Sep 12, 2008

Military’s RRW Alternative Is Warhead Life Extension

By Elaine M. Grossman
Global Security Newswire

WASHINGTON — Convinced the time has come for an alternative to building a controversial new nuclear warhead, a key U.S. military command is laying the groundwork for Plan B: Dramatically extending the existing stockpile’s service life, Global Security Newswire has learned (see GSN, Aug. 5).

Yet this approach might also prove contentious once the details are sorted out, critics are already asserting.

Officials at U.S. Strategic Command, which is responsible for nuclear combat operations, say they now want to expand “life-extension programs” under way for aging weapons in the arsenal. Under ongoing efforts, the Energy Department’s National Nuclear Security Administration is infusing another 20 to 30 years into warheads already three to four decades old by refurbishing and replacing aging components.

Strategic Command chief Gen. Kevin Chilton had previously been among the most vocal advocates of the Reliable Replacement Warhead, and his aides said this week he continues to support it. Under the program, the Bush administration proposes to build a new series of new weapons aimed at offering increased safety against accidents, security against potential misuse, operational reliability, and maintainability to decrease annual costs.

Chilton has argued, as recently as this past spring, that design studies for the new warhead should be fully funded as a hedge against a potential discovery that the aging arsenal would not function as expected. Ongoing life-extension efforts might be insufficient to guarantee that the warheads would work, in the absence of explosive testing, in the future, according to past statements.

“We need to get on with this,” Chilton said in February (see GSN, March 6).

However, political realities are setting in.

His command’s about-face comes on the heels of congressional action to eliminate the Bush administration’s requested RRW funds for the second year in a row (see GSN, July 10). Congress has demanded that the administration spell out how such a new weapon would figure into a comprehensive nuclear deterrence strategy before lawmakers would consider funding the program.

Detractors have argued that a new warhead would send the wrong message at a time when the United States has led international efforts against known or suspected nuclear weapons programs in countries such as North Korea and Iran.

‘You Do The Best You Can’

Under Strategic Command’s new approach, some of the advanced technologies previously imagined for the Reliable Replacement Warhead might now be retrofitted into existing weapons as they undergo maintenance. The intent would be to meet as many RRW objectives as possible — principally increased safety and security — without a wholesale replacement of the warhead.

The fiscal 2010 budget request, which the Bush administration could hand off to the president-elect before the end of the year, is likely to include “an effort which just says, ‘Let’s look at [doing] as much as we can technologically, without actually doing ‘RRW work,’ which Congress didn’t want to approve,” a senior Strategic Command official said during an Aug. 21 interview.

Current LEP efforts are aimed at extending the service lives of the Air Force’s B-61 bomb warhead and the W-76 warhead used on the Navy Trident D-5 missile. These initiatives focus on overhauling or replacing corroded metal parts and other aging weapons components.

The Energy Department’s semiautonomous nuclear weapons arm in June 2006 delivered its first refurbished B-61 bomb to the stockpile. The agency expects to complete work on all the B-61 Mod 7 and Mod 11 versions undergoing this limited life-extension effort before the end of fiscal 2009, according to NNSA spokesman John Broehm.

Following deployed-warhead reductions in 2012, the United States would have roughly 420 B-61 Mod 7s and 35 B-61 Mod 11s, according to data compiled last year by Robert Norris of the Natural Resources Defense Council and Hans Kristensen of the Federation of American Scientists. An estimated 2,000 W-76 warheads would undergo life extension, Kristensen also reported last year.

Agency officials plan to complete the first limited overhaul of a W-76 warhead by January. That program is to wrap up in 2022, when the entire W-76 stockpile has been refurbished.

Strategic Command officials now hope to add RRW-like improvements to the menu of future LEP changes to these warheads.

“You do the best you can with the weapon systems that you’ve already got fielded,” said the command official. “And so you try to go back and retrofit those instead of building a fresher weapon.”

The official, who requested anonymity because of sensitivities surrounding the discussion of U.S. nuclear weapons policy, offered an analogy drawn from everyday life.

“It would be like adding a stereo to your car,” he said. “OK, I can’t buy a new car so I’ll go buy me a stereo and put it in my car.”

Similarly, “in many cases, now you can go update the avionics or the electronics that are in the weapons,” the official said. “We had thought we were going to do this in an RRW program. So if we won’t do it in that, then we’ll do as much as possible [on] the LEP side of the house.”

As it stands, the existing LEP effort involves some amount of modernizing old parts, the official explained. Under the revised approach, “when I do this enhancement or depot modification and maintenance, I’d [also] like to enhance security and reliability,” the official said.

However, the NNSA spokesman said his organization is already doing everything possible to update nuclear warheads that undergo life extension, short of building a new weapon.

“With every LEP that we do, we are always enhancing the safety and security of the weapons,” Broehm told GSN this week. “We just won’t be able to do it [in life extension] on the scale that we were hoping to with an RRW.”

