Thursday, April 28, 2005

WHAT'S YOUR PENSION AT SANDIA/LOCKMART?

From Anonymous:

WHAT'S YOUR PENSION AT SANDIA/LOCKMART (AT FUTURE LANL/LOCKMART?)?

Following is extracted from rip2003.pdf (google "rip2003.pdf sandia")

Pension=(highest average pay over 3 years)*(retirement age factor)*(service credit)

The key differential numbers are the "retirement age factor" numbers for
Sandia vs Lanl. I've extracted them below from rip2003.pdf and from the Lanl
Retirement Handbook, the third column is the ratio of Sandia/Lanl expressed
as a percentage i.e. (Column2/Column3)*100.

Age Sandia Lanl Ratio
50 1.04% 1.11% 93.6
51 1.12% 1.24% 90.3
52 1.20% 1.38% 86.9
52 1.28% 1.52% 84.2
54 1.36% 1.66% 81.9
55 1.44% 1.80% 80.0
56 1.52% 1.94% 78.3
57 1.60% 2.08% 76.9
58 1.68% 2.22% 75.6
59 1.76% 2.36% 74.5
60 1.84% 2.50% 73.6

It seems that based on the above info, that Sandia/Lockmart (Lanl/Lockmart?)
retirement benefits ranges from 93.6 to 73.6% of Lanl/UC, and gets progressively
worse with employee age. If sick leave is not converted to service credit at
Sandia/Lockmart as it is at LANL/UC then that's another loss. The Lanl COLA
issue (retire by July 1, lock in 4% more) has been discussed already.

DISCLAIMER: I'm not a benefits rep, nor otherwise expert, and am offering a
strictly personal opinion about some publically available information. No one
should take action based solely on the numbers or discussion above, they
should seek out and independently verify facts on their own.


Comments:
Given those numbers, it would appear that there is no financial incentive for anyone over 55 to remain at the lab. Will the last one out please turn off the lights?

An observer from the "other" lab in California (next on the hit list)
 
Aha! One of our "wine country" brethern speaks up. Pay attention, take notes. You guys will be the next to pop up on the radar screen.
 
If in fact those numbers hold up as being accurate, then I, who will be 55 next year, will be out of here.
 
The comparison of the LANL and SNL pensions is not correct. SNL has both a defined benefit pension which is described in the article and a 401K in which SNL will match a 6% employee salary contribution with 3%. Hence, one needs to compare the SNL defined benefit pension + the 3% company 401K match to the LANL defined benefit pension.

There is no unique or "best" way to make this comparison. Ignoring survivor benefits, The LANL pension stream of payments ends upon death of the retired employee. To match this stream of payments for the SNL case, one has to assume that the company 3% 401K contribution plus accumulated gains will be paid out as an annuity from retirement to employee death. Hence there are added variables: rate of return of 401K, rate of return of 401K residual after retirement, number of years to employee death after retirement,...

Some spreadsheet based Monte Carlo calculations which I made when SNL changed the pension plan a few years ago suggested that the current SNL plan is in rough equality(at the 50%ile level) with the LANL plan for 60+ age employees with ~ 30 years of service. However, this conclusion was based on an average 401K rate of return that is somewhat higher than what we have experienced in the last four years.
 
However, to take advantage of that 401k requires one to put in 6% of their salary to get the 3% match. Also, is the 3% match vested immediately, or is there a tim e lag?

LANL's equivalent would be the 403b, which is not a matching plan. The participation rate at LANL for the 403b was 4598/8881, which is about 52%, as of 6/30/04. I do not have figures about the percentage of salary put into the plan by those participating.

So it seems that a) about 48% of the people at LANL would have to begin chipping in 6% of their salary, for 30 years to have an equivalent benefit and, b) the other 52% would have to continue to do so. Of course, both groups would have essentially built up a vested, "unmatched" 401k over time.

It also appears that the 401k contribution was assumed to occur for 30 years until age 60. What about those people aged 40 or 50 say? Are they equivalent since they will not have put money into the 401k for 30 years?

Retirees at LANL also have the option of a lump sum payout.

Also, retirees have the ability to name a contigent annuitant (annuity is reduced somewhat in this case). The retirement payments would continue if that person survived the retiree's death.
 
