Inequity in Costing the Surviving Spouse Option

Retirees' Request:

Equalize the cost of the Surviving Spouse Option by extending the same cost, 2% reduction in pension, to all retirees regardless of retirement date.

Discussion

At retirement, retirees of ORNL, B&W Y-12, UCOR, and NSPS may elect a Surviving-Spouse Option (SSO) which will provide a pension for a surviving spouse equal to one-half of the retiree’s pension.  The cost of this benefit is paid by a percentage reduction in the retiree’s pension.  Prior to July 1, 2004, the reduction factor ranged between 5 and 18%, depending on the ages of the retiree and the spouse.  The average was approximately 8%.  On July 1, 2004, the reduction factor for future retirees of ORNL and B&W Y-12 was decreased to a flat 2%.  This improvement in benefits was not extended to retirees of ORNL or B&W Y-12 who retired before July 1, 2004; nor was it extended to active employees or retirees of UCOR or WSI.  This inequity forces older retirees to pay a much higher cost than younger retirees, for the same benefit.  This inequity persists today, more than a decade later.

Correction of this inequity is foremost among CORRE’s requests of DOE and its Oak Ridge contractors.  CORRE believes that this issue should be resolved now, for the following reasons:

-Some 7,000 pre-2004 retirees and spouses would benefit financially; it would provide an increase in take-home pay averaging approximately 6%.

-These retirees comprise the older population, those who most need financial help.

-Precedence exists within DOE contractor organizations for (1) granting identical SSO costs simultaneously to current and future retirees, and (2) for extending benefits to active employees first and retirees later.

-Correction of the SSO inequity is affordable.  The impact of corrective action is estimated to be a decrease in pension trust funding level of approximately 1%.  This amount will not prohibit the contractors from attaining 100% funding levels.

-The obstacle is a stalemate.  No one disputes that an inequity exists in costing the SSO.    The real obstacle is a result of DOE’s position, which is that the contractors have made   no proposal for change, combined with the contractors reluctance to propose corrective action under an assumption that DOE will disapprove.

CORRE believes that DOE and its Oak Ridge contractors can work together to correct this decade-long inequity in retiree benefits.  The retirees deserve no less.