Under the emerging Strategic Command concept, the lines typically drawn between congressionally mandated life extension for existing warheads and a congressionally prohibited warhead-replacement program might become more blurry, nuclear arms expert Jeffrey Lewis said last week.

As the LEP effort evolves into something more ambitious, it might trigger alarms as to whether the refurbishments entail so much change as to effectively create the very sort of “new” nuclear weapon Congress has sought to block.

Reliable Replacement Warhead advocates in the administration “keep pushing that envelope just a little bit more,” said Lewis, who directs the Nuclear Strategy and Nonproliferation Initiative at the New America Foundation. “And they’re going to keep getting their hands slapped.”

Putting More Warheads Into Life Extension

Strategic Command officials are also seeking life-extension programs for additional warheads in the arsenal, ones that would have simply been replaced by the Reliable Replacement Warhead if it had it gone forward.

The prior “strategy was to not do LEP [for some warheads] because we were assuming we would do RRW instead,” the command official said. “So, absent RRW, then we’ll continue to do maintenance on the existing weapon stockpile.”

The official would not specify which additional warheads would immediately follow the B-61 and W-76 in life extension, saying those judgments would be left to NNSA scientists and policy officials.

However, in the Air Force, next up would likely be the Minuteman 3 ICBM’s W-78 warhead, a senior service official said in an interview Wednesday. Significant life-extension design work for the W-78, though, would not begin until around 2020, the official said.

“All of them will eventually be done,” the Strategic Command official said last month, referring to the entire nuclear arsenal.

Under the 2002 Moscow Treaty, the United States is moving to a deployed stockpile of no more than 2,200 warheads by December 2012. Schedules and cost estimates for the overhaul concept are in the works, officials said.

Even without the new warhead on the drawing boards, “the intent is going to be the same,” explained the senior official. “It’s just not going to be accomplished to the same degree that it would have been with RRW, if I go down a pure LEP path.”

The NNSA spokesman said his agency still has not given up on the idea that the Reliable Replacement Warhead remains necessary and should go forward during a new U.S. administration.

“I would still argue for RRW,” Broehm said. “It would allow us to make the enhancements to a much greater degree.”

‘Little Chemistry Experiments’

Chilton has depicted the nuclear arsenal as nearing the edge of a precipice, in which U.S. officials could discover that one or more types of aging warheads have ceased to function as expected.

Nuclear warheads “sitting on the shelf” are “actually little chemistry experiments that are cooking away,” the general told a Capitol Hill breakfast audience in July. With the gradual degradation, “I sense there’s a cliff out there someplace, and I don’t know how close I am to the edge of that cliff,” he said (see GSN, July 22).

Others have voiced more confidence in the ability of an LEP effort to forestall indefinitely any serious nuclear weapons degradation.

“I don’t agree with the generally stated assumption that confidence and the reliability of our existing nuclear weapons will inevitably decline with time as the weapons age,” physicist and former weapons designer Richard Garwin said in March 2007 congressional testimony.

He said the science-based Stockpile Stewardship Program — an NNSA initiative that encompasses the life-extension program — has resulted in greater confidence in the viability of weapons cores, or “pits,” over time.

So, too, “with the passage of time and the improvement in computing tools, I believe that confidence in the reliability of the existing legacy weapons will increase rather than diminish,” Garwin told lawmakers last year.

Chilton’s command now envisions a life-extension effort for the entire arsenal simply “because they didn’t get to do Plan A,” said nuclear arms analyst Lewis, referring to the RRW program. From the start, though, life extension “probably ought to have been Plan A,” he said.

Strategic Command is expected to convey to the Energy Department’s nuclear weapons branch in the coming weeks its ideas for expanded life extension, according to the official interviewed last month.

For its part, at least one of the national laboratories involved in both the RRW and LEP efforts has said it would remain agnostic.

“We will pursue the course of action decided by the administration, Congress and the DOD,” the Los Alamos National Laboratory is cited as saying in a Congressional Research Service report issued last year. “If they wish to pursue LEPs, then we’re fully committed to that path and will provide our best advice and service.”

39 comments:

Anonymous said...

So LANL won't be needing to build a large 100 pit per year production facility. I'll bet that really chaps Bechtel's ass. And I guess we can start laying off all those Bechtel construction managers that LANS hired over the last 2 years, seeing as there will be no need for them any longer. That should help LANS balance the operating budget.

Anonymous said...

“It would be like adding a stereo to your car,”

Hardly a LEP.

Anonymous said...

Not a logical conclusion, 10:37. *Plutonium aging* may not drive pit rebuild, but plenty of other issues might. 'Nuff said in this venue.

Anonymous said...

Laying off those Rechtal construction managers will not be acceptable. They will have to put them in charge of the R&D work. After all, a fundamental premise of the MBA program is that "a good manager can manage anything."