4/28/2005 08:57:24 PM “Ignoring survivor benefits, The LANL pension stream of payments ends upon death of the retired employee. To match this stream of payments for the SNL case, one has to assume that the company 3% 401K contribution plus accumulated gains will be paid out as an annuity from retirement to employee death.”

Well of course the “stream of payments ends upon death” IF you ignore the UC survivor benefits. However, why would you propose to ignore one of the strengths of our current UC plan (the availability of multiple options for survivor continuance)? Your implied requirement “to assume that the company 3% 401K contribution plus accumulated gains will be paid out as an annuity” in an attempt to elevate the SNL plan to some semblance of equivalency with the UC plan is a real stretch of credibility. The effective time period required for any appreciable growth on investments in a defined contribution plan significantly penalizes late-career employees. Also, given the unpredictable nature of investments, who in their right mind would trade a stable defined benefit plan like UC’s for a hybrid plan of reduced defined benefits supplemented by defined contributions. If the table of the first poster is even close to accurate, anyone 55 and older is ~24% better off with UC but using your arguments could trade 6% of their income to gain an additional 3% under the SNL plan. Even then there is still a very significant gap.
 
Let's see, we can take our known and very generous UC retirement benefits
to "the bank" right now, or we can wait until: (1) the RFP is awarded and
then, (2) the new contractor takes 60 days to come up with a new plan, and
then, (3) DOE takes 60 days to agree to the new plan. Hmmm, what to do?

The real clincher is we all know any future plan will: (1) not be as
generous as the current UC plan, and (2) probably be at greater risk in
the outlying years due to the the small pool of benefit members (LANL-only)
and due to constant DOE meddling. Damn it, this situation really sucks!

It's looking more and more to me like everyone at 50+ years of age might
be safer in just placing their bets with the current UC benefits package
and go inactive (and possibly lose your job) or just retire. At least
that's a known bet. Everything outside of that is almost completely
unknown, and won't become clear until well after the contract is awarded.

We've already lost around 15% of the TSMs in my group. I've got a bad
feeling that the total number of people gone by the end of this fiasco
is going to go much higher. It's getting quiet in the hallways.
 
To 4/28/2005 08:29:35 PM:

Seems to me that anyone 50 or older benefits from leaving just looking at the SNL/LANL ratio at ~93%.

Staff in the 40-50 range have to clearly make an assessment.
 
Agreed. Most of those in their early 50s that I have spoken to seem to think the way they are going to go is to lock up the UC benefit by going inactive. They'll have to take their chances of being rehired by the successor or looking elsewhere for a new job.

Anybody have an idea on the numbers for the first wave of retirees coming July 1?
 
The REAL question staff should be asking about the pension is: "Who do you
trust for the long term?" If you take the UC pension, you know that you'll
be part of a huge and powerful pool of retirees and DOE can't touch it in
any fashion. If you go along with the new contract, you'll be in a small
pool of retirees with no political power and be subjected to constant DOE
threats against your pension. Who do you want to trust when you are
old and living on your pension -- the UC system or the DOE bureaucrats?
That's the pivotal question.
 
10:48, Those early 50s staff that I have spoken to have already answered that question in their minds - UC obviously.
 
The UCRP will be stable since it is a state educational institution and not a private "for-profit" company. The constituency for UC is the current population of employees and who knows how many retirees that will make their political voice heard in Calif. Those for-profits have been raiding the pension funds left and right for the last decade, with nary a peep from the US govt.

A point that has not gotten much attention in all of this is the fact that under UC the post retirement health care is very good. Which can be decreased but will not be at the same risk as under the for-proift. Under for-profits post retirement health care is going toward zilch.
 
11:41 don't be too sure of the health benefits for retirees with UC they can and will if necessary go for zilch. Look what is happening with our health care now.
 
Seems to me that post retirement health care is at less risk with UC than with a for-profit. Yes at LALN our health care has increased in cost, but not at the same rate as in privat eindustry.
 
What about Schwartzenegger's planned raid on UCRS which I believe was planned to be put to the UC voters in May '06?
 
...uh, make that the "CA" voters, not the "UC" voters...duh...
 
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