Anonymously contributed:
I thought this might be of interest, Parney give a good explanation on the LLNL Pension. The graph, which is very informative, is also attached.
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LLNL Newsline
Status of the LLNS Defined Benefit Pension Plan
3/5/2012
As discussed at my January all-hands talk, I'd like to provide some more information about the funding status of the defined benefit pension plan and how its liabilities and funding level are determined. Note that this applies only to those employees who selected Total Compensation Plan 1 (TCP1) when they transitioned to LLNS on Oct. 1, 2007. (All other employees -- those who selected TCP2 and those hired since Oct. 1, 2007 -- are not affected.)
I want to emphasize that DOE/NNSA has repeatedly stated that they understand their responsibilities and commitment to fund contractor pension plans.
The graph below shows the plan's assets (left-hand scale), funded ratio (right-hand scale), and liability levels. As you can see, the return on assets has been quite good, growing from $1.58 billion when the assets were transferred from the UC Retirement Plan (UCRP) to $1.86 billion on Dec. 31, 2011, for an overall increase of 17.7 percent. This is significantly better than the performance the S&P 500 Index, which gained 7.3 percent during the same period. Since its inception, our plan's investment performance has been in the top third of similarly sized plans in the U.S.
Over this same period however, our plan's liabilities have grown by 125 percent, from about $800,000 at the plan's inception to almost $1.8 billion on Dec. 31, 2011. The reason for this is twofold. Liabilities have grown because plan participants continue to earn additional benefits based on increasing salary, age and years of service. This growth was fully expected and results in about half of the increase in liabilities.
The other driver for the increase in the plan's liabilities and the decline in its funded ratio has been the unprecedented drop in interest rates. Specifically, since the plan's inception, corporate bond yields have declined from about 6.5 percent to 4.9 percent. These rates are important because they are the interest rates used (as required by the Pension Protection Act of 2006) to calculate the present value of current benefits for the plan -- that is, the plan's liabilities. As these interest rates decline, the plan's liabilities increase.
As with most defined benefit pension plans, our plan is extremely sensitive to changes in these interest rates because of the age demographics of our plan's participants (average age about 50 years), because of the long period that benefits will be paid to participants and their beneficiaries (about 80 years), and because all Lab retirees prior to contract transition remained in UCRP. This is the overriding reason the plan's funding level has declined from 219 percent at the plan's inception to 104 percent on Jan. 1, 2012.
As you have undoubtedly read or heard in the news media, interest rates are at an all-time low. In order to encourage economic growth, the Federal Reserve has committed to keeping interest rates at or near their current level until 2014. As a result, we do not expect our defined benefit pension plan to start a meaningful recovery for at least a couple of years.
Contributions are not legally required at this time. They will be required when the plan's funding ratio drops such that the surplus assets are insufficient to cover the normal ongoing benefit increases. We have presented this information, along with projected contribution requirements, to NNSA and requested the start of employer and employee contributions to prevent future funding shortfalls.
I am continuing to work with NNSA to resolve this situation. I am committed to ensuring the future financial solvency of our defined benefit pension plan and will elevate the issue to increasingly higher levels as necessary to achieve this goal.
Parney Albright
LLNL Director
I thought this might be of interest, Parney give a good explanation on the LLNL Pension. The graph, which is very informative, is also attached.
--------
LLNL Newsline
Status of the LLNS Defined Benefit Pension Plan
3/5/2012
As discussed at my January all-hands talk, I'd like to provide some more information about the funding status of the defined benefit pension plan and how its liabilities and funding level are determined. Note that this applies only to those employees who selected Total Compensation Plan 1 (TCP1) when they transitioned to LLNS on Oct. 1, 2007. (All other employees -- those who selected TCP2 and those hired since Oct. 1, 2007 -- are not affected.)
I want to emphasize that DOE/NNSA has repeatedly stated that they understand their responsibilities and commitment to fund contractor pension plans.