Anonymous said...

Wait a minute...No Pit Manufacturing, Duh no $$$$$$$, what happens to LANS?

Anonymous said...

A tone deaf NNSA is probably thinking... if we replace all the parts with upgraded ones and call it LEP, then what have we really achieved? A stealth RRW!

A loose interpretation on LEP opens up a brilliant new path for NNSA to once again bypass the wishes of Congress. You could swap out the pit, swap out the secondary, change the fusing, modify the fillers, etc, etc.

Congress won't have the smarts to fully understand that these highly modified LEP parts are being used to "upgrade" the current arsenal to RRW status. Even better, NNSA can announce that the costs to proceed with LEP on each warhead will end up costing far more than proceeding with RRW. Either way, the NNSA gets what it wants (i.e., a new warhead production complex) and Congress can be safely ignored.

The only guestion is... will Congress foot the bill? The costs which NNSA forcasts to implement this new vision of LEP will be a shocker. In fact, the LEP production costs may become so high that they result in the necessity of even greater layoffs at the NNSA research labs.

Anonymous said...

Re 3:32

Exactly. The Air Force in particular has ambitious modernization plans and doesn't really care what title (LEP or RRW) is required to achieve them.

Anonymous said...

“It would be like adding a stereo to your car,”
============================

Yes - you can add a stereo to your car.

However, if what is wrong with your car
is that you want better crash safety -
you want to make the car safer by
beefing up the car's "crumple zones" -
that's NOT an LEP.

If you want to the increased safety of
a more modern design of crumple zones -
then that calls for a new car.

Anonymous said...

LEPs are ok up until you have a real need to change the physics package.

Anonymous said...

Rumor has it that some of the Bechtelians tried to jump from NSSB windows when the market crashed today. Lots of cracked ribs, but no cracked panes. Of course, the old LASL pros could have told them that jumping from the second or third floor would be be more painful than fatal. But, why would the Bechtelians even think to seek advice when they already know all of the answers?

Anonymous said...

"Rumor has it that some of the Bechtelians tried to jump from NSSB windows when the market crashed today." - 8:46 PM

Don't worry. They didn't get hurt because Mikey placed large bales of soft cash bonuses on the hard ground to help cushion their fall.

Anonymous said...

Whoops! There goes the pension. Good thing that Mikey got special pension insurance from UC when he became LANS' top executive.

When the TCP1 pension goes belly up, he'll shoulder no losses. They rest of you are not going to be so lucky.

Anonymous said...

Frank,

I hope your inattention to this blog, your legendary non-interest in LANL in general, except for exposure stories, and your recent tardiness in posting new messages all point to your intent to finally give it up to someone who actually cares about LANL. Please. Or alternatively, your clients deserve a statement about why you continue this. Give up the historic "LANL - The **** Story" logo that you can't pay honor to, by explicitly passing it on to someone who wants it.

Anonymous said...

The Wall Street Journal (below) says in today's paper that this financial crisis is unfolding at the same rate and scale as the Great Depression of the 30's! This is not a minor correction. It's the Financial End Game. In the recent words of Alan Greenspan, "it's a once in a century event".

It was nice at LANL while the good times lasted, but I'm beginning to suspect that LANL employees may not be able to count on seeing much, if anything, from their LANS LLC "substantially equivalent" pension. Even the Pension Benefit Guaranty Corporation (PBGC) may soon be swamped beyond the point were they'll be able to offer assistance to pensioners caught up in this terrible financial black hole.

Of course, life at the top of the LANS LLC food chain will remain as before... just grand!


online.wsj.com/article/SB122169431617549947.html

* SEPTEMBER 18, 2008 - Wall Street Journal *
----------------------------------------------------
Worst Crisis Since '30s, With No End Yet in Sight
----------------------------------------------------

The financial crisis that began 13 months ago has entered a new, far more serious phase.

Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. New fault lines are emerging beyond the original problem -- troubled subprime mortgages -- in areas like credit-default swaps, the credit insurance contracts sold by American International Group Inc. and others. There's also a growing sense of wariness about the health of trading partners.

The consequences for companies and chief executives who tarry -- hoping for better times in which to raise capital, sell assets or acknowledge losses -- are now clear and brutal, as falling share prices and fearful lenders send troubled companies into ever-deeper holes. This weekend, such a realization led John Thain to sell the century-old Merrill Lynch & Co. to Bank of America Corp. Each episode seems to bring government intervention that is more extensive and expensive than the previous one, and carries greater risk of unintended consequences.

Expectations for a quick end to the crisis are fading fast. "I think it's going to last a lot longer than perhaps we would have anticipated," Anne Mulcahy, chief executive of Xerox Corp., said Wednesday.

