculation of Unfunded Vested Benefits
UVBs are determined using the vested funding target (which reflects at-risk status, if applicable) and the market value of assets.
Vested Funding Target
The rules propose two alternatives to calculate the vested funding target for UVBs.
The first alternative is to determine vested benefits using the segmented yield curve "spot rates" (a single month's bond yields). The PBGC has defined this as the "premium funding target" to distinguish it from the funding target. The spot rates are determined as of the month preceding the start of the plan year.
The second alternative is to use only the vested benefits of the funding target calculated for minimum contribution purposes. This calculation is defined as the "alternative premium funding target." Thus, the same interest rate assumption used to determine plan funding for the premium payment year would be used to determine the variable rate premium. An election, which is irrevocable for five years, is required to use this alternative. This election will be reported in the PBGC premium filing. Due to the five-year requirement, a plan sponsor could not calculate the funding target under both alternatives and use the calculation that produces the lowest premium.
Hewitt Comment: The second alternative would make the variable rate premium calculation more consistent with the plan's funding. Also, estimated premium payments may be more easily determined since an estimate of the 24-month average rates could be slightly more predictable than spot rates. However, since market assets are measured as of the valuation date, using the spot rates may better match the position of the plan as of the measurement date.
Market Assets
The proposed rules require that market assets be determined as of the measurement date; there is no alternative to use valuation assets used for plan funding (e.g., a 24-month average cannot be used for premium purposes). Assets are not reduced by the prefunding or funding standard carryover balances. Contributions made for the prior plan year are included in market assets only to the extent they are contributed prior to the date of the premium filing. Contributions made after the valuation date are included in market assets discounted at the effective interest rate used for the funding valuation. That is, regardless of a plan's election of which interest rates to use to calculate UVBs, the funding valuation effective interest rate is used to discount contributions. This eliminates the need to calculate an effective interest rate based on the spot rates used for premium calculation purposes. In addition, these amounts could be used for the Schedule SB as well.
Vested Benefits
For premium purposes only, the rules propose two situations where benefits will generally be considered vested.
If a benefit can be eliminated or reduced by amendment, (i.e., it is not protected under IRC 411(d)(6)), it would nevertheless be considered vested (if vested entitlement has been met) if the benefit has not actually been eliminated or reduced.
Also, the following death benefits would be considered vested (to the extent the vesting entitlement has been met) when a participant is living:
The plan's qualified preretirement survivor annuity (QPSA);
A post-retirement survivor annuity payable to a beneficiary (e.g., a J&S or certain and life benefit);
A return of accumulated mandatory employee contributions.
Hewitt Comment: Vested benefits were not clearly defined under the rules in effect prior to PPA. As a result, there was not consistent practice in determining whether a benefit was or was not vested. For example, some plans may not have considered death, disability, or supplemental benefits as vested benefits. Under the proposed rules, these types of benefits would be considered vested for premium purposes if the participant has satisfied the plan's vesting rules (e.g., if the participant has more than five years of service). For some plans, this change in definition of vested benefits could have a somewhat significant impact on the amount of UVBs.
Changes in Due Dates and Penalties
In order to provide time for plans to perform actual calculations for UVBs, the PBGC has proposed changes in the due dates and penalties for premiums and allows for an estimated variable rate premium filing. The proposed due dates vary depending on plan size since the PBGC has different requirements for the flat rate premium for small and large plans and the PPA allows for different valuation dates for small employers. The following due dates would apply beginning with plan years after 2007:
Due Date (Calendar Year Plans)
Premium Small Plans
(< 100 ppts) Mid-Size Plans
(100-499 ppts) Large Plans
(500+ ppts)
Flat Rate - Estimate N/A N/A Last day of the 2nd month that begins on or after the 1st day of the premium payment year (February 28th)
Flat Rate - Final Last day of the 16th month that begins on or after the 1st day of the premium payment year (April 30th) 15th day of the 10th month that begins on or after the 1st day of the premium payment year (October 15th) 15th day of the 10th month that begins on or after the 1st day of the premium payment year (October 15th)
Variable Rate - Estimate N/A 15th day of the 10th month that begins on or after the 1st day of the premium payment year (October 15th) 15th day of the 10th month that begins on or after the 1st day of the premium payment year (October 15th)
Variable Rate - Final Last day of the 16th month that begins on or after the 1st day of the premium payment year (April 30th) Last day of the 16th month that begins on or after the 1st day of the premium payment year (April 30th) Last day of the 16th month that begins on or after the 1st day of the premium payment year (April 30th)
The variable rate premium filing date of October 15th (for calendar year plans) has been maintained for large and mid-sized plans. However, the premium filed and paid by this date can be an estimate. A final variable rate premium can be paid by April 30th of the following year (for calendar year plans) without a penalty if an estimated variable rate premium is filed and paid by the due date and is based on:
Final market value of assets, and
A reasonable estimate of the funding target for the premium payment year taking into account the most current data available.
