May 13, 2009

Lab Pensions and the 2010 Budget

By John Fleck, Albuquerque Journal Science Writer
Tuesday, 12 May 2009 15:22

Pension benefits are not as big a policy issue as nuclear weapons design and manufacturing, but they may turn out to be one of the big hidden land mines for Sandia and Los Alamos National Laboratories in the 2010 budget year and beyond. The question is how the major contractors who run National Nuclear Security Administration sites, including Los Alamos and Sandia, will meet ongoing defined benefit pension obligations given the way the huge market downturn has eaten away pension plan assets.

Sandia's plan lost 25 percent of its value last year, according to Mark Biggs, who manages program for Sandia. In the past, earnings on the plan's assets generated enough money to pay benefits to 6,500 beneficiaries (Sandia retirees and their surviving spouses). Sandia has already had to contribute $25 million last year, and is contributing another $50 million this year, Biggs said. The money comes directly out of Sandia's budget. It has not been given any addition money by NNSA to cover pension costs.

Nationwide, the NNSA has set aside $122 million for next year to try to deal with the problem, NNSA chief Tom D'Agostino told reporters during a budget briefing last week as the budget was being rolled out. According to budget documents, $64 million of that will go to nuclear weapons design and production sites (such as Los Alamos and Sandia), with the rest going to contractors that support the Navy's nuclear power reactors. It's not clear at this point how large the total obligation is, or how much will come via extra money from the federal government and how much the labs will have to pay by moving money within their existing budgets (as Sandia has thus far done).

Biggs said uncertainties about the market make it impossible to predict how much money will be needed. The NNSA budget request puts it this way: "Whether additional funding will be needed in future years will depend on the funded status of the plans based on plan investment portfolios managed by the contractors as sponsors of the DB pension plans."

110 comments:

Anonymous said...

Everything is fine here at LANL. LANS LLC sent out a letter two weeks ago telling the TCP1 employees that their pension is *over-funded* to the tune of 135%!

Of course, if you believe this letter given the severe downturn in almost every other pension out there, then you probably also believe every word Mike had to say during the latest All-Hands, too.

Anonymous said...

Can somebody please post the LANS LLC TCP1 pension letter.

Anonymous said...

The letter just sent out by LANS was for calendar year 2007. The data contained therein is almost 1 1/2 years out of date.

It's unconscionable for LANS to have sent out such a deceptive letter without an accompanying warning that the data no longer represent the state of the pension's health.

Anonymous said...

+1

That letter was insulting. To provide data on plan value only to Dec. 31, 2007 was amazingly irresponsible. A detailed look at the letter showed something like 97% of plan value invested in equity and security instruments.

I've looked and have been unable to find any information on the value of the plan today, the percentage of funded liabilities, etc.

Anonymous said...

What? LANS isn't telling the truth? Impossible. There must be some mistake. We'll put our best and brightest right on it and get our employees some clear and direct answers.

Anonymous said...

Well the LLNL plan funding level is 200% or so I have heard and UC is requiring contributions from employees (just got my retiree news letter). Is there a disconnect?

Anonymous said...

This from LLNL

I received from LLNS my TCP1 (Defined Benefit Pension) summary notice as required by the Pension Protection Act of 2006. Since the plan has only been around for a year and half there's limited information and its from Jan 1, 2008. As of that date there were 3927 in the plan - 3915 active and 12 retired/separated but not getting benefits yet. Based on what was in the "Funding Target Attainment Percentage" table the plan was at 209.62% of its funding target - $1.65 Billion in assets and $790 Million in liabilities. 109% more than what is required to pay lifetime pensions to all the participants in TCP1.

There was another section in the summary text called "Fair Market Value of Assets" and it was said to offer a "clearer picture of a plan's funded status as of a given point in time." This was as of Dec 31, 2008 - $1.3 Billion in assets and $882 Million in liabilities. My calculation puts TCP1 at 147.91% of necessary funding or 47% overfunded.

Anonymous said...

WOW! things are going down hill fast! Now our pension? Can we trust NNSA on this one?

Anonymous said...

"Can we trust NNSA on this one? "

Oh, sure. They'll do the right thing. Haven't they always?

Anonymous said...

The latest Pension Letter is available to the public as a PDF right here: Click here or
http://www.lanl.gov/worklife/benefits/pdfs/funding_notice.pdf

At "fair market value," discussed in the body of the text but not the tables, the LANS TCP1 would appear to be slightly underfunded:

As of December 31, 2008, the fair market value of the Plan’s assets was $1,215,411,134. On this same date, the Plan’s liabilities were $1,243,212,531.

Anonymous said...

8:37 pm: "At "fair market value," discussed in the body of the text but not the tables, the LANS TCP1 would appear to be slightly underfunded"

As has been noted before, this situation will only get worse, regardless of what the market does. This is a "closed end" pension fund, which will have to fund a rapidly growing pool of retirees from a slowly growing fund. If employee contributions are required (almost a given), then a dwindling group of eligible employees will have to support that growing group of retirees. Not a pretty picture. I wouldn't want to be the last TCP1 LANS retiree looking at how much was available to support me in my retirement.

Anonymous said...

The phrase in that letter of "fair market value" had me perplexed. Is this really the same as the more clearly understood term of "mark to market" (i.e., the market price)?

Also, given that LANS is telling employees their pension is now over-funded at the 135% level (even after a market crash!!!), there's going to be hell to pay if they come back in the next year or two and suddenly tell these same employees that they'll be required to make salary contributions to the pension to cover for shortfalls. If LANS does this after publishing these pension figures, LANS will have lost any of the trust they have left with their employees.

Anonymous said...

The plan termination language and the info from the PBGC scare the living daylights out of me. Basically, the pension plan can be terminated at any time, and if the plan defaults, the PBGC benefits are a maximum of $4500/month. This is far-less than many (most?) LANL staff will receive on retirement. I can just see this coming in the next 5-10 years...

Anonymous said...

By contract, LANL is supposed to pay into the fund whenever UC does.

This one is not LANS fault.

Anonymous said...

Fair Market Value of Assets" Dec 31, 2008

LLNL TCP1 - $1.3 Billion in assets and $882 Million in liabilities. 47% overfunded.

LANL TCP1 - $1.215 Billion in assets and $1.243 Billion in liabilities. 2% underfunded.

Does anyone know why the big difference since the LLNS and LANS committees overseeing the two pensions are basically the same people?

Anonymous said...

5/14/09 6:42 AM

Here is my guess.

Some body is lying to somebody else?

Anonymous said...

Any underfunding of the our "pension" fund at this point in time could be extremely dangerous. The fund value does not reflect the value for the last 5 months, and we all know that those months are crutical to the overall actual value of the entire fund. We also know that up to now (May 09) the picture is not good. More importantly, the long term effects, which include a sluggish markert, a poor economy, poor job numbers, and funding decline at LANL, may excel the decline in value.

Anonymous said...

This is the first sign of some extremely bad news, (our declining pension fund) This will affect everyone at LANL within the near future. If you think that these numbers are bad, wait until LAN's combines the last quater of this year to the bottom line.
If anything happens to tip the economy further into the red, guess what?.....

Anonymous said...

"Does anyone know why the big difference since the LLNS and LANS committees overseeing the two pensions are basically the same people?" - 6:42 AM

The difference is easy explained by the fact that UC decided to be far more generous in letting go of UCRP funds for the NNSA lab that was in their own state of California.