"This has been the worst financial crisis since the Great Depression. There is no question about it," said Mark Gertler, a New York University economist who worked with fellow academic Ben Bernanke, now the Federal Reserve chairman, to explain how financial turmoil can infect the overall economy. "But at the same time we have the policy mechanisms in place fighting it, which is something we didn't have during the Great Depression."

- Spreading Disease -

The U.S. financial system resembles a patient in intensive care. The body is trying to fight off a disease that is spreading, and as it does so, the body convulses, settles for a time and then convulses again. The illness seems to be overwhelming the self-healing tendencies of markets. The doctors in charge are resorting to ever-more invasive treatment, and are now experimenting with remedies that have never before been applied. Fed Chairman Bernanke and Treasury Secretary Henry Paulson, walking into a hastily arranged meeting with congressional leaders Tuesday night to brief them on the government's unprecedented rescue of AIG, looked like exhausted surgeons delivering grim news to the family.

Fed and Treasury officials have identified the disease. It's called deleveraging, or the unwinding of debt. During the credit boom, financial institutions and American households took on too much debt. Between 2002 and 2006, household borrowing grew at an average annual rate of 11%, far outpacing overall economic growth. Borrowing by financial institutions grew by a 10% annualized rate. Now many of those borrowers can't pay back the loans, a problem that is exacerbated by the collapse in housing prices. They need to reduce their dependence on borrowed money, a painful and drawn-out process that can choke off credit and economic growth.

At least three things need to happen to bring the deleveraging process to an end, and they're hard to do at once. Financial institutions and others need to fess up to their mistakes by selling or writing down the value of distressed assets they bought with borrowed money. They need to pay off debt. Finally, they need to rebuild their capital cushions, which have been eroded by losses on those distressed assets.

But many of the distressed assets are hard to value and there are few if any buyers. Deleveraging also feeds on itself in a way that can create a downward spiral: Trying to sell assets pushes down the assets' prices, which makes them harder to sell and leads firms to try to sell more assets. That, in turn, suppresses these firms' share prices and makes it harder for them to sell new shares to raise capital. Mr. Bernanke, as an academic, dubbed this self-feeding loop a "financial accelerator."

"Many of the CEO types weren't willing...to take these losses, and say, 'I accept the fact that I'm selling these way below fundamental value,'" said Anil Kashyap, a University of Chicago Business School economics professor. "The ones that had the biggest exposure, they've all died."

Deleveraging started with securities tied to subprime mortgages, where defaults started rising rapidly in 2006. But the deleveraging process has now spread well beyond, to commercial real estate and auto loans to the short-term commitments on which investment banks rely to fund themselves. In the first quarter, financial-sector borrowing slowed to a 5.1% growth rate, about half of the average from 2002 to 2007. Household borrowing has slowed even more, to a 3.5% pace.

- Not Enough -

Goldman Sachs Group Inc. economist Jan Hatzius estimates that in the past year, financial institutions around the world have already written down $408 billion worth of assets and raised $367 billion worth of capital. But that doesn't appear to be enough. Every time financial firms and investors suggest that they've written assets down enough and raised enough new capital, a new wave of selling triggers a reevaluation, propelling the crisis into new territory. Residential mortgage losses alone could hit $636 billion by 2012, Goldman estimates, triggering widespread retrenchment in bank lending. That could shave 1.8 percentage points a year off economic growth in 2008 and 2009 -- the equivalent of $250 billion in lost goods and services each year.

"This is a deleveraging like nothing we've ever seen before," said Robert Glauber, now a professor of Harvard's government and law schools who came to Washington in 1989 to help organize the savings and loan cleanup of the early 1990s. "The S&L losses to the government were small compared to this."

Hedge funds could be among the next problem areas. Many rely on borrowed money to amplify their returns. With banks under pressure, many hedge funds are less able to borrow this money now, pressuring returns. Meanwhile, there are growing indications that fewer investors are shifting into hedge funds while others are pulling out. Fund investors are dealing with their own problems: Many have taken out loans to make their investments and are finding it more difficult now to borrow.

That all makes it likely that more hedge funds will shutter in the months ahead, forcing them to sell their investments, further weighing on the market.

Debt-driven financial traumas have a long history, from the Great Depression to the S&L crisis to the Asian financial crisis of the late 1990s. Neither economists nor policymakers have easy solutions. Cutting interest rates and writing stimulus checks to families can help -- and may have prevented or delayed a deep recession. But, at least in this instance, they don't suffice.

In such circumstances, governments almost invariably experiment with solutions with varying degrees of success. President Franklin Delano Roosevelt unleashed an alphabet soup of new agencies and a host of new regulations in the aftermath of the market crash of 1929. In the 1990s, Japan embarked on a decade of often-wasteful government spending to counter the aftereffects of a bursting bubble. President George H.W. Bush and Congress created the Resolution Trust Corp. to take and sell the assets of failed thrifts. Hong Kong's free-market government went on a massive stock-buying spree in 1998, buying up shares of every company listed in the benchmark Hang Seng index. It ended up packaging them into an exchange-traded fund and making money.

