Energy Department Reverses Decision to Cut Pension Benefits

June 20, 2006 (PLANSPONSOR.com) - The Department of Energy (DoE) has decided to suspend its Contractor Pension and Medical Benefits Policy, which cut reimbursement to contractors for benefits of new hires, for one year.

In a letter to the chairman of the Committee on Energy and Natural Resources, Secretary of Energy Samuel Bodman writes that the department has seen “escalating and volatile growth” in its costs to reimburse contractors for employees’ pensions and other post-employment benefits. According to Bodman the estimated costs to the department for fiscal year 2006 is $784 million, a nearly 200% increase since 2000.

Bodman says the unfunded liability for these benefits reported for fiscal year 2005 was $11.6 billion. He expresses concern that the growing costs will result in less funds for the department’s critical missions.

Attached to the letter is his memo to the Director of the Office of Management, in which he also directs the office to solicit views on the issue of contractor benefits from stakeholders, including Congress. The memo says the reversal of the policy is effective immediately.

The DoE had announced discontinuation of reimbursements for new hires in May (See Energy Dept Cuts Contractor Pension Cost Coverage ).

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