Both LANS and NNSA should have protested loudly about this large disparity but did nothing about it.

Anonymous said...

"This is the first sign of some extremely bad news, (our declining pension fund)" - 9:00 AM

Can you not read, 9 AM? The TCP1 pension has been reported by LANS to be *over-funded*. Is that too hard for you to grasp?

Anonymous said...

I wouldn't want to be the last TCP1 LANS retiree looking at how much was available to support me in my retirement.

5/13/09 9:40 PM

We didn't have many choices. I guess I wouldn't want to a part of TCP2 either in view of near crash of the stock market. We got screwed either way. Both are TCP1 and TCP2 are substantially equivalent.

Anonymous said...

... This is a "closed end" pension fund, which will have to fund a rapidly growing pool of retirees from a slowly growing fund. If employee contributions are required (almost a given), then a dwindling group of eligible employees will have to support that growing group of retirees. ...

5/13/09 9:40 PM

A retirement fund is not like Social Security, with current contributors paying for people already retired. The current estimated "liabilities" are based on who is in the plan, when they will retire, and how much the plan will owe them. Assumptions are based on IRS rules. This is compared with current assets.

What was really annoying was the focus on the 1/1/08 status. As a couple posters have notice, the 12/31/08 status, at about 98% funded, was buried in the text. The letter presumably met IRS requirements. Why does the IRS give let a plan report a status about 16 months old?

Anonymous said...

5:44 pm: "Both are TCP1 and TCP2 are substantially equivalent."

Well not if you were eligible for UC retirement and chose to take TCP1. Bad, bad, choice.

Anonymous said...

"Well not if you were eligible for UC retirement and chose to take TCP1. Bad, bad, choice." - 8:08 PM

I suppose you consider yourself one of the brilliant ones who went with UCRP, 8:08 PM. Think again.

FYI, UCRP is reporting that it is considerably more underfunded than TCP1. Sounds to me like going with TCP1 was the wise choice. Yeah, LANS was a horrible idea but employees may come out better in the end by having switched over to TCP1 vs. UCRP. Life can turn out funny in that way.

It's also instructive to note that the CA state government is close to bankruptcy, so I doubt they'll be willing or able to help bailout the UC pension system with any future pension shortfalls.

As far as the TCP1 being a "closed" pension, the fact that people are still moaning about this point shows their financial stupidity. Even the last person in this pension should be OK. At worst, the money that have been allocated and saved over time for this last person could be used to purchase an annuity that will pay them their monthly pension benefit for the rest of their life. In most respects, the TCP1 pension is actually a more solid bet than Social Security, which is largely being run on a "pay-as-you-go" systems since Congress decided to raid the SS funds back in the 1980's and replace them with IOUs.

It should also be pointed out that the letter on TCP1 which was sent out had some limited information on asset allocation within TCP1. In general, it looks like the investments are very conservative with the majority of the holdings being high quality bonds (around 65%). Perhaps one reason the investments were so conservative is that most of the people who were close to retirement went with UCRP. This meant that TCP1 had time on their side and could begin the pension with more conservative investments (i.e., the rate of return and associated risk levels could be lower at startup). With stocks now at cheap prices, TCP1 might even be able to employ their cash to pick up some good bargains during the current market decline.

There are a lot of things to be upset and angry about after NNSA stuck LANL employees with a lousy for-profit LLC. Fortunately, the TCP1 pension is *not* one of them.

Anonymous said...

Social Security has turned into a Ponzi scheme that makes Bernard Madoff's look like amateur hour.

If you really want to be a world-class criminal, Government is the only way to go.

I remain comfortable with my decision to go with TCP-1.

Anonymous said...

8:13,

"Social Security has turned into a Ponzi scheme that makes Bernard Madoff's look like amateur hour."No argument here.

"I remain comfortable with my decision to go with TCP-1."Now you sound like a fool. Anybody comfortable investing in a retirement plan with such shaky fundamentals simply is not facing reality.

Anonymous said...

The LANL funds inside of UCRP were segregated into their own UCRP-LANL fund, as part of the agreement between UC and DOE. If I recall correctly, there was about $4.5B total, and about $3.1B was left in UCRP-LANL, to fund the retirees and the inactives (including those who went with TCP2). The remaining $1.4B or so was transferred to LANS to form TCP1.

The UCRP-LANL fund is managed for the sole benefit of the LANL former employees and is guaranteed by DOE to stay solvent. That was part of the deal for UC to release the remaining funds to LANS and not be stuck with a liability later.

Anonymous said...

To 10:26, hmmm, sounds like you are trying to persuade yourself that you made the intelligent choice withe TCP1. I'd like to hear from you in the next 5 years and see if you still think so.

Anonymous said...

It's beganning to sound to me like some of the "real-smart" folkes do not quite understand the difference between TCP1 and TCP2, and with that lack of understanding will come consequences, "you will reap what you sow".

Anonymous said...

"To 10:26, hmmm, sounds like you are trying to persuade yourself that you made the intelligent choice withe TCP1. I'd like to hear from you in the next 5 years and see if you still think so." (8:55 AM)

By almost every measure imaginable, TCP1 was the wisest choice for LANL employees. There were a few employees near age 60 with around 30 years of service credit who obviously benefited by going UCRP since they were given the golden opportunity to "double dip" (i.e., receive a nice pension while still being allowed to work for the same company). The age credit growth of UCRP also stops at age 60, so these people had additional reasons to stick with UCRP. However, there aren't that many people at LANL who are in this special category.

The trustees of the TCP1 pension have obviously done an excellent job mitigating risk in this historic market crash. Most corporate pension (inc. Sandia's) are suffering significant losses. Not so at LANL.

For once, the whiners should take the time to look at the data. Not everything at LANL is gloom and doom. And 5 years from today, TCP1 will likely still be in good shape, regardless of the bad things that some of the whiners may be wishing to see.

Is it really so hard for some of you people to practice a little gratitude from time to time? Try it. It's good for the soul.

Anonymous said...

It is interesting to note the high density of financial geniuses concentrated in podunk Los Alamos,compared to The Street.

Anonymous said...

"It is interesting to note the high density of financial geniuses concentrated in podunk Los Alamos,compared to The Street.

5/15/09 8:33 PM"

It is not so interesting to note the high density of crap from idiots like you on blogs.

Anonymous said...

Show some gratitude you soul-less whiner (said while double-dipping on a UC pension and LANS salary paid for at taxpayer expense). Say, Mike A., can I have a new executive title for my loyalty to the Bechtel clan?

Anonymous said...

10:26. I have had similar thoughts. CA is in a deep hole and even safety in numbers ain't gonna help UCRP. I also noticed the large amount of bonds the fund held. That's where I have been since Dec 07. Nice little 4% return. I also remember in 06 someone thoughtfully posted a large question mark on what would happen to UCRP if the state goes down the tubes- or something to that affect....the poster then mentioned TCP1 may then not be all that bad.

One last thought- just think- if contributions to TCP 1 started I would hazard a guess that it could cause of flurry of retirement activity....

Anonymous said...

LANS and LLNS have to pay back to UC 75 million a year for the next 5 years because UC transfered to much money to these companies. this is the dirty little secret LLNS and LANS has not told TCP1 people.

UPTE local 11 LLNL Skill Crafts

Anonymous said...

"t is not so interesting to note the high density of crap from idiots like you on blogs.

