Anonymously contributed:
I didn't see George Miller's quarterly all-hands meeting yesterday, but thought this recap item today from Lab Public Affairs of note:
...Regarding the status of the LLNS defined benefit pension plan, Miller explained that although the plan is currently overfunded at 130 percent, future liabilities are such that employee and employer contributions will be needed within the next five years. "We believe the most prudent approach would be to start payments early, but DOE denied our request to begin contributions. I expect that we'll request approval again early next fiscal year."
Seems DOE wants its contractor's pension plan to fail.
24 comments:
We dont mind if DOE does not require contributions! Pension has to be managed sensibly and if it is closed-ended should not require contributions.
I don't understand this at all. Doesn't the calculation that the pension fund is overfunded at 130% take into account future liabilities? Is this a statement that no one understands how the fund is managed?
i was perplexed about this as well. It is worth a call to the plan adminstrator to verify.
My guess -- I think the stated liability is only the current liability of the plan as of the report date. That is, all obligations accrued only to that point in time,not an estimate of future accruals.
It is not, I am guessing, an estimate of what additional liabilities (obligations) that will accrue over time as the covered workforce accrues additional pension with service, age and salary growth.
The calculation of the expected future cash outflow liability that the LLNS pension will have over the life of the pension should be straightforward for an actuary to estimate since the LLNS pension population is closed and there is a very good history from which to make reasonable bounding estimates.
With proper accounting of the financial considerations (discounted cash flow and estimated returns, estimated inflation rate) . This liability can compared with current assets to estimate what additional capital must be contributed and when. (You learned how to do this kind of cash flow estimate in engineering economics or corporate finance if you took either of these courses)
I suspect that it is this calculation that supports George's statement that future contributions will be necessary, but that it is sound today.
I think that you all would benefit if George walked you through the calculation details, which would take about 20 -40 minutes.
At LANL, the LANS TCP1 pension is so poorly funded that staff members must now fork over around 8% of their salaries... on an "after tax" basis! Ouch!
The "after tax" basis of this pension contributions makes the financial pain feel like about a 10% cut in take-home pay.
With the stock markets beginning to crater (once again) and with fixed income securities having insanely low yields, it highly likely that the pinch on LANL employee salaries to support their declining TCP1 pension will only get worse. I see no reason why LANL employees shouldn't expect to see TCP1 salary contributions of 12% within a few more years (on the same "after-tax" basis, of course!).
Sandia already had their pension decimated last year on the NNSA's command. NNSA has been trying to implement the same tactic at LANL and will be successful some day in pulling it off. Then they will follow up by reducing future pension payouts at LLNL.
DOE/NNSA wouldn't mind seeing the balance sheets of these pensions worsen so that can use that as an addition excuse to "freeze" them out. If you have many years to go before retirement, be very wary about ever seeing the pension payouts that you were expecting to receive.
I give it about 3-4 years before a "freeze-out" occurs at LANL, followed by a similar pension "freeze-out" at LLNL. When the "freeze-out" hits, you'll no longer get any service contributions in your pension payout. In addition to this, the age related payouts will be greatly reduced and you won't be able to pull your pension until age 62. Currently accumulated pension benefits can't be touched by law, but future accrued benefits from age and from years of service will be severely reduced.
Are you prepared for this?
Contrary to 11:16 comments, the LANS plan is currently fully funded and contributions are 4% increasing to 6% for earnings above $106,800. Because LANS has been proactive in funding in advance to the extent we have, the huge hit for 2012 has been reduced significantly. The LANS plan is in great shape and while another market downturn would be hurtful, it is still one of the best funded plans in the country and it is also one of the richest in benefit value. Find something else to bitch about if you just have to bitch.
" Contrary to 11:16 comments, the LANS plan is currently fully funded and contributions are 4% increasing to 6% for earnings above $106,800..."
Right, sorry.
When I posted the observation at 10;16 I did not make it clear that it applied George Miller's recent comments about the status of the LLNS pension only.
I don't have a clue about the LANS pension.
Sorry for the confusion.
"Sandia already had their pension decimated last year on the NNSA's command. "
Can a kind soul from Sandia concisely explain the changes that occured last year? Did it apply only to ALBQQ or also Livemore?
Thanks in advance.
Just another note to all when changes occur to a pension plan - especially an ERISA plan changes can only be applied prospectively. Benefits earned up to the date of a change can not be diminished in any way. So, even the changes to the Sandia plan will only effect future service in the plan. not past service. There for the change in HAPC from HIGH 3 as in the LLNL/LLNS plans to career average is not as cataclysmic as it may seem.
It is interesting to hear all the hype on the LANS/LLNS pensions while people on the University of California (UC) pension plan face a $20B shortfall. Yeah, that's billion. There are literally hundreds of thousands retirees living on borrowed time and they seem completely oblivious to it. Wake up UC pensioners, it's all going to come crashing down, and in a BIG way!
$20B for 200,000 employees over 40 years is something that needs to be fixed, but it is not the end of the world. It is about 1/8 of a $160B portfolio.
Of course, the devil is in the details. The good news, UC's pension managers are not the typical Wall Street liars and cheats. They are salarymen who are part of the same system.
It must be managed, but can be with relatively modest measures over a long time. Many of the steps already taken will soften impact.
I just got my first LLNS pension check. It actually works!
Thanks to the UC leaders who had the foresight to establish PERS/UCRS so many years ago. They deserve a commemorative statue in California Hall from a grateful staff.