Anonymous said...

"I hope your inattention to this blog, your legendary non-interest in LANL in general, except for exposure stories, and your recent tardiness in posting new messages all point to your intent to finally give it up to someone who actually cares about LANL."

Way to go Frank!

How dare you take a break from attending to our pathetic little needs for your posts.

You let a little hurricane supercede our needs just to satisfy your's.

Surely you can see how short sighted you've been:)

greg close said...

Yes, folks - like all pension plans, presumably even UC's, adverse market events will have a potential adverse effect on the plan. Go figure. TCP1 will likely be not much better or worse off than most plans, but hopefully the diversity of invested funds will help mitigate our risk. Long term funding is always a valid concern, but I really hate how much people enjoy taking pot shots JUST to create panic or fear over a situation clearly out of our control (i.e. a market-wide issue of financial uncertainty and volatility, not a matter of bad plan management, per se). Mike's pension guarantee with UC, whatever that might be, has less built in legal protection than your ERISA plan benefits, so I wouldn't assume he's giddy as a school girl over the market woes.

Certainly be concerned and attentive to these issues. Vote for whatever candidate that in your judgement may have the most potential to better secure our economy and market stability. Do something constructive to affect change rather than revel in the potential misfortune of anyone's pension plan, now or in future.

To the person whining about Frank's absence, sounds like you should just post on another blog if you don't value what he's doing with this one. Don't waste our time or yours by bemoaning that someone else's blog isn't what your blog would be, if you bothered to back up your words with some sort of positive action of your own. Why are you waiting for someone else to do it for you?

Regards,
Greg

Anonymous said...

6:14 pm: "Don't waste our time or yours by bemoaning that someone else's blog isn't what your blog would be, if you bothered to back up your words with some sort of positive action of your own. Why are you waiting for someone else to do it for you?"

Greg,

You are a good guy, but please stick to what you know. Who doesn't understand that LANS is not responsible for the silliness on Wall Street? You are whining a little too much here, as if you could even know what the poster is doing or not doing. What is it you are thinking the poster is waiting to be done for him/her? Since nobody really knew where Frank lives, how would he/she know that Frank was affected by Ike? The fact that Gus stepped in is to his credit, but his attitude sucks. I guess he really is better than everone else. I hope you don't think that too, because up until now, I respected you, with first-person evidence.

greg close said...

I apologize for being a little testy. To be clear though, I was actually whining about two or three different posts. Of course, reasonable people may disagree!

Whine A, which was a reaction to the typical "now TCP1 will crash but UCRP will obviously remain in good shape" statements/implications. Defensive? Probably. Valid... I think so. I stand behind my expressed opinion that making statements like that are generally not productive, and that the poster could find better use for his/her time. Most frustrating, is *seems* like there's an "I told you so" aspect to these posts sometimes.

Whine B, the "where are you Frank, why don't you give it up" post just seemed mean and pointless to me, regardless of Ike.

In either case, I'm not making a value judgement about any poster him/her self, just the value of the posts. It's just my opinion, and believe me, it ain't worth much anyway. If I came across a little too grumpy, I apologize.

Anonymous said...

Thanks Gus,

And, REDACTED to the little prick. The lab is full of'em. REDACTED, REDACTED. Maybe downsizing has an upside !

Anonymous said...

Greg may know something about helping LANL employees with benefit questions, but I suspect he knows very little about the world of finance or investments.

People at LANL have a right to be very wary about the state of their TCP1 pension. They need more from LANS than to just be told "Trust us, everything is fine so don't worry."

LANS secretiveness in holding back accurate and timely information on the current state of this pension is troublesome. I suspect there is more going on in terms of this pension that most employees fully realize. It's possible that current losses are mounting, but don't expect to find out until it is too late. Time will tell who is right on this subject.

Anonymous said...

I think all TCP1 employees can find out what securities TCP1 is invested in, by federal law. Then they can do their homework. Waiting to be spoon-fed the answers is stupid.

greg close said...

9/20/08 4:57 PM - Please, and I mean this in a friendly way rather than how it might sound, but... please, don't put words in my mouth.

I did not, in fact, say: "Trust us, everything is fine so don't worry" I didn't, and I never will. If I implied that, it was unintentional. The gist of my comment was that these are indeed grim times, but that it's inaccurate to state that being in UCRP will somehow, by default, protect you from the same market forces that are affecting TCP1. The comment that sparked my response was phrased not in interest of helping or informing people (eg. "hey - if you're in UCRP or TCP1, pay attention to what's happening on Wall Street. These collapses could have a serious consequence on our retirement annuity"). On the contrary, it was just a little jab at Mike and LANS and the ever-doomed fortunes of TCP1. Useless and uninformative in any quantitative way.

As for your other points.