5/15/09 9:46 PM"

Screw you jerk remember Bill Gates never went to any school. I would listen to him before the best and vightest.

Anonymous said...

"LANS and LLNS have to pay back to UC 75 million a year for the next 5 years because UC transfered (sp) to much money to these companies." - 6:27 PM

I've never heard about this TCP1 debt to UCRP. Could this be something specific to LLNL since they got a much large amount of cash at the start? Do you have some specifics to back up this claim? I would think that this would have to be subtracted out of any credit figures in the TCP1 letter which was recently sent out to employees. Pension reporting laws would require it.

Greg Close said...

Just a quick note to those who have misunderstood the content, purpose and reason behind the recent pension funding letter.

Purpose: the law. Pesky thing. The new notice is required as a replacement for the old Summary Annual Report that everyone complained about.

Purpose: to report on the plan's funding status etc. The "out of date" info is not some lie perpetrated by LANS - it's the required reporting period under the law. We didn't pick the timeframe - the feds did.

Content: the notice does not pretend to report the current value of the plan, and it does not attempt to brain wash you into pretending that the market is not shaky. The content, again, is only the result of the federal requirements.

As some posters have mentioned, although the market has produced some horrifying losses to pension and 401(k) plans across the country, TCP 1 actually held up well under the circumstances.

I believe copies of the funding notice are still on-line on the LANL Benefits page somewhere. Call or email LANL benefits if you need help finding it, we'll be happy to get you a copy.

Greg

Anonymous said...

"Screw you jerk remember Bill Gates never went to any school. I would listen to him before the best and vightest.

5/16/09 7:55 PM"

Gates went to a school named Harvard.

Anonymous said...

Two points that may have been forgotten.

1. PBGC has probably 100,000,000 pensions to support and no source of income except voluntary taxes on current workers.

2. An LLC can go out of business at any time. Legally, its owners do not assume the pension or other liabilities of the now defunct LLC. So contractor mistakes on running pension funds cannot be recovered.

Anonymous said...

This is really easy..DOE

Pay my benefits first. That's what you said you'd do. So do it.

You got 15 years of free ride,not into a pension plan because UC managed funds so well...so pay up.

It not there would be Hell to pay....

Anonymous said...

"Does anyone know why the big difference since the LLNS and LANS committees overseeing the two pensions are basically the same people?..."

LANS got the best Bechtel people....LLNS got the 2nd team.

Anonymous said...

"...If you really want to be a world-class criminal, government service is the only way to go..."

Best thing I've read on the blog since Brooks was fired.

Anonymous said...

So lets slow down and examine the pertinent facts.

Both TCP-1 issued letters to beneficiaries recently based on the funding situation on December 31,2008. In it, they described in adequate detail both the ERISA required basis for estimating the present value future liabilities and future assets. They also provided some useful information on the portfolio on that date.

Using the facts therein ( and ignoring the possibility that the ERISA method is in error) it is possible to do a reasonable estimate of where the fund stands today.

For this purpose consider only the largest investment pools, Stocks and Bonds.

Using estimated values for this illustration (the reader can do the actual calculation after Googling the relevant info)

For stocks, the SP500 is down about 10-15% from 12/31/08.

For bonds, I am not sure. I think that the conservative long-term bonds are also down 10-15%. ( I vaguely remember that LLNL does not have bonds in the portfolio, I think they have preferred stock, but this acts like bonds over the long term, unless it is convertible)

For illustration purposes, using a 60% stock, 40% bond portfolio, and having stock index now valued at 90% of the 12/31/08 values, and the bond index valued at 95% of an bond index on that date. A good guess of the value today is

Vp (portfolio today) = Vp (12/31/08) * [ 60% Vs(stocks, today) + 40% Vb(bonds, today)] or

[ .6*.95.4*.95)= 92%

So the fund value is down 8%.

You decide how to use the info.

Anonymous said...

An old discussion and review of the calculations and conditions of the UCRP-DOE-LANS pension transfers can be found in LANL-the-corporate-story blog:
Good news for UC Retirees (click here) or http://lanl-the-corporate-story.blogspot.com/2007/03/good-news-for-change-for-uc-retirees-at.html

Fact sheets of the transfer:
Transfer fact sheet or
http://atyourservice.ucop.edu/news/retirement/lanl_asset_transfer_factsheet.pdf

Memo and Attachments:
March 2007 Regent Meeting or
http://www.universityofcalifornia.edu/regents/regmeet/mar07/c11.pdf
Attachment 1 or
http://www.universityofcalifornia.edu/regents/regmeet/mar07/c11attach1.pdf
Attachment 2 or
http://www.universityofcalifornia.edu/regents/regmeet/mar07/c11attach2.pdf

John said...

5/15/09 8:27 AM wrote:

"The UCRP-LANL fund is managed for the sole benefit of the LANL former employees and is guaranteed by DOE to stay solvent."

Hopefully I am wrong, and please correct me if so, but my recollection is that DOE agreed to keep the UCRP-LANL fund at no less that 100% of its actuarial liability, but for only 7 years. That would be until around 2013.

After that, all bets are off. The fund is on its own unless DOE in its largesse (hah, hah), or some other munificent entity, decides to assist with any deficit.

Anonymous said...

For those at LLNL and LANL who are retirees and inactives (such as those who went with TCP2), here's their financial summaries as of the end of UC fiscal year on June 30, 2008 (from Actuary's Report (click here) or http://www.universityofcalifornia.edu/regents/regmeet/nov08/f10.pdf.

UCRP Lawrence Livermore National Laboratory (LLNL) Retained Segment Valuation Results
• The June 30, 2008 LLNL segment market value of assets was $3.31 billion and the segment actuarial value of assets was $3.32 billion.
• The July 1, 2008 segment actuarial accrued liability was $3.67 billion.
• The July 1, 2008 segment actuarial valuation report reflects the transfer of assets and liabilities associated with UCRP benefits accrued by LLNL employees who elected to participate in the LLNS Plan effective October 1, 2007. Only LLNL retired, disabled or inactive members and their beneficiaries remain in the LLNL segment.
• In addition to retaining assets to cover 100 percent of the liabilities of the LLNL segment,
UCRP retained an additional Contribution Reserve Amount (CRA) of $140 million to offset future funding obligations for the LLNL segment. After application of the CRA, there is no contribution for this segment for the 2008-2009 plan year.

UCRP Los Alamos National Laboratory (LANL) Retained Segment Valuation Results
• The June 30, 2008 LANL segment market value of assets was $3.04 billion and the segment actuarial value of assets was $3.17 billion.
• The July 1, 2008 segment actuarial accrued liability was $3.10 billion.
• Only LANL retired, disabled or inactive members and their beneficiaries remain in the LANL segment.
• Because segment actuarial assets exceed segment actuarial liabilities, there is no required contribution for this segment for the 2008-2009 plan year.
Note that "required contribution" refers to requiring DOE (not UC nor the retirees/inactives) to contribute more money to keep these plans 100% funded. From the "Transfer Fact" PDF linked above,

The DOE/NNSA has agreed to a target funded ratio of 100% for the Retained LANL Segment. To the extent that the funding of the Retained LANL Segments falls below 100%, DOE/NNSA will begin seven years of level payments in an amount projected to restore full funding by the end of the seven-year term. This seven-year payment approach, which is based on the new federal funding rules that will generally apply at other DOE sites that offer corporate pension plans, clarifies DOE/NNSA’s obligations and provides a high degree of protection for UCRP. (note that it's a seven year payment plan, not a seven year limit)

John said...

