<nobr>May 1, 2006</nobr>

Department of Energy to End Reimbursement for Contractors’ New DB Plan Expenses

The Department of Energy (DOE) has announced a new policy discontinuing reimbursement to contractors for defined benefit pension costs for new employees hired after a date no later than March 1, 2007. DOE will continue to reimburse contractors for DB accruals for existing employees but only for amounts comparable to defined contribution plan market based allocations for future employees.

The DOE policy affects both future new hires as well as existing employees covered under a defined benefit plan. For employees hired after the effective date, the DOE will only reimburse for DC plan costs, and only if the plan Relative Benefit Value Index (RBVI), a measure established by the DOE, does not exceed the market average RBVI by more than five percent.

For existing employees and existing plans, the DOE will no longer reimburse costs associated with any amendments increasing or potentially increasing benefits, including early retirement windows, regardless of the plan’s funded status. The DOE will also not reimburse costs for lump sum distributions, other than small lump sums no greater than $5,000, with respect to future accruals. The DOE will reimburse costs of permitting existing employees a one-time election between DB and DC coverage.

The DOE also announced that reimbursement of contractors for medical benefits will be similarly limited to “market trends.”

(ERIC note: We find this policy disturbing in light of other pronouncements relating to retirement security and we are interested in ERIC member comment, especially from companies that may contract with DoE or other federal agencies. Please reply to Mark Ugoretz, president (mugoretz@eric.org) and/or Janice Gregory, senior vice president (jgregory@eric.org).)

Text Files:

DOE Press Release & Policy

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