As a 25-year-old who just started a career at LLL decades ago, I would have never thought to even consider the benefit of a defined benefit pension plan. I am delighted someone else thought ahead for me and my family.
We owe it to our young successors to think of their welfare in the same way.
Kudos to UC!!!
We owe it to our young successors to think of their welfare in the same way.
June 24, 2011 2:52 PM
Huh?
The good news, UC's pension managers are not the typical Wall Street liars and cheats. They are salarymen who are part of the same system.
June 24, 2011 2:43 PM
Boy you sure are naive. All due respects, but the UC pension managers are responsible for the UC retirement system being in total turmoil. They are largely responsible for the $20B problem due to lack of vision and poor investments. They are part of the UC management system that has become arrogant, corrupt, and wealthy from student tuition and state (CA) appropriations.
Back to George Miller's comments:
Does anyone have any idea why NNSA would reject LLNS's request to begin requiring employee contributions to TCP1 pension fund?
Is anyone aware of any DOE lab pension fund that was turned over to PBGC and how that worked?
June 26, 2011 11:46 AM
Good question.
I believe under the DOE approach to M&O contracting, DOE approved contractor pension plan cost are a "reimbursable cost." So the "employer" contribution is NOT taken out of the $46 million profit LLNS gets, but instead is billed by LLNS (or any DOE site contractor) to DOE as an allowable cost.
I my opinion this is at the heart of the silly way DOE has set up its M&O/GOCO national lab site contracts. Especially when they are now required to go out to competitive bid.
It would have been very interesting to see what would happen if the "employment" related Appendix A of the contract had been removed from the bidding process. Allowing LLNS and NSTech to really submit bids for operating LLNL that had to factor in real employee cost (not reimbursed and taken out of the management fee).
When you hire a contractor to work on your house, you don't tell them - hey I'm going to give you this profit and also on top of that cover the cost of your employee's retirement.
If I remember correctly (and is not always the case), TCP1 will need to get ~6.75% annual average return on investments w/o requiring contributions.
GM is correct and prudent in his request, just my thoughts.
So it appears that NNSA intends to starve LLNL's TCP1 pension of the funds that would keep it healthy and in the not to distant future simply walk away from it by turning it over to the PBGC. Otherwise, if they agree to allow employee contributions then the portion that must be contributed by LLNS is considered a "reimbursable cost" which must be covered by NNSA. Comments?
In view of NNSA having no influence over LLNS/LANS on their (i.e. Chu) directive to freeze salaries why should they have influence to freeze contributions pensions? Unless, LLNS/LANS Senior Management seem inclined to comply on this one, for whatever reason.
Boy you sure are naive. All due respects, but the UC pension managers are responsible for the UC retirement system being in total turmoil. They are largely responsible for the $20B problem due to lack of vision and poor investments. They are part of the UC management system that has become arrogant, corrupt, and wealthy from student tuition and state (CA) appropriations.
June 26, 2011 4:40 AM
Perhaps some perspective of history is in order here. Up through the 1990s UCRP was managed in house through the UC Treasurers office with the result that, beginning in 1990, no additional contributions were needed from employees or the University to keep the plan solvent; the return on investments was sufficient to all current and future liabilities. In the early 2000s UCRP funds management was, under the careful guidance of Gerald Parsky, outsourced to commercial financial managers (Fidelity and the like) and the funding excesses of the 1990s began to evaporate. At their inception both LANS and LINS Boards of Governors were chaired by that same Gerald Parsky, but now neither mentions his name save in some older documents that, perhaps, have not yet been purged from all the archives. But not to worry, Parsky has been getting plenty of press lately; perhaps his financial management style is finally catching up with him.
Thanks for June 27, 2011 1:49 PM for providing this history. Don't forget the decision to give cash to UC employees Capital Accumulation Provision (CAP) accounts because the pension was just "flush" with money. The CAP put the equivalent of 3 percent of the employee’s salary into a separate retirement account in UCRP where it earns a specified rate of interest (currently 7.5 percent) until the employee begins to draw on retirement funds. While I benefited from this decision, in retrospect this was BAD decision. How many other BAD decisions did Parsky make? Where is this con artist now?
Where is this con artist now?
June 27, 2011 2:30 PM
"Fixing" CALPERS
Where is this con artist now?
June 27, 2011 2:30 PM
"Fixing" CALPERS
June 27, 2011 3:10 PM
Oh I'm sure he's "fixing" it alright. Just like he fixed the University of California with a $20B "hole".
YOU sound like Chicken Little.
UC's plan is not in serious trouble, it has in hand, sufficient funds to pay 20-30 years of obligations without any return. $160B is quite a bit of money. It is underfunded by about 10% now and has plenty of time to either increase contributions or garner perhaps 1% more yearly return on investments. Much of the former mismatch with future obligations has been reduced by the newly resumed contributions and the reduced pension commitment to new employees.
The difficulty is not with UC Regents but with the entire mismanaged state budget, where legislators promise larger wages and benefits than are sustainable during downturns. It the state kept it promises to UC.... Meanwhile, from the point of view of Lab retirees, no worries, DOE is meeting each pension obligation as it arises...
UC's plan is not in serious trouble, it has in hand, sufficient funds to pay 20-30 years of obligations without any return. $160B is quite a bit of money. Meanwhile, from the point of view of Lab retirees, no worries, DOE is meeting each pension obligation as it arises...
June 29, 2011 8:03 PM
In perspective the U.S. deficit is $15 Trillion. Yeah what's a few billion? It's all optics. No not NIF, that's another "success story" too. Incidentally, how much energy is NIF producing?
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