5/17/09 9:02 PM,

Thank you for your closing parenthetical statement:

"(note that it's a seven year payment plan, not a seven year limit)"

I am assuming of course that this was directed at my hopefully, and now seemingly, incorrect interpretation of the meaning of the seven year period.

If so, how are these "agreements" enforced? Do they carry the weight of law, or are they only as good as the will of the people and institutions (DOE, UC, LANL) who wrote them?

For example, could a future administration simply ignore them at will and with no consequence?

I pose these questions rhetorically, but, if you are able and willing to answer them, I (and presumably others) having a, let us say, vested interest in them would very much appreciate being enlightened.

Thanks again.

Anonymous said...

"For bonds, I am not sure. I think that the conservative long-term bonds are also down 10-15%." - 1:41 pm

Actually, if you held ultra safe US Treasuries (which TCP1 did), this last year was one of those very rare times when you made a killing in government bonds as inflation disappeared and the US went into deflation (PPI down about 3 percent over the last year, first time since 1954!). The market value of US 30 year bonds went up by about 20% in 12 months as the government's 30 year bond saw yields decrease to 60 year lows.

A to BBB rated corporate bonds went down in value since the yields had to be raised due to business uncertainty after the market crash. And, of course, anyone holding bonds in many of the banks or the auto companies would be looking at very large bond losses. Lehman bonds, for example, are almost worthless.

The value of any bonds that you hold are inverted as to rising yield. If you hold a 10 year bond paying 5% and inflation later forces these same bonds to be issued with yields of 10% then you can lose some serious money. If inflation ramps up after the recovery begins, many pension that are now holding "safe" bonds will suffer serious damage, much as they did during the late 1970's.

Anonymous said...

5/17/09 1:10 PM Since LLNS has apparently done a better job managing the LLNL TCP1 account it seems the "2nd team" turns out to be the "A" team. I am sure that fact will become clear once you start contributing to your TCP1 retirement plan.

LLNL-1 LANL-0

Anonymous said...

To 11:10,

Do these agreements have the force of law?

Yes and no. They seem to be either contracts or unenforceable 'goals.' Contracts have escape clauses.

Can an administration ignore them?

Sure. They have already given most of the liability to a non government entity. So, the agreements are not really with the government. Can the government change a written agreement with the government? Of course. The only real thing holding them to their agreement is a worry that they would be sued or that there was a large political cost to unilaterally changing the agreement. I do see any group of people who would sue the government over these agreements. Politically, if done carefully, voiding these agreements appears to be a plus for the government not a minus. They would save money that could then go to more worthy causes. 'LANL folk are rich anyway and do not need this money.' would be the feeling.

John said...

To 5/18/09 4:27 PM

Thank you for addressing my questions/concerns. Your response resonates with my distrust of the way the transition from UCRS to UCRP-LANL was handled. I always viewed it as a "good 'ol boy" handshake with a wink and a nod.

My admittedly cynical expectation is that Congress/DOE will simply renege if any substantial amount of money is required to shore up the retirement fund.

Incidentally, you wrote "do" and I assumed you meant "don't". I just hate it when I don't that. :-)

I appreciate the dialogue.

Anonymous said...

"If so, how are these "agreements" enforced? Do they carry the weight of law, or are they only as good as the will of the people and institutions (DOE, UC, LANL) who wrote them?"

This is part of the Pension Protection Act of 2006 - Public Law 109-280 - Aug. 17, 2006 (120 STAT. 829), which, among other provisions, modifies 26 USC 430 (IRS Code) - "Minimum Funding Standards for Single-Employer Defined Benefit Pension Plans". So the agreements DO carry the weight of law.

Anonymous said...

Thanks for the comment on rule of law.

On the other hand,

a. Minimum funding standards can always be changed and would be if no contractors were willing to manage the Lab without the change. U.S. laws are changed or ignored constantly. They are not like F=mA or the speed of light.

b.Once LANS, LLC stops managing LANL (for whatever reason), LANS, LLC will cease to exist. It will no longer be an employer, it will no longer be a company, and so 26 USC 430 will not apply. There will no longer be any force of law on defined benefit pensions because the company that would be forced by this law no longer exists and its previous owners will not be liable for the non existent company's debts. A point of the transfer to LANS was to move pension benefits out of UC and the government so that neither would be legally liable in the future.

c. Thanks for the comment on 'do.'

John said...

5/18/09 11:32 PM and 5/19/09 6:26 AM:

Thanks for your replies.

While I do not doubt that the transition agreements are subject to the Minimum Funding Standards ... of the PPA, I am more persuaded by paragraph b. of 6:26 AM's comments, particularly the last sentence.

Such persuasion is more a reflection of my cynicism in this matter than any thoughts based on knowledge or experience.

Thus, is it possible that the provisions of the PPA *require* companies bidding for any future LANL management contract to meet the obligations of the existing defined benefit pension plan(s)?

In short is their any guarantee that a future manager cannot wiggle off the retiree-obligation hook?

Anonymous said...

John,

A future manager will not wiggle off the hook. They will never get on it. They will just not bid on the Lab's M&O contract to begin with unless there are strong concessions from the government. We came very close to having no bidders this time around.

Remember that Northrup Grumman's market capitalization increased by more than the value of the LANL contract an hour after they dropped out of the bidding and that a Lockheed Martin senior VP was quoted in the news as saying,'We will never bid on a government contract like this one again until Hell freezes over, the Devil fields a hockey team, and they win the NHL.' Also remember that Lockheed Martin's bidding documents all burned up in an unprecedented fire at a warehouse in Albuquerque.

My current front runner for the next M&O contractor for LANL?

Sandia Casino.

I can't see major players, including Bechtel et al. bidding on the contract. Bechtel, worldwide, brings in $25,000,000,000 a year and does not bid on contracts for less than $1,000,000,000 with 20% profit margin. Why bid on LANL?

Anonymous said...

Why bid on LANL?

5/19/09 11:53 AM


Because...

(a) It's easy money with little downside risk for the LLC partners.

(b) It allows a big construction company like Bechtel a place to park their key employees during down periods between projects within the mother company.

(c) It allows big construction companies like Bechtel an inside track on expensive construction projects within the NNSA complex.

I could go on, but that is enough for now. The NNSA LLCs are a perfect profit vehicle for sleazy companies like Bechtel. These same NNSA LLC setups are a much less effective profit vehicle for solid defense contractors like Lockheed.

John said...

5/19/09 11:53 AM and 5/19/09 12:33 PM:

In light of your latest comments allow me to re-pose my assumptions and question.

LANL may continue to atrophy, but is not going away any time soon. Some organization will have to manage it.

It seems reasonable that any manager will be required to assume responsibility for all of LANL's assets and liabilities, excluding perhaps those for which a specific waiver is granted.

Barring explicit exclusion, won't then the care and feeding of a prehistoric, defined-benefit pension plan (eg LANL-UCRP) be viewed like any other liability (eg cleaning up a contaminated site or razing a decrepit building) for which the manager will be responsible?

What am I missing? I recognize the hazardous improbability wherein the manager declares bankruptcy and all is thrown on the mercy of the court.

By the way, in case it isn't obvious I am searching for a way to remain optimistic about the future of the LANS retirement plans.

Anonymous said...

You got the right reasons. An inside track on construction bids is the big one.

Congratulations!