Actually, yes, I do know something about investment and finance. I worked at Fidelity Investments, and have at least a moderate amount of training and experience. I will not pretend to be a financial advisor, but I am a fairly well informed commentator on the subject - specifically as it pertains to the relation of the market and how that may affect funds invested in a Pension Plan.

As for the accuracy and timelines of LANS information regarding the pension plan, your comment is factually incorrect. LANS has not missed any reporting/disclosure deadlines as outlined in Title I of ERISA. All filings have been complete, and on time or within legal extensions obtained through proper channels. This has been elaborated upon in more detail in previous posts, and I'm already pushing out a long-winded response, so I won't start that again.

No one with a Defined Benefit should be without concern this year. Not pensioners in UCRP, TCP1 or anywhere else. I was just at an ERISA seminar, and this was a topic of great concern for all the administrators who were there. But don't assume that one bad year will kill the plan off, either.

Stay concerned, stay alert, and make sure your rights are honored by me and anyone else administering your pension. But, if you make a comment (eg. 9/17/08 7:24 PM), make sure it has a point beyond snarky self-importance. That's all I'm saying.

Anonymous said...

"Thanks Gus,

And, REDACTED to the little prick. The lab is full of'em. REDACTED, REDACTED. Maybe downsizing has an upside !

9/19/08 5:44 PM"

Flagged for being lame.

Anonymous said...

Greg, perhaps LANS is meeting the "letter of the law" in terms of TCP1 pension disclosures. However, these legally required disclosures would tell employees almost nothing about the state of TCP1 over this last year. They contain old information. In fact, I remember the one page memo which LANS sent out to employees about 6 months ago regarding the state of TCP1. It contained virtually no real information! This was in sharp contrast to the way in which UC kept employees informed about the state of the UCRP pension.

Right now would be an excellent time for LANS to show some true leadership and begin talking to the staff about what is going on with their TCP1 assets. I'm certain there are a lot of people at LANL with questions about the pension after the events of this last year. I, for one, would like to see some real LANS leadership on this issue rather than their meeting only the low bar set by the minimum legally required disclosure laws.

Anonymous said...

The bottom line on TCP1 is...

How badly underfunded is it at this particular time?

Surely, that can't be too hard for the LANS TCP1 trustees to compute and then release to employees. Underfunding on TCP1 will have a huge impact on future earnings of employees who are in the pension. They want to know how much of their future salary they may be required to "kick-in" to help salvage this pension.

greg close said...

The "letter of the law" is actually pretty comprehensive. I would suggest going back to the 2007 SAR posted for the TCP1 DB Plan and taking another look.

http://lanl.gov/worklife/benefits/pdfs/annual401k_report_tcp1.pdf

Within that summary document there is a section that very clearly outlines your right to request more detailed information and how to go about it. The 2008 SAR will have the same options. I urge you to exercise your rights as you see fit.

I I will also inquire this week to see if there's any info that I can provide during our upcoming Open Enrollment information sessions to address TCP1 funding concerns and/or what this means re: future contributions. Despite your assumption, getting a SAR like report at the same time we're filing 5500's and getting the "real" SAR prepared, at the same time our trustees and agents and fund managers are handling the same for all of their other clients... well, let's just say you might be assuming a little too much about how easy that might be. Regardless, whatever I can get, I will be happy to share.

Anonymous said...

The US government has just bought off on the idea of handing out about $1 trillion in cash to bailout Wall Street bankers and Fannie. Of course, we don't have any of this money on hand, so it will have to all be borrowed from overseas lenders. Since these oversea lenders have lost trust in the US, the interest rates paid out will probably have to go up on these newly issued Treasury bonds, thus eating further into income tax payments to help cover the growing interest payouts.

Does anyone have ideas how this will effect the discretionary budgets in the next few years (i.e., funding for NNSA)?

It would seem to me that adding this huge debt load to the US budget will cause the politicians to start looking for massive cuts in all Fed agencies in a mad scramble to help bring the US budget back to reality.

If so, this $1 trillion dollar bailout could be bad news for anyone working for the Federal government and especially bad news for anyone working in the NNSA complex. The politicians will have no choice this time around. They'll have to start paring back spending on all discretionary budget accounts.

Maybe I don't fully grasp the situation, but this doesn't look good for either LANL or LLNL.

Darko said...

Frank -

Good luck on getting back to normal after Ike. It is a coincidence that I checked in today... I'm down to once every month or two (or three).

Gus -

Good on ya for taking over the comments and bitch-slapping the "little pricks" with their own hankies.

Maybe a blog hiatus of a week or two will shake off the whiners and the "little pricks".

- Darko

Anonymous said...

*** RED ALERT! *** RED ALERT! *** RED ALERT! ***

As this recently issued UC memo below shows, the UCRP pension is going to start requiring salary contributions by next summer. UC says the exact amount taken out of employee salaries won't be know until a few more months have passed.