The estimated variable rate premium would need to be certified by the enrolled actuary, and would be subject to audit. The proposed penalty relief would be lost if the market assets reported in the estimate were not the same as in the final filing (i.e., a mistake was made either resulting in either higher or lower market assets). The proposed rules do not provide any specific instances where a mistake would be acceptable; however, the PBGC would consider waiving penalties based on facts and circumstances. Regardless of whether or not penalties apply, interest would accrue on the unpaid premium from the estimated variable rate premium due date to the final "true up" payment date.
Hewitt Comment: The requirement to have a final market value of assets is significant. If a mistaken asset value is used, the plan could be subject to late filing penalties.
For situations where a plan is considered a "small plan" for one year, but a "large plan" in the next year, the proposed rules provide safe-harbor relief for plans whose flat-rate due date for the plan year preceding the premium payment year is later than the large-plan flat-rate due date for the premium payment year. In such situations, any penalty would be waived.
Other Changes in Filing Rules
The proposed rules eliminate the following current special filing rules:
Exemption of variable rate premium reporting for plans with fewer than 500 participants with no UVBs;
Calculation of the variable rate premium on all accrued rather than vested accrued benefits for plans with 500 or more participants; and
Valuation of benefits at the funding interest rate if less than the variable rate premium interest rate.
A new exemption is added for very small plans which allows such plans that qualify for the variable premium participant cap to pay the capped premium and not report UVBs.
Recordkeeping and Audits
The proposed rules add the requirement that plan sponsors and employers must maintain records in addition to the parties currently specified in rules. Also, the operation of the system used to determine premium information must be available for demonstration to the PBGC so that its effectiveness and reliability can be assessed by the PBGC. In addition, the proposed rules would add data used for the UVB calculation to the list of items the PBGC can gather from other sources such as the IRS and DOL when the PBGC determines that records are insufficient.
Effective Date of Proposed Rules
When final, the new premium rules would apply for premium payment years beginning after 2007. These new rules apply even if the plan has special funding rules that apply to certain plans of commercial passenger airlines and airline caterers or delayed effective dates for the PPA funding rules (such as cooperatives, government contractors or plans with settlement agreements with the PBGC).
Implications for Employer Reporting under ERISA 4010
The PPA changed the criteria to determine if employer reporting under ERISA 4010 is required. For "years" beginning after 2007, reporting is required if the funding target attainment percentage at the end of the preceding plan year is less than 80%. In the past, 4010 reporting was triggered based on variable rate premium calculations. After the PPA, premiums and 4010 reporting are no longer linked as the asset and liability measures differ. These proposed regulations do not address any outstanding issues associated with reporting requirements under 4010 including the effective date for reporting in relation to an "Information Year," the determination of an end of year funding target attainment percentage, and any potential small plan exemptions.
"Our focus is HR. Period."
ReplyDeleteThat's from the Hewitt
and Assoc. web site.
Nowhere does it mention
pension management.
Nor does the mumbo-jumbo
regarding LANL mention
how it will invest the funds.
It looks like they handle
Human Resources (period).
Its like having the
HR dept. handle
your pension -- this is
not the way it should be done.
Then you better read this again and call for yourself.
ReplyDeleteDear Mr. Sir,
Hewitt Associates is handling the LANL TCP 1 and medical, dental and legal coverage.
No decision has been made as to who the administrator will be for the LLNL plan yet. When a decision has been made it will be prominently posted ont he LLNL transition website.
Please let us know how we may further assist you.
UC Customer Service
1-800-888-8267 Option 4
Fax: 1-800-792-5178
Still have any doubt as to who's handling your pension plan?
ReplyDeleteFact SheetOverviewFact SheetHewitt Associates (NYSE: HEW) is the world’s foremost provider of human resources outsourcing and consulting services. The company consults with more than 2,300 organizations and administers human resources, health care, payroll and retirement programs on behalf of more than 340 companies to millions of employees and retirees worldwide.
Located in 35 countries around the world, Hewitt has offices across Asia Pacific, Europe and the Americas, and employs approximately 24,000 associates.
Founded in 1940, Hewitt is headquartered in Lincolnshire, Illinois. The company is led by Chairman and Chief Executive Officer Russell P. Fradin.