Not reasons helpful to LANL staff but good reasons for a construction company.

Interestingly, the construction company is solidly Republican and has been for decades.

Anonymous said...

John,

There are ways to make your own benefit plan work out for you. Discussions of those ways are individualized and beyond the scope of blog comments.

What you are missing, at least to me, is that no company will bid on an M&O contract for the Lab unless it is in the company's best interest to do so.

A partially funded multibillion dollar pension liability (with lawsuits on top) for managing LANL would have to be balanced by very secure multibillion dollar benefits to the M & O company. One possibility for such benefits might be lots of construction contracts. Another possibility would be increased sales of fighter planes and advanced electronics. A third possibility would be that the new M&O contractor had no liability for pension shortfalls. Without some surety against bottomless liability, no board of directors would allow their company to bid on being an M&O contractor here. The question is not about cash flow to LANL but about risk and liability.

As a personal level example, would you buy a gas station with a good cash flow that you got for $10,000 below market price if it was above a toxic waste dump for which you were now liable?

Does this make things any clearer?

Anonymous said...

John and others,
I am willing to expand my side of this discussion off line.

I will not expand it much here because:

1. The real discussion is long.
2. I am sick to death of the whining anonymice.

Greg Close said...

It's my understanding that there is a "successor contractor clause" in the contract that would ostensibly require any successor contractor to assume the continuing liability of the pension plan. Any future transition from LANS to WalLab or McLab would still require DOE/NNSA review and approval, so likely there would be a similar analysis, recommendation, selection and implementation process, like we saw the last time (i.e. "substantial equivalence in the aggregate").

Anonymous said...

"It seems reasonable that any manager will be required to assume responsibility for all of LANL's assets and liabilities, excluding perhaps those for which a specific waiver is granted." - 3:14 PM

It's an LLC. The whole idea of a Limited Liability Corporation is to PROTECT the mother companies from most legal problems. Besides that, LANL is a GOCO (Government Owned Contractor Operated) lab. The lab's assets are owned by the US government, not Bechtel or LANS. Likewise, most of the liabilities are also owned by the government. The LLC can be fined, but I would imagine that if a fine ever wiped out the for-profit fees, the LLC management companies might decide to simply walk away from the contract. Regardless, it would be very unlikely that the fines could ever be collected from any of the mother companies that make up the LLC.

Bottom line: For the LLC, there is little risk in managing LANL and much potential for profit. The worst that could probably happen would be a batch of bad PR for the LLC mother companies.

Eric said...

Current status of Pension Benefit Guaranty Corporation

Warning: adult content.

http://www.nytimes.com/2009/05/21/business/economy/21pension.html?_r=1&hp

John said...

Thanks to all who replied. To ...

5/19/09 8:28 PM:

Your comments have been most helpful and have cleared up a number of things. Thank you.

I am not interested in making my own benefit plan "work out". Instead, I want to get a handle on how well protected (or not) the LANS DB pension plans (TCP1 and UCRP-LANL) are going forward.

Your reply made your opinion clear that no fiscally prudent company would bid on a LANL M&O contract unless it is in their interest, eg there are good possibilities of tangential contracts and/or limits on liability.

I can't argue with that, but again, some organization will manage LANL under some predefined, mutually-agreed constraints. The bottom-line is what happens to the pension plans.


5/19/09 11:08 PM:

You make good points about the likely LLC nature of any future private manager. It was my fault in the two paragraphs on the subject of assets/liabilities for being ambiguous about the manager having no equity interest in the lab. I understand that the manager assumes responsibility for M&O only. I tried to imply that in my examples, but clearly was unsuccessful. Thanks for clarifying that for me and other readers.


5/19/09 8:32 PM:

I don't blame you. I empathize.


Finally, Greg:

The "successor contractor clause" (SCC) is one thing I have been flailing around and fishing for in my comments, ie some "guarantee" that our pensions have a chance at continuity across managers. The key word seems to be "ostensibly", begging the original question, "How enforceable is the SCC and through what mechanisms (eg complicated, drawn out, expensive law suits)"? Any words of wisdom on that question?


As for Eric's comment, which may well have been made independently of all of ours, I don't think the PBGC comes into play unless the contractor declares bankruptcy and the government refuses to honor their pension obligation. Correct me, if I am wrong.

Eric said...

John,

You may not be wrong, but during and after the transition to LANS, I tried hard to find out who had the actual money to cover TCP1 (defined benefits) and TCP2 (401K).

As far as I could tell then, Vanguard had the money for TCP2 and held it in trust for LANL individuals. Each person owned a 401K whose money was at Vanguard. Independent of the future of LANS or other future M&O contractors, a person's money was with Vanguard, not the government, not UC, not an M&O contractor.

Some pension money, for people who chose this, remained with UC.

The rest, the bulk of the actual TCP1 money, the bulk of the pension money, was given to LANS in a deal between NNSA and UC so that UC could not be held liable for increased pension expenses. As far as I know, LANS, LLC has legal title to TCP1 pension funds and may have given the actual money to some other corporation to manage.

Does this help?

Someone please correct the above if it is no longer true.

Eric said...

This is a stub to make sure that follow up comments come to me. Sorry for not being smarter the first time.

Anonymous said...

Eric,

Your comment about 401(k) funds is correct, except that at the time of transition it was Fidelity, not Vanguard. But yes, the funds belong to the individual regardless of future M&O contract status at LANL. The only circumstance I am aware of that would result in contributions being pulled out of the 401(k) is if an individual overcontributed in a specific year. Vesting is immediate.

Quite frankly, I view this as a major plus for TCP2 over TCP1.

Anonymous said...

A slight refinement on the comment I just left:

Vanguard is the default holder of the 401(k) funds. Employees can also open a "brokerage window" and use Fidelity.

Eric said...

Another article on pensions.
This one on pensions and federal policies in other areas.

http://online.wsj.com/article/SB124286497706641485.html

SVDecomposer said...

In my posting above, (click here), the links to UC documents discuss that the original defined benefit funds (pre LANS and LLNS) are now in their own sub-funds or "segments" within the UCRP, designated as UCRP-LANL and UCRP-LLNL. My other posting, (click here) reports that these segments remain adequately funded.

DOE has contractually agreed to keep these segments fully funded. That was the only way UCRP would release the remaining funds that kick-started the defined benefit plan TCP1s at LANS and LLNS. Given the trouble the rest of UCRP is in, I trust that UC will stay fully on top of DOE to ensure that these old LANL and LLNL segments in their portfolio are the least of their pension worries.

As to the safety of TCP1 at LANS and LLNS, they are ultimately guaranteed by PBGC, but I seriously doubt it would ever come to that. I think you have to get a judge to sign off that your company is broke before it gets assigned, and it would seem that a judge would simply order DOE to pony up, rather than stick PBGC with yet another failure.

The bigger risks for TCP1s will be the reductions in benefits and/or high payroll deductions to the active participants in the near future. Too many other "peer" private companies have already altered or frozen their defined benefit plans.

UC states it needs about 16% of payroll annually to keep the pension adequately funded. In the past two decades this money came from profits made on the surplus funds, and hence neither employer or employee contributed anything. The future plan is to ask CA to pay 11% and the employee 5%, but CA is broke and can't afford this now. Thus the funds are projected to continue to decline until contributions are resumed and/or their return on investments dramatically improve.

