More FAQs for LLNS Defined Benefit Plan

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More FAQs for LLNS Defined Benefit Plan

A second round of answers to Frequently Asked Questions (FAQs) has been posted on the LLNL TCP1 Benefits Web page.

Frequently Asked Questions as of April 2, 2012

1. What is the ratio of employer vs. employee contributions?

A. For FY12, the $20 million employer contribution equates to 17 percent as compared to the 5 percent employee contribution. For FY13, the employer contribution is projected to be $88 million, or 24 percent.

2. Why are contributions starting out at 5 percent? Why not a lower amount?

A. Had contributions been approved two years ago, they would have begun at a lower rate and would have increased over time. Since DOE only recently approved starting contributions, it was necessary to begin at 5 percent because the obligations of the plan are higher than they were two years ago.

3. Are employee contributions capped at 5 percent or will they increase?

A. The amount of future contributions will depend on many factors including future asset performance. The contribution schedule currently authorized by DOE includes approval to increase employee contributions to 7 percent of pay in 2013. LLNS will be requesting DOE approval to increase employer contributions to $88 million, or 24 percent of pay.

4. When will employee contributions end?

A. Contributions must continue until the plan has sufficient assets to pay all future pension obligations. We expect contributions to continue for the foreseeable future.

5. What happens when interest rates increase and the Defined Benefit Plan becomes well overfunded?

A. The amount of future contributions will depend on many factors including future asset performance. As interest rates increase and assets grow through earnings and contributions, the plan will become better funded. Once the plan has enough assets to pay all future pension obligations, both employee and LLNS contributions will cease.

6. What happens to the plan as the number of members continues to decline? Will the fact that there are fewer members mean they have to increase their contributions?

A. As the number of active members in the plan decreases due to retirement, the rate of increase in future plan obligations will decline, since those who have retired are no longer accruing future benefits. By starting employer and employee contributions to the TCP1 pension plan now, the Laboratory will mitigate future shortfalls. The steps under current implementation are designed to ensure that the pension plan will be able to fully meet all of its future obligations.

7. How is my pension benefit calculated at time of retirement?

A.. When your 5 percent contribution is withheld from your paycheck, it will be reported to the pension plan administrator, Aon Hewitt. They will keep track of your contributions, both taxable and non-taxable, separately from all other employee contributions in your "account." At the time you retire, when your monthly benefit is calculated, a portion of it will be attributed to your contributions. The IRS dictates how the allocation is determined; should you pass away before exhausting all of your contributions, any remaining contributions are paid out based on the election you chose when you retired.

Depending on this election, remaining contributions are either credited to your spouse's or contingent annuitant's monthly benefit payment, or to your beneficiaries if you chose an annuity only for yourself. If your contingent annuitant dies prior to exhausting your employee contributions, any remaining balance will be paid to your beneficiaries. If you instead only chose an annuity for yourself, the remaining employee contributions you made will be paid out to your beneficiaries upon your death. Your contributions are used to fund your retirement benefit. The formula to calculate your pension benefit remains as Age Factor x Service Credit x HAPC (highest average monthly full-time equivalent plan compensation over 36 continuous months as an active plan member).