If UCRP needs these salary contributions, you can be sure that TCP1 needs them even more, since it started out from Day One being underfunded. Unlike UC, however, LANS has said little to LANL employees about this situation.

Get ready, folks. You'll soon be required to fork over hefty amounts of your salary to keep TCP1 afloat. Since LANS doesn't have the deep pockets of UC, I would guess that LANL employees will end up footing the whole amount needed to get TCP1 back to full solvency. Salary reductions in the range of 15% may not be out of the question, so enjoy your 5% raises for this year.

The idea that the small, poorly funded TCP1 pension was somehow "substantially equivalent" to UCRP may soon be proven to be a cruel NNSA hoax.

===========

[September 12, 2008]

The following is a letter to UC employees from Judy Boyette, Associate Vice President, Systemwide Human Resources and Benefits.

---

Dear Colleague:

The purpose of this letter is to update you regarding the restart of employer and employee contributions to the UC Retirement Plan (UCRP).

As you know, the University has been engaged in a multi-year process concerning the need to keep UCRP fully funded in order to ensure the plan remains able to pay retirement benefits to employees in the future, and that UC’s benefits remain competitive in the marketplace. At their July meeting, the Regents discussed a proposed funding policy for the UCRP to accomplish these objectives.

This proposal, which includes restarting employer and employee contributions, is now being brought to the Regents for approval at their September 16-18 meeting. If you have not already seen the proposal and would like to, it is available online.

As it states, the proposal establishes the date of July 1, 2009, subject to collective bargaining where applicable, for the resumption of employer and employee contributions to the UCRP. However, the actual amounts of employer and employee contributions will not be decided at the September meeting – that is expected to happen at a future meeting. In November, UC’s actuary will present the Regents with the annual valuation for UCRP, and information regarding the total recommended level of contributions required from both UC and employees to keep UCRP fully funded. Then, at one of their 2009 meetings, Regents are expected to determine the amount of resources available, and how contributions should be divided between the University and employees (i.e., the amounts UC will contribute and the amounts employees will contribute). As the proposal also indicates, the level of employer contributions from the UC will never be lower than what employees are contributing.

Although, we won’t know specific contribution amounts for several months, as previously announced the University’s expectation is that there would be no impact on employee net take-home pay in the first year of contributions, because employee contributions could begin in the form of a redirection of mandatory employee contributions currently going into the UC Defined Contribution Plan. Additionally, the university expects that its long-term approach to how UC and employees share the cost of UCRP benefits will be consistent with the State’s approach to contributions to CalPERS (see below websites for current CalPERS rates).

As you know, the University has been very fortunate in that it has enjoyed a UCRP funding surplus since the early 1990s which has allowed the Regents to suspend UCRP contributions. This has meant that, unlike the vast majority of employees at other institutions, UC employees have not been required to contribute to the cost of their pension benefits for the last 18 years.

At the same time, it was understood that this “contribution holiday” would end at some point and that contributions, from both UC and its employees, would be needed to keep UCRP fully funded. The market returns on UCRP have declined over the 2007-08 year, due to the performance of the financial markets. In addition, we are seeing the impact of delaying the restart of contributions.

We will continue to update you about the restart of contributions as decisions are made. Meanwhile, you are encouraged to visit the following websites to learn more about the process the University has been engaged in concerning this issue, and the CalPERS approach to contributions:

The Future of the UC Retirement Plan

CalPERS – Employer Contribution Rates

CalPERS – Employee Contribution Rates (Cal State University example)

Sincerely,

Judith W. Boyette
Associate Vice President
Systemwide Human Resources and Benefits

greg close said...

9/23/08 10:44 AM - "15% contributions..." I guess you have so little idea what you're talking about that you don't even know how ridiculous that statement sounds to someone who actually works in Benefits. I reiterate my commitment to sing the Love Boat Theme naked on LabNet if that ever transpires while I'm employed here.

To distill your observation into something that might be more useful to folks: YES, if UC has announced a contribution, then reason dictates the LANS is at least looking at the same possibility. That is the responsible thing to do. That doesn't mean there will or won't be a required contribution - we will have to wait for an announcement.

I reiterate: 15%, Love Boat, Greg Singing Naked. Of course, if it's 14.9% you're on your own!

Anonymous said...

I reiterate: 15%, Love Boat, Greg Singing Naked. Of course, if it's 14.9% you're on your own! - 12:56 PM

Greg, believe me, no one wants to see you naked on LabNet, no matter what the cause. Please keep your clothes on.

However, significant salary contributions are likely for TCP1. LANS should start talking to employees about this NOW, and not rely on 3rd party reps in blogs like you to tell us what is really going on.

Where is the LANS leadership on these issues? I see none.

greg close said...

The reason you've seen no comment on how much of a pension contribution you might have next year is that, as of NOW, there is no planned pension contribution!

