Energy Dept Cuts Contractor Pension Cost Coverage

May 4, 2006 ( - The US Department of Energy (DoE) said it will no longer cover the cost of traditional pension plans for new hires of its contractors.

The department has reimbursed companies working for it for the costs of their defined benefit pension plans, but will begin paying only the costs of defined contribution plans for new workers next year, the Wall Street Journal reports.

Individuals already working for the approximately 100,000 DoE contractors will not be affected, according to the WSJ.

Labor groups said they fear the move will encourage more departments and companies to drop traditional DB plans. “With retirement security fast becoming a goal that is beyond the reach of most Americans, the federal government should sustain and promote secure, reliable pensions for all workers, and especially those who are employed in the nation’s defense, developing, manufacturing, testing and cleanup of nuclear weapons,” said John Sweeney, president of the AFL-CIO, in the news report.

However, the decision falls in line with the administration’s general support of DC plans over more costly DB plans. DoE employees are covered by both DB and DC plans, but the department is taking steps to reduce the cost to taxpayers of work done by contractors. “It is important that we take this action now to improve the predictability and impact of these costs and mitigate the growth of the department’s long-term liabilities,” said Energy Secretary Samuel Bodman.