DOE Management: Contract Provisions Do Not Protect DOE From Unnecessary Pension Costs
RCED-94-201
Published: Aug 26, 1994. Publicly Released: Oct 19, 1994.
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Highlights
Pursuant to a congressional request, GAO reviewed Department of Energy (DOE) pension fund payments for University of California employees at three DOE laboratories, focusing on whether: (1) DOE can recover the payments if they are unneeded; and (2) provisions in revised contracts will allow DOE to control its future pension costs and prevent unneeded payments.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Energy | The Secretary of Energy should: (1) evaluate the advantages and disadvantages of all of the alternatives available to recover surplus pension funds associated with the laboratory employees; and (2) initiate action to recover the surplus funds if recovery is to the government's advantage. |
Closed – Implemented
As recommended, DOE evaluated the advantages and disadvantages of recovering surplus pension funds. It concluded, however, that it was not in its best interest to do so. Efforts to recover the surplus assets via a plan termination could be delayed several years by lawsuits or time to pass special legislation and, during the delay the surplus could be substantially reduced. In addition, DOE would then be required to pay annual contributions of $140 million. Use of the surplus funds to pay retiree medical benefits would incur a significant cost because all plan participants must be vested immediately.
|
| Department of Energy | To improve control over the Department's liability for pension fund contributions, the Secretary of Energy should review ongoing contracts with all management and operating contractors that have defined benefits pension plans to determine if they provide for DOE approval of pension benefit changes and limit the DOE contribution to that needed to maintain an equilibrium between assets and current liabilities. |
Closed – Implemented
DOE determined that all management and operating contracts where separate site pension plans have been established do require DOE approval for changes to pension benefits. In addition to the three laboratories managed by the University of California, only three facilities with defined benefit plans do not have separate site plans: Stanford Linear Accelerator Center, West Valley Test Facility, and the Waste Isolation Pilot Plant. DOE will continue to establish separate site plans where feasible.
|
| Department of Energy | To improve control over the Department's liability for pension fund contributions, the Secretary of Energy should initiate negotiations with the University of California and other contractors, as necessary, to revise the contracts to implement these controls. |
Closed – Implemented
DOE indicated that it will continue to establish separate site pension plans where feasible. DOE also stated that it has initiated discussions with the University of California, the manager of the three laboratories, and Westinghouse, the manager of the Waste Isolation Pilot Plant, about establishing separate plans.
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