The graph below shows the plan's assets (left-hand scale), funded ratio (right-hand scale), and liability levels. As you can see, the return on assets has been quite good, growing from $1.58 billion when the assets were transferred from the UC Retirement Plan (UCRP) to $1.86 billion on Dec. 31, 2011, for an overall increase of 17.7 percent. This is significantly better than the performance the S&P 500 Index, which gained 7.3 percent during the same period. Since its inception, our plan's investment performance has been in the top third of similarly sized plans in the U.S.
Over this same period however, our plan's liabilities have grown by 125 percent, from about $800,000 at the plan's inception to almost $1.8 billion on Dec. 31, 2011. The reason for this is twofold. Liabilities have grown because plan participants continue to earn additional benefits based on increasing salary, age and years of service. This growth was fully expected and results in about half of the increase in liabilities.
The other driver for the increase in the plan's liabilities and the decline in its funded ratio has been the unprecedented drop in interest rates. Specifically, since the plan's inception, corporate bond yields have declined from about 6.5 percent to 4.9 percent. These rates are important because they are the interest rates used (as required by the Pension Protection Act of 2006) to calculate the present value of current benefits for the plan -- that is, the plan's liabilities. As these interest rates decline, the plan's liabilities increase.
As with most defined benefit pension plans, our plan is extremely sensitive to changes in these interest rates because of the age demographics of our plan's participants (average age about 50 years), because of the long period that benefits will be paid to participants and their beneficiaries (about 80 years), and because all Lab retirees prior to contract transition remained in UCRP. This is the overriding reason the plan's funding level has declined from 219 percent at the plan's inception to 104 percent on Jan. 1, 2012.
As you have undoubtedly read or heard in the news media, interest rates are at an all-time low. In order to encourage economic growth, the Federal Reserve has committed to keeping interest rates at or near their current level until 2014. As a result, we do not expect our defined benefit pension plan to start a meaningful recovery for at least a couple of years.
Contributions are not legally required at this time. They will be required when the plan's funding ratio drops such that the surplus assets are insufficient to cover the normal ongoing benefit increases. We have presented this information, along with projected contribution requirements, to NNSA and requested the start of employer and employee contributions to prevent future funding shortfalls.
I am continuing to work with NNSA to resolve this situation. I am committed to ensuring the future financial solvency of our defined benefit pension plan and will elevate the issue to increasingly higher levels as necessary to achieve this goal.
Parney Albright
LLNL Director
Comments
At LANL, all we from LANS is.... well, actually... nothing. Or next to nothing. At best, a single typed page each year telling us everything is just hunky-dory with the LANL pensions and to "just trust us".
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Wow! At LANL, were now kicking in 8% of our salaries on an after tax basis. The financial pain is severe. We can probably count on that figure going up even further.
Nice to see that the LLNL pensions was handled properly. Wish I could say the same about how LANS handled the LANL pension, but they acted like they could care less. All too typical of the incompetence of LANS executive managers.
March 8, 2012 9:47 AM
Spoken like someone who really has no idea who actually manages the LANS pension fund.
Perhaps someone can share the names of the *key personnel* that oversee the pension? Or, is that *corporate information*?
1. how much dose the investment frim charge llns for funds investments; 1%, 1.5% or .5% of the gross
2. how much does hewitt & associats take from the pension fund to be admentstraitors; .5%, 1%or 1.5% of the gross??
these are questions you tcp 1 sheepeople should be asking ulm.
NOTE: if the market is up or down the investment firm and hewitt still get thier cut!!!!
Oh dear god, don't start the TCP-1 versus TCP-2 litmus test crapola again.
I tried every online language translator I know of, but none them could translate this drivel.
March 8, 2012 10:42 PM
Of course they do, you fool. What are you, 12 years old?
Thanks Parney.
"Substantial Equivalent" ??
Trying to talk in percentages-of-liability-funded is a bit tricky. The TCP-1 liability is likely growing faster on a percentage basis than the UC pool due to the higher average age and salary in our limited population. It would be easier to compare the performance of assets under management on an apples-to-apples basis. Not that I have those data at my fingertips.
Wasn't entirely trying to compare apples-to-apples, but note that even if assets perform the same, the liabilities are on different curves ... which may result in TCP1 blowing up! Bottom line (factoring everything, including "higher average age and salary in our limited population"): TCP1=Much_Higher_Risk than UCRP !
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