WASHINGTON A coalition of major pension and business organizations is asking the Department of Energy to end a controversial cost-cutting proposal that would stop reimbursement of contractor contributions for some defined benefit and medical plans for new employees.
Under the initiative, announced last year, the Energy Department would limit future DB plan reimbursements to existing employees and retirees only.
Retirement-related reimbursements for new employees would be limited to the costs of market-based plans, according to Megan Barnett, a DOE spokeswoman. Ms. Barnett said that meant for retirement plans, reimbursement for new employees would be limited to defined contribution plans or other plans in which the total benefit package does not exceed a market average of similar industry plans by more than 5%. Reimbursements for the medical plans of new employees would also be limited to no more than 5% more than medical plans offered by similar industries on average.
Under the threat of a legislative override promoted by unions and pension industry lobbyists, the department last June announced a one-year suspension of the policy. As part of its review, the DOE solicited public comment on the proposed change; comments were due May 11.
The suspension expires June 19, but Ms. Barnett, a DOE spokeswoman, said the policy will only go into effect if department officials implement it; she said there is no deadline for DOE action.
The Energy Departments plan has come under fire from pension industry and business groups: They say the change in policy is a slap at Congress and the White House, which recently endorsed defined benefit plans with their approval of the Pension Protection Act of 2006.
By stating that it no longer supports defined benefit pension plan designs, the DOE would be effectively stating that it does not view these plans as beneficial or viable, said a coalition led by the American Benefits Council, Washington, in its comment letter to the department.
Such a statement would be inconsistent with the intent behind the PPA and would undermine both the work done in the PPA to support the continuation of the defined benefit plan system and the voluntary nature of the system, the letter added.
It has been the long-standing policy of the federal government to support American workers retirement security through guaranteed pensions, added Gene Wickes, global practice director, benefits consulting group, Watson Wyatt Worldwide, Arlington, Va., in a separate letter. It is inappropriate for the DOE to put itself outside of this policy consensus to unilaterally impose a viewpoint that is prejudicial toward plans.
Also blasting the Energy Departments proposal are union representatives of the contract employees that would be affected.
We believe its inappropriate for the Department of Energy to change its policy and mandate the plans employers should provide to their workers, Karin Feldman, benefits and social insurance policy specialist, AFL-CIO, Washington, said in an interview.
Added Mike Fanning, chief executive officer for the $10 billion Central Pension Fund of the International Union of Operating Engineers and Participating Employers Union, Washington, in an interview: Union members generally have expressed a strong preference for defined benefit plans. We believe strongly that these plans should be protected and strengthened.
According to the Energy Departments public explanations, the reimbursement proposal is supposed to help the agency cut costs.
In a March 27 news release, the department said its costs for reimbursing contractors pension and medical benefits plans in fiscal 2006 were $1.1 billion, up more than 226% since fiscal 2000. The release also said the department reimburses benefits for 100,000 active contract employees and another 100,000 retirees, dependents and beneficiaries.
The Department of Energy is committed to finding ways to help ensure the long-term viability of our contractor employee pension and medical benefits plans while managing our long-term financial commitments, said Ingrid Kolb, director of DOEs office of management, in the release.
While no decision on a path forward has been made at this time, we are continuing our efforts to seek input on this important policy matter, Ms. Kolb added.
In an interview, James Klein, ABC president, said pension industry representatives are concerned the Energy Departments proposal could become precedent for other federal agencies with contractor work forces, if allowed to go into effect.
In addition, assuming the Energy Department gets its regulatory druthers, companies that contract with multiple agencies could be forced to contend with a variety of conflicting retirement plan regulations at the same time, Mr. Klein said.
Only those agencies with jurisdiction over pension and health policy should develop rules governing employee benefit plans, Mr. Klein said.
The Energy Departments Ms. Barnett said the DOE which in addition to seeking public comment has held dozens of meetings with stakeholders on the best way to address increasing costs is reviewing the suggestions.
At this point, were considering all that input, she said.
The other members of the ABC coalition are the American Society of Pension Professionals & Actuaries, the Business Roundtable, the ERISA Industry Committee, Financial Executives Internationals Committee on Benefits Finance, the Financial Services Roundtable, the HR Policy Association, the National Association of Manufacturers, Society for Human Resource Management and the U.S. Chamber of Commerce.