The TCP1s pledged (but I don't think it was guaranteed) to mimic whatever payroll contributions UC instituted. At some point, however, since the TCP1s at LANS and LLNS are now private and ERISA obligated, they will have to make whatever payroll adjustments are necessary to remain legally funded. Since the TCP1s were setup "substantially equivalent" to UC in their defined benefits, I would guess that they too need 16% of payroll to stay sustained, at some proportion of employer/employee split.

UCRP has been trying to ease into these new contribution levels over several years, to allow both employer and employee budgets to adjust. It would be nice to see LANS and LLNS propose the same things for the future of TCP1.

Eric said...

Nice and detailed comment. Thanks.

What happens if LANS, LLC loses the contract or walks away from it out of aggravation and goes out of business? That scenario seems to be the big elephant in the room about which no one talks.

John said...

Eric,

Yes, your comments did help. Thank you.

As for TCP2, I can't add much beyond what 5/20/09 7:02 PM wrote, except perhaps to point out that one advantage of "immediate vesting" is that if one leaves LANL under TCP2, their 401k goes with them.

I'm pretty sure that what you wrote about TCP1 also applies to the UCRP-LANL fund, except that those funds remain with UCRS and, while actuarially separate from the main UCRS fund, are managed identically.

Again, my bottom-line concern is if either TCP1 or UCRP-LANL under perform to the extent they can no longer meet their actuarial obligations, what happens?

1. Will we all get "Dear Annuitant" letters, and a reduced pension?

2. Will the "gumment" (ie Congress/DOE/NNSA make up the difference, via "seven years of level payments" as referenced by 5/17/09 9:02 PM?

3. Will we have to sue somebody or some institution?

Anonymous said...

Some straight talk about the pension situation.

The LANS TCP1 pension fund belongs to the participants in the plan. The LANS(/LLNS) BIC committee manages the funds through a series of fund managers for the different types of investments with a 60%/40% mix of stocks to long term bonds, which is typical of pension investment philosophy. As stated in the recently distributed Funding Status Letter, the LANS TCP1 was 134% funded as of the end of 2007. The market values of LANS pension funds way a slight fraction below 100% of the fund liablity as of the end of 2008. With the increase in the market through the first half of 2009, the fund is likely still very well funded.

If the contract were at some point awarded to a new M&O contractor, the pension liability and the trust fund would transfer to the new contractor.

All things considered, TCP1 is in solid shape right now, but it is likely that contributions, including some level of employee contributions, will be necessary in the next year or two absent a strong continuing market recovery.

The LLNS plan got a better funding deal up front and additional funding may not be necessary for some time, if ever, unless the market situation deteriorates again.

Anonymous said...

5/21/09 10:06 AM

You miss one important point in your assessment of TCP1. It is a closed plan while UCRP is open and adding new members. UCRP membership continues to grow while TCP1 continues to get smaller (members die off).

Greg Close said...

Hi Eric - ERISA was put into law specifically to help address that very question, because Studebaker went belly up in the late sixties/early seventies and defaulted on it's obligation to retirees. The money for TCP1 is not "LANS Money" - it's money held in trust for it's retirees. If LANS closes up shop they can't just take the money with them. Although I can't and won't make any guarantees about the future, the pension trust and ERISA regs are there to help protect our retirees from any repeat of the Studebaker fiasco.

John said...

SVDecomposer,

Good, content-rich posting. Lots to think about. Thanks.

I don't doubt that UC "will stay fully on top" of what DOE is doing, but does UC really have any leverage?

Furthermore, do they really care? LANL and LLNL are no longer under their purview and as you later indicate, they have serious problems of their own.

Not knowing the law I am way out in left field here, but assuming some malfeasance on DOE's part with respect to adequately funding TCP1 or UCRP-LANL, it seems to me that some sort of breach-of-contract suit would have to be filed.

Adding extrapolation to ignorance, doesn't damage have to be done to the plaintiff before a suit can be filed? If so, then in theory UC could continue to write full retirement checks until the money is exhausted and "damage is done" before any action (other than whining, complaining, and stamping of feet) could be taken.

Somebody, tell me I'm wrong! And why.

Eric said...

John,

I am not a lawyer either but have talked to a number of lawyers and other folk on the issue of Lab pensions.

Here are a few tentative conclusions.

UCRP-LANL is owned by UC and covered by agreements between UC and NNSA and by separate agreements between UCRP and the beneficiaries. There are subsidiary agreements between UCRP and UC and other agreements between UC and the state of California. UCRP does not involve LANS or current LANS pension plans.

TCP-1 is owned by LANS, LLC and may or may not be covered by agreements between LANS, LLC and NNSA. These agreements are not binding on any of the owners of LANS, LLC (UC, Bechtel, et al.). None of the owners of LANS,LLC are legally owners of TCP-1.

If, for any reason, LANS,LLC ceases existence, agreements between LANS, LLC and NNSA become void (this is standard contract language) and the funds under TCP-1 are owned by whomever LANS,LLC sold them to at whatever price they could get.

Disclaimer - I am not a lawyer. None of the above is legal advice. It is just the conclusions that I arrived at in trying to understand the situation in support of some friends and colleagues and in talking to a lot of people who are smarter and more experienced than I am.

Hope this is useful to you.

Eric said...

Hi Greg,

Thanks for the clarification.

Where is the TCP-1 money, physically, now? Who holds the trust?

Where, under ERISA, does it go if LANS closes up?

Are there recent examples of how ERISA works when a company goes out of business?

More recent than Studebaker? ;-)

Anonymous said...

Eric is wrong about who owns the LANS/LLNS pension trusts. Again, they are owned by the participants. The LANS/LLNS BIC committees, per their contracts with NNSA, manage the funds through a series of investment managers in the interest of the participants. The only monies that can be removed from the funds are fund management costs, and benefit payments. The idea that LANS or LLNS can sell the trust to someone is just not substantiated anywhere. If LANS/LLNS lose or give up the M&O contracts. the trust will go under the management of NNSA or the subsequent contractor.

Eric said...

Anonymous,
Interesting response.

Please show me the contract between LANS/LLNS BIC and NNSA including the part where NNSA gets the funds back.

Also, are the people in LANS/LLNS BIC employees of LANS or LLNS? If so, and LANS goes out of business, who is there to give the funds back?

A non-anonymous answer would be appreciated by readers.

I am not trying to make trouble. I am just trying to get some substantiation on facts that are hard to come by.

Thanks for starting to fill in details.

Eric said...

http://www.universityofcalifornia.edu/regents/regmeet/nov08/a8attach.pdf

If you are a glutton for punishment, here is a recent presentation on the UC audit. Somewhere in here, I don't know where, it apparently says that LANS/LLNS BIC charges where acceptable.

A note from the LLNL blog in 2007 says that all members of LLNS BIC are LLNS employees.

Clarification would be appreciated. Thousands of people's pension seem to depend on clarity.

Thanks.

Anonymous said...

Eric,

The below is from Section H-36(e)(10)(f) of the LANS Prime Contract with NNSA.

"Contract Expiration or Termination With a Follow-on Management and Operating Contract

If the Contract expires, or is terminated and an award is made to a follow-on management and operating contractor, as a part of the transition to another entity and in accordance with Contracting Officer direction and applicable law the Contractor shall transfer sponsorship of site-specific pension and other benefit plans covering employees at the Laboratory to the follow-on management and operating contractor".

Seems pretty clear to me.

Eric said...

