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.
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.
Comments
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.
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?
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.
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.
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.
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!!!
June 24, 2011 2:52 PM
Huh?
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.
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?
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.
GM is correct and prudent in his request, just my thoughts.
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.
June 27, 2011 2:30 PM
"Fixing" CALPERS
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".
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...
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?