Key Facts
Achieved global revenue of approximately $2.8 billion in fiscal 2006.
Recognized as one of America's Most Admired Companies (Fortune, 2004, 2005, 2006).
Leads the HR Business Process Outsourcing (BPO) industry with the greatest market share (TPI, October 2006, based on contracts covering 10,000 employees or more, by number of clients).
Ranked as the 6th largest diversified outsourcing company in the U.S. (Fortune, 2006).
Named China's HR Outsourcing firm of the Year and Consulting Firm of the Year for Change Management (ChinaSTAFF Magazine, 2005).
Recognized as Outstanding HR Consulting Firm in China (SMART Fortune, 2004, 2005).
Featured as one of the 100 Best Places to Work for IT (Computerworld, 2001, 2002, 2003, 2004, 2005).
For more information, contact Public Relations at 847-295-5000 or visit www.hewitt.com.
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The skills for HR are
ReplyDeleteobviously not the same
as for pension managent.
That is why university
HR depts do not manage
pensions but a staff of
experts in that area.
If Hewitt and
Assoc. is contracting out
the pension management
-- it should be made
known to whom and under
what performance criteria
was the selection made,
and the annual costs
involved.
Also, any delay in transferring
investments to like
investments could jeopardize
returns. The handling
of over $1B should not be
taken lightly.
The only way you are going to get this information is to request it in writing, yourself. Once you do please share it. Thanks
ReplyDeleteOkay people that was easy. I went here http://resources.hewitt.com/clientsearch/ and typed in LANL. Guess what? Up came a URL that said Los Alamos national Lab. When you click on it, it will take you to another web page where you can establish a user name and password. Have fund people and let us know the results.
ReplyDeleteTake a breath folks. Hewitt has been successfully managing the SRS (Savannah River Site) 401K for years. Here's their sign in page: http://resources.hewitt.com/wsrc/
ReplyDeleteA 401K is not the same
ReplyDeleteas a pension!
In a 401K, each employee
makes investment choices
from a given list of selections.
This is in contrast
to a pension plan which
is usually managed by an
investment team. A pension
has to meet future
objectives regarding
rates of return, whereas
a 401K does not.
Do a google on yale and
harvard pension management
teams to see the high rates
of return of good
management.
I would assume that all of those who went TCP_1 have their money safely tied up in the UC Pension Plan where as all of those who went TCP-1 are now with Hewitt and their funds are on the global market with this Multinational Corporation who seems to be heavily invested in China, the next industrial national as we were at one time. I feel real warm and fuzzy about this economy. Note that they are specialist in outsourcing too. We are closing the books on hiring our own people to do the work in America. Corporate America knows no loyalty to anyone. All they care about are the profits shown at the end of the quarter to their stock holders..
ReplyDeleteHave the funds actually arrived from UCRS to LANS TCP1? The agreement as to the amount was signed off just a few months ago, and in that agreement was wording to the effect that the various authorities still had to approve the details. The $1.28B was as of last June 1, 2006, and the actual transfer amount would include investment returns since then.
ReplyDeleteTherefore, there's a good chance that TCP1 funds today are still in the hands of the dozens of the investment funds hired by Parsky in the last few years at UCRS.
Once the money is at LANS, and the full Plan Description has been filed (I think only a Summary Description has been filed for now), then we may finally see who the pension investment managers will be. From the above postings, it sounds to me like Hewitt will play the administrative role of gathering contributions and dispersing funds.
Parsky is also the Chair of LANS, so I would expect that he will direct the funds right back into the same (very poor) stable of investment managers he brought in to wreak havoc on UCRS (be sure to re-read "Parsky's Party" in this blog from May 18).
From 11:20:PM to 1:20AM Duhhh! The point was that Hewitt isn't just an "HR" firm as was being put forth by other posters. Most of us understand the differnces between a defined pension plan and a 401K or we wouldn't find this discussion so stimulating.
ReplyDeleteHewitt and Mercer are leading us onward into the "one-world order". Better buy solid gold and bury it someplace.
ReplyDeleteThe packages for LLNL have been announced. TCP2 is *significantly* less at LLNL than at LANL.
ReplyDeletehttp://www.llnsllc.com/file/Employeebriefing062007.pdf
We must assume that LANS TCP2 will be adjusted in the near future to match the lower LLNS amounts.
ReplyDeleteAnd LANS TCP1 participants should be prepared to start paying 5% of their paycheck into their plan.
Why do we find these things out second-hand, and not directly from Mike?
12:01 Could it be that it either isn't true or that no such decisions have yet been made?
ReplyDelete