The below is from Section H-36(e)(10)(f) of the LANS Prime Contract with NNSA.

"Contract Expiration or Termination With a Follow-on Management and Operating Contract

If the Contract expires, or is terminated and an award is made to a follow-on management and operating contractor, as a part of the transition to another entity and in accordance with Contracting Officer direction and applicable law the Contractor shall transfer sponsorship of site-specific pension and other benefit plans covering employees at the Laboratory to the follow-on management and operating contractor".

Thanks a lot.

It seems less clear to me. But then maybe I have read too many of these contracts.

"is terminated and an award is made"

What if LANS quits and no award is made for a substantial amount of time, for instance because a potential new M&O contractor is unwilling to assume the liability?

"the Contractor shall transfer sponsorship of site-specific pension and other benefit plans covering employees at the Laboratory to the follow-on management and operating contractor"

In this section, under my assumption, the Contractor (a former LLC) no longer exists and so cannot transfer anything. The owners of the LLC are not bound by a terminated contract to a now non-existent entity.

'site-specific pension and other benefit plans covering employees at the Laboratory'

This piece strikes me as amusingly vague. Are former employees covered? What about part time employees? What about post docs? Employees of whom? In my example there is no longer any whom. What about employees who are on change of station and not currently 'at the lab'?

There appears to be a large amount of room for negotiation under these words.

Someone else please jump in. I am only commenting because I have spent a lot of time, a couple of years ago, trying to understand the implications of the M&O transition.

Cheers.

To 'anonymous'
I wish you weren't anonymous, but I really appreciate the useful information.

Anonymous said...

A good review of UC's view of TCP1 can be found at

http://www.universityofcalifornia.edu/regents/regmeet/mar08/f13attach.pdf

Anonymous said...

The key clause in TCP1 is that the plan may be changed by LANS at any time. A new contractor can come in with a new plan and get rid of the defined benefit plan altogether. Of course the new plan would be 'substantially equivalent' e.g. Bechtel stock or whatever DOE wants.
TCP1 participants could sue claiming LANS breached their responsibility to the participants but that would be a tough case to win since the TCP1 folks agreed to the clause when they signed up.

Anonymous said...

Pardon me, but isn't it a bit late for all this agonizing over TCP-1 versus TCP-2? Unless I'm missing something obvious here, the deadline for doing your risk analysis on which retirement plan to select at LANS was July 1, 2005.

Are you guys at LANL really all that slow on the uptake?

Eric said...

A possible reason for agonizing now is to try to find escape hatches from not agonizing earlier.

Your results may differ.

SVDecomposer said...

Snide comments aside, yes, the time for risk analysis for Los Alamos was in the spring of 2006, before the contract change-over on June 1, 2006. Unlike Livermore, who changed over Oct 1, 2007, Los Alamos employees had much less to go on at that time. None of the details were worked out, including even IRS formal permission to allow UCRP to disgorge a chunk from a public state pension plan to a private for-profit company.

The Livermore agreement was a copy of the Los Alamos agreement. As the "f13attachment" above for Livermore details, the final calculations were to ensure that UCRP-LLNL (as was UCRP-LANL) was 100% funded, forever. Whatever funds were left over (the formula was called "A minus B") were sent to the new LLCs to kick-start their TCP1 plans. For whatever reason, UCRP-LLNL had more money in "A" and/or needed less money in "B" than UCRP-LANL, and thus the TCP1 at LLNS received more. Indeed, the doc shows that an additional $75M be withheld at UCPR-LLNL (and it was later amended to be $140M) as the "CRA".

UCRP-LANL/LLNL are "wasting trusts" (a loose term) in that everyone inside of them are either retirees already drawing income or inactives waiting to start withdrawals. There are no active employees, and no contributions being made. No one's salary and years of service is increasing and therefore increasing their benefits. They are therefore the easiest to predict. DOE is contractually obligated to keep both of these segments 100% funded until the last member of each segment has died.

The TCP1s at LLNS and LANS are "closed" plans. They are not "frozen" (equivalent to "wasting"), in that membership in them is closed, but the members are still "active". (All new-hires are sent to TCP2-a 401(k) defined contribution plan). However, the employees in the TCP1s continue to get raises and add years of service to their benefits. They are therefore more difficult to predict, and generally require an infusion of cash each year to keep them viable.

The original posting for this thread was about how would NNSA meet ongoing defined benefit pension obligations in TCP1s. DOE clearly spelled out its pension obligations to the old UC contracts by guaranteeing UCRP-LANL and UCRP-LLNL. It's never been spelled out what DOE's obligations are to the pensions in these new private LLCs that were formed to run their labs.

The article that started this thread discusses that NNSA has set aside some money, but that Sandia is currently paying for its plan out of current budgets. Hence there is still a lot of concern over the future safety and security of the TCP1 defined benefit plans, and who will pay in the future.

Anonymous said...

Unless Congress changes the law and DOE changes the LANS contract the DOE responsibility towards TCP1 is clear. DOE has no liability, obligations, or authority over the private company pension. If TCP1 goes bust its taken over by the PBGC which has its own formula as to how much pension will be paid to TCP1 retirees. The TCP1-LANS plan is then null and void.
Welcome to corporate America!

Anonymous said...

4:06 pm: "If TCP1 goes bust its taken over by the PBGC which has its own formula as to how much pension will be paid to TCP1 retirees."

The real question which has not been answered, at least here, is what happens to TCP1 in the interim if LANS walks away and therefore ceases to exist, and before DOE/NNSA chooses a new contractor? Who owns the TCP1 funds and who ensures that former LANS employees at LANL get protected? The contract seems to cover transfer to a new M&O contractor, but what happens if there isn't one (at least for a while)? Presumably NNSA takes over day-to-day running of the Lab, which they own, but who gets the pension money?

Anonymous said...

"If TCP1 goes bust its taken over by the PBGC which has its own formula as to how much pension will be paid to TCP1 retirees."

That was my understanding at the time I had to decide TCP-1 vs. TCP-2. TCP-2 was a no-brainer.

Anonymous said...

8:39 pm: ""If TCP1 goes bust its taken over by the PBGC which has its own formula as to how much pension will be paid to TCP1 retirees."

That was my understanding at the time I had to decide TCP-1 vs. TCP-2. TCP-2 was a no-brainer."

That was my decision also. Back then, as I asked friends and colleagues about their TCP1 choice, the consistent answer was someting along the lines of "I think LANS is a solid, respectable, long-term, legitimate corporation that I can trust to do a good job with my pension." I never understod the source of that confidence, and still don't. I'm glad I made the decision I did.

Anonymous said...

DOE gave LANL workers their word during the early 2006 town hall meetings that they would never let TCP1 pensioners lose what had been promised to them in retirement. At the time, lots of people felt a good measure of comfort with those DOE verbal promises. I'll bet most of the employees left at LANL don't feel nearly as comfortable with those DOE verbal promises as of today.

It's clear that a bankrupt TCP1 would be kicked over to the PBGC. The max payout PBGC will give is about $45K. However, that max payout is only for employees who retire at age 65. If TCP1 were to ever go bust, employees who had retired at age 60 would only get a maximum payout of around $25K per year. The drop in living standards for employees who retired under a bankrupt TCP1 pension would be extreme, especially for the well paid scientists and managers under this retirement plan. Better hope it never happens.

One person who wouldn't be hurt by a bankrupt TCP1 would be LANL's Director, Mike Anastasio. As part of his special LANS contract, he gets executive pension insurance that helps back up any pension payment loses he might experience at a future date.