It remains a complete hypothetical at this point. If that decision is ever made, there will certainly be lots of communications to the employees on the subject. Nothing is being hidden - at this point there's nothing to hide.

Anonymous said...

Greg - While it is obviously true that no decisions have been made so there is "nothing to hide" from that standpoint, it is also obvious that high-level discussions are going on and potential solutions are being weighed. You, personally, may or may not know details about these, and probbly won't be willing to say if you do, but your position inclines peole to think that you know more than you say. Get used to it.

greg close said...

No offense intended, but I disagree with your premise - that high level discussions, even if they are "obviously" going on, would provide information or "leadership." On the contrary, I believe it would be irresponsible to release premature and incomplete information. Do you realize how much B.S. pervades your average "high level" discussion? Data should be shared when it's solid, useful, and well vetted, IMHO.

Used to it? Are you kidding? ;) I'm used to people either assuming that I know more than I'm saying (usually wrong) or that I'm just trying to put a nice shine on the truth (always wrong) or that I have some sort of innate trust in LANS, as s corporate entity (not bloody likely). No problem. But if I think that an issue is being viewed without full understanding of the facts, laws, and processes involved, with shallow logic, or flat-out blind prejudice, I just can't shut up about it (obviously). That's what people will have to get used to about me, I guess.

Anonymous said...

The recent UC memo on UCRP salary contributions shows that UC is at least talking to their employees.

Given that the funding for TCP1 came out of UCRP and it was insufficient, it's clear that LANS should also be talking to employees about future salary contributions.

End of story.

Anonymous said...

I am amazed that some people still claim the TCP1 pension plan was initially underfunded. That simply is not true. Some people just like to stir the pot I guess. I just wish thew would stike to hyperbole related to LANS management of t he workforce and quit creating unwarranted concern about the retirement plan. Is there a possibility that future additional funding for the TCP1 pension plan will be required, absolutely, but it will be because of the current market problems and PPA requirements, not because the plan was initially underfunded. As to who will be required to provide that funding, Greg Close's comments are right on point.

greg close said...

I really, really, tried not to post again, but I just couldn't help it. Your argument/analysis is just too lazy with the facts.

Your hypothesis: that since TCP1 derived its original funding status from UCRP, and UCRP is planning/announcing an increase, that by definition LANS TCP1 must be in the same boat but chooses not to communicate.

The fallacy: Although initial funding was indeed derived from UCRP, the TCP1 Pension Trust has been it's own entity for some time now. Our fortunes are now completely separate from UCRP, for better or worse. Our populations differ significantly in terms of size and demographics, our contribution base is different, etc. etc.

Therefore, your entire argument is not logically sound - if your premise is incorrect, the facts derived from that premise are not valid. If TCP1 is not tied to the ups/downs of UCRP anymore, why would it stand to reason that we must take the same actions as UCRP for funding? We might need 20% more or 20% less than UCRP, or exactly the same. The fact that UCRP has been considering this for years, and has finally reached a solid decision and communicated that, should give you an indication that leadership in this case is one of patience and careful analysis, not a rush to press. LANS is taking the same cautious approach to the determination as UCRP.

I know people are scared about TCP1, and that was BEFORE the market took a dive. And I know people don't trust LANS. Some of that is certainly valid concern/mistrust, I'm sure. That doesn't substitute for establishing a rational argument and following it through to conclusion, however. All of this fact-free arguing only diminishes the attention you will need if there really IS a problem with TCP1 at some point (see: Wolf, Boy Who Cried).

Anonymous said...

Greg, I've looked at the one page TCP1 status memo you list in one of your posts above:

"annual401k_report_tcp1.pdf"

It only goes from June '06 to December '06 and it has virtually NO information content!

Holy Cow! Is this what you take to be valid information on the current status of TCP1?

FYI, it's now September of *2008*, and we need to know far more about the status of TCP1 than what this silly and out-dated one page LANS memo presents to us.

greg close said...

Um, no... actually what I said was:
"Within that summary document there is a section that very clearly outlines your right to request more detailed information and how to go about it. The 2008 SAR will have the same options. I urge you to exercise your rights as you see fit."

The dates are appropriate based on the required reporting period, under ERISA (you are reporting on the prior full year when you release the SAR). So, if you want more data - then exercise your right to request it. I ENCOURAGE you to do so. You can bet if I seriously thought we were violating ERISA i would not be working here - that's why I left my last job in the Fortune 50. I'm not here to protect a corporate shell, I'm here for the participants.

You don't have to believe me, but go check the law - it's all in Title I of ERISA. I've posted the link before (just don't confuse SPDs with SARs again, please).

gsclose@lanl.gov if you want to follow up with me privately. I'm buried in email, so don't take it personally if it takes a couple days.

Thanks.
Greg
P.S. I'm on YOUR side... sigh.