Thursday, December 15, 2005

Like UCRP, Sandia's pension plan is still overfunded

Doug - no need to post this anonymously

Comment on Sandia pension fund shortfall

Assuming that the statement about the Sandia pension plan needing an
infusion of cash by 2010 is true, one
still ought not be alarmed by the $7 million number. As a private entity
(and unlike UCRP), Sandia's
pension plan reports are probably not publicly available, but one can
sensibly estimate its size by
comparison to LANL, since the institutions are of comparable size and annual
budget.

LANL's share of UC salaries is roughly 10%, and therefore should account for
roughly 10% of UCRP
assets and liabilities. The latest UCRP annual report
(http://atyourservice.ucop.edu/forms_pubs/categorical/annual_reports.html)
shows assets of roughly $41 billion and liabilities of about $37 billion.
LANL's share of this would amount
to ~$4 billion. For LANL, a $7 million shortfall would amount to less than
0.2% of assets and less than 1% of
annual salaries.

I suspect that what the statement really means is that, like UCRP, Sandia's
pension plan
is still overfunded thanks to the high returns on stock investments during
the 90's and may not require
any contributions by the employer (and perhaps the employee) at this time.
At some point that will no longer
be true. In the case of UCRP, the 2005 annual report estimates that time to
be 3.2 years in the future. Note
that this doesn't mean the plan is out of money - it simply means that
employer and employee will need to start
putting money in again, as was the case until 1990.

For those contemplating retirement under UCRP, I strongly recommend looking
at the annual reports available at
the above URL (1997-2005). There is a wealth of detail available in them -
probably much more than would
interest most folks. Given that the new contractor will be a private LLC, I
would suspect that such detailed
reports are unlikely to be the norm in the future. In any case, similar
information certainly won't be available
for whatever assets are rolled over into the new plan in time to make an
informed decision on the plan's fiscal
solvency.

Jim Amann
LANL Retired


Comments:
Once we are in a LLC no matter who wins this type of information will not be readily available. I am 55 with 22 years of service and there is no way any of my accumulations are going to be transferred to the new LLC. The good news is that if you leave your accumulations in UCRP and are inactive vested your HAPC increases up to the annual COLA provision. This year it was 2%. That means your final HAPC increases every year. If I work another 7-10 years the upper end is 20%. Probably going to be better percentages than our annual salary increases. I think we are going to be in for some low raises for quite some time except for management which always seem to take care of themselves. For the last 20+ years the entire lab population always basically recieved the same percentages so the wage gap between the have and have nots has widened considerably. Now UC sees that and they have a 10 year plan to equalize things. How stupid is that?
 
Don't count on a 10% UCRP share being transferred to the new LLC.

DOE and UC will be required by law to move an amount determined by actuarial tables, nothing more. And the true amount transferred may not be publicized by either party- making your stay/go decision difficult.

Never fear. If a low amount is moved, the LLC employees will have the opportunity to make up the difference through monthly contributions. Cheers.
 
There is a BIG difference between UCRP and Sandia's pension plan. Sandia's pension plan has only given one single "cola" to retirees in the last dozen+ years (~6% several years ago). That's a far cry from UCRP's regular colas of ~2% each and every year.
 
"LANL's share of UC salaries is roughly 10%, and therefore should
account for roughly 10% of UCRP assets and liabilities. " - Jim Amman

Jim, this doesn't make sense. Yes, LANL salaries may make up 10% of what
UC pays out each month in pay checks, but not all of those receiving
the paychecks are equal in their claims on the pension. Some of
those who make up the 10% in LANL/UC salary have only been working at
LANL for a few years, and so have a very small claim on the pension pot.
Bottom line is we'll see far less than 10% of UCRP cash go into the LLC.
Perhaps much, much less if UC feels slighted by not winning the contract.
I'm guessing LANL employees will be force to start making significant
contributions to the new LLC pensions within two years of inception.

The COLA aspect is also very important. I'll be looking for items
in the new LLC pension offer that address this, but my guess is the new
LLC pension will have almost nothing to say in regards to future COLA
promises. We have a good history to go on with UCRP COLAs, but the
new LLC pension COLAs could be a real crap-shoot. If inflation picks
up (as it appears it will, esp. given the need to pay off our huge
national deficit with cheaper dollars), then not having an adequate
COLA will make a huge difference in your retirement lifestyle.
 
Just a couple of comments on issues raised by previous posters. My assumption that LANL accounts for ~10% of UCRP assets and liabilities assumes that the LANL population mirrors that of UC as a whole in regards to the distribution of salaries, ages and years of service. Yes, LANL has a broad spread in those variables, but then so does a typical university. The actual LANL fraction might be 9% or 11%, but it is almost certainly not 5% or 20%. The UCRP annual report lists some relevant parameters for the system as a whole on page 2. Information on LANL salaries and dates of hire are available at the UPTE website
http://www.upte.org/LosAlamos/salaries/salaries.html

The current contract specifies that the amount UCRP needs to fork over to DOE will be based on the value of the assets (not the liabilities) attributable to transferring employees at the date the current contract terminates. As of 6/30/2005 the value of UCRP assets exceeded its liabilities by ~10%. A $4 billion LANL share would amount to an ~$400 million windfall for DOE, assuming they are so generous as to fully fund (but not overfund) the new plan for the successor contractor. While I'm willing to bet we are unlikely to learn exactly how much DOE puts in the new pot, I am quite confident that the 2006 UCRP annual report (or perhaps 2007 depending on the actual date of the transfer) will give plenty of information on how much UCRP turned back over to DOE. While UC has given folks plenty to complain about over the last few years, the UCRP is certainly not one of them, either in regard to benefits or the availability of relevant information.

The UC pension plan is an extremely generous one as such plans go (regular COLA's, 2.5% per year of service, 100% salary limit, multiple CAP distributions, etc). The principle reason that these provisions have been possible is that, despite periodic downturns, the stock market really has done very well since the late 70's (Vanguard S&P 500 has returned an average of more than 12% annually since 1976). The situation that has existed since 1990 wherein neither employer nor employee have had to put in a penny to fund the plan should be considered an anomaly that will almost certainly go away in the future both for the new contractor and for UC employees as well. Back in the "good old days" of the 70's and 80's employees contributed between 2 and 4% of their salaries and UC/DOE another 4% to fund the plan - I would expect that something similar will return quickly under the new contractor. The real issue for employees over 50 will be evaluating the fiscal viability of going with the new plan versus going inactive in UCRP.


Jim Amann
LANL retired
 
Eventually relevant appear to be the questions:

How much is the state of California going to contribute if UCRP needs additional fundning?

How much is DOE/NNSA going to kick into the 2 new LANL plans? Anyone know how much they currently contribute to Sandia's or other plans around the complex?
 
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