Anonymous said...

8:39 and 9:49, I arrived at the same conclusion you did, and I imagine you're in the same age bracket I'm in. I know a lot of people who went TCP1 because of the promise of retiree medical benefits. My retirement horizon is 2 or 3 contract changes away, and even if I can hold my nose and continue to work at LANL that long, I just don't see it as plausible that the promises made for TCP1 in 2006 will still hold in 2026.

About a year or two ago, some of us started asking "Why should employees work hard to earn bonuses for our senior managers? Where's the shared fate you keep talking about?" My Division Leader too the question up to the AD, and the answer was: "People don't understand that the efforts to hold benefits equivalent in the UC to LANS transition probably won't apply in the next contract change." In other words, our senior managers believe it's all downhill from LANS.

Anonymous said...

"8:39 and 9:49, I arrived at the same conclusion you did, and I imagine you're in the same age bracket I'm in."

Actually, I'm one of the old guys who retired and started receiving monthly payments under UCRP. Of course I kept working for a while (socking away the 11-1/2% 401(k) match) until something better came up outside of the LLC - a new job with a raise, bonus, etc.

Anonymous said...

The real sad point that is missed in this debate - 401k plans were never intended to replace pensions. The benefits received under a 401k (even with employer matching funds) will never equal the benefits for a pension covering the same long term employment period. Search the web for articles on this issue. In fact PBS ran a series on this a few years ago. It was very enlightening and frustrating.

Anonymous said...

5/23/09 12:14 PM
About a year or two ago, some of us started asking "Why should employees work hard to earn bonuses for our senior managers? Where's the shared fate you keep talking about?" My Division Leader too the question up to the AD, and the answer was: "People don't understand that the efforts to hold benefits equivalent in the UC to LANS transition probably won't apply in the next contract change." In other words, our senior managers believe it's all downhill from LANS.

You know, fuck em. That is what they want you to believe. Your AD got at least a $1.2M bonus last year. And us?

Anonymous said...

"I know a lot of people who went TCP1 because of the promise of retiree medical benefits."

Duhhh ... LLNL retiree are now complaining about their reduction in medical coverage and increase cost. It's 80/20 now and probably going to 20/80 (20%employer, 80% employee paid). No where is it stated that retiree medical benefits are promise or gurantee.

Anonymous said...

6:42 pm; "No where is it stated that retiree medical benefits are promise or gurantee."

This is true and was also always true under UC. Retiree medical was never a guarantee, contract obligation, or "promise." It was a benefit the University (and now LANS) claims it has no intent of ending, but it could happen any time. No legal obligation on LANS' part will be violated if they end retiree medical. However, if LANS ends it for UC/LANL retirees while UC keeps it for non-LANL UC retirees I expect DOE will have something to say about it. And probably NNSA too.

Anonymous said...

"I know a lot of people who went TCP1 because of the promise of retiree medical benefits."

It doesn't matter whether you went TCP1 or 2, you get the same medical benefits. If you went TCP2 and take the UCRP lump sum, you get no medical benefits. New hires are TCP2 and get no retiree medical benefits. [Note: this is for LLNL, I assume LANL is the same.]

Anonymous said...

"However, if LANS ends it for UC/LANL retirees while UC keeps it for non-LANL UC retirees I expect DOE will have something to say about it. And probably NNSA too."

DOE-NNSA may say "Thank You" for performing 'cost saving'. Since transition, all LANS/LLNS actions are 'cost saving' ...nothing to do with improvement, higher productivity, better efficiency, reducing mangement layers, etc.

Anonymous said...

"However, if LANS ends it for UC/LANL retirees while UC keeps it for non-LANL UC retirees I expect DOE will have something to say about it. And probably NNSA too."

Sure, but what is the origin of your apparent faith that UC will continue to have a stake in LANL's operations?

Anonymous said...

7:20 pm: "Sure, but what is the origin of your apparent faith that UC will continue to have a stake in LANL's operations?"

Uh, because UC is a member of LANS? Chairman and Executive Vice President of the LANS Board of Governors? Contractually obligated to LANS?

Eric said...

Uh, because UC is a member of LANS?

Chairman and Executive Vice President of the LANS Board of Governors?

Contractually obligated to LANS?

Please correct me if I am wrong but as far as I know.

1. UC is not a member of LANS. UC is an owner of LANS.
2. Owners are on the board of governors as a matter of routine.
3. LANS is contractually obligated to UC not the other way around. UC, Bechtel, et al. can make LANS go out of business in a second not the other way around.

As has been stated many times in this interesting set of comments, LANS LLC is a creation of Bechtel and UC for a specific purpose--managing LANL for a few years. Once that purpose is over, as many have said, things get interesting.

In this discussion about pensions, it is important (at least to me) to keep the relationships straight.

P.S. Anonymous commenters on LANL:The Rest of the Story do not control LANS, LANL, DOE, or Congress. ;-)

Anonymous said...

TCP1 summary:
1) Private pension goes to PBGC administration if LANS ceases unless its passed to successor company.
2) No guarantee of medical plan irregardless of UC actions.
3) No liability on part of DOE.
4) Can be changed at any time.
5) No guarantee next contractor will continue TCP1 plan.
6) TCP1 electees forfeit all previous rights to UC public pension.

Anonymous said...

5/25/09 7:55 AM

A good UC view on LANS can be found in "An Introductory Guide to UC’s Ties to LANS LLC and LLNS LLC and their Management of the Weapons Labs at Los Alamos and Livermore - prepared by Council Chair Oakley and University Counsel Bill Eklund (8/07)"

http://www.universityofcalifornia.
edu/senate/reports/ac.labguide.
0807.pdf

Anonymous said...

5/24/09 8:34 PM, sorry, let me phrase the question more transparently:

What is the origin of your apparent faith that *LANS* will continue to have a stake in LANL's operations?

Anonymous said...

2:54 pm: Thank you for the link to the UC paper by Bill Eklund, et al, on the LANS and LLNS situations. After reading it, I believe that anyone interested in LANL or LLNL and their current management needs to read this very detailed and well-researched and referenced article.

As an aside, I worked with Bill Eklund, and also his wife Sharon, well before they left LANL to work for UC (and well before the UC - LANS transition). They are both exemplary people, and were a great benefit to LANL.

Greg Close said...

@5/24/09 9:54 AM: that's a false statement. It absolutely DID matter if you went TCP1 or 2 for retiree medical. TCP1 continued to accrue service credit (i.e. future subsidy of retiree medical) whereas TCP2ers needed at least 10 years as of the date of Transition (either of them, LLNS or LANS) to even be eligible. Also, with TCP2, there's no further service credit accrued (to apply toward subsidy). FYI.

As for all the pension prognostication - there's a disturbing lack of understanding and education on this subject in many of these posts. In order not to misrepresent the facts in your posts, I would suggest doing some more homework on ERISA, Pension Trusts, and successor contractors. You can't just read the contract and figure out what's going to happen from there - there's a lot in play.

Remember, last January when people were complaining about the SAR we'd sent out, the common wisdom on the blog was that LANS was hiding something and that TCP-1 was drastically under-funded. As it turns out, and as you can verify for yourself in the recent funding statement, TCP-1 was close to 140% funded at that same time. It was in much better shape than many of you thought possible (and still is).

Common wisdom is often more common than wise. *Bwoooong*