After an intensive year-long negotiating effort, Sandia’s pension plan changes and other benefit changes affecting employees’ retirement years have won approval from DOE and the National Nuclear Security Administration. The changes apply only to participants in the Labs’ Retirement Income Plan. Represented employees and formerly represented retirees covered by the Pension Security Plan are not affected by any of the changes at this time. Their pension benefits are negotiated as part of the collective bargaining process.
Based on current retirement patterns and with the caveat that every employee’s circumstances are unique, the new formula should increase pensions by 25 percent on average — sometimes more, sometimes less –for employees who retired on or after Dec. 19, 2000. Employees and surviving spouses who retired before that will receive a 15 percent ad hoc increase on the fixed portion of their pensions, effective on Jan. 1, 2002.
According to Labs Deputy Chief Financial Officer Ralph Bonner (10300), the changes to the plan — combined with the value of the company match to the 401(k) plan — make Sandia’s retirement benefit very competitive.
In a letter to Sandians Feb. 13 announcing the approval, Labs President C. Paul Robinson noted that as the give-and-take of the negotiation process moved forward, the proposed changes had strong support from Lockheed Martin, the Sandia Board of Directors, and the New Mexico congressional delegation.
Armed with a vigorous “go for it” nod from Paul and Executive VP Joan Woodard, Ralph, Mark Biggs, and Bruce Criel (both 10310) did the bulk of the nuts-and-bolts work of putting the new pension package together. Becky Statler (3341) and her team from the Benefits organization developed the changes to the medical plans.
Here’s the new formula (effective Dec. 19, 2000): “High-three” average earnings (i.e., the average of the highest three years of an individual’s eligible income) multiplied by credited pension service multiplied by a retirement age factor. The retirement age factors range from 2.0 percent at age 62 and above to 1.04 percent for ages 50 and below (See “Retirement age factors” chart on page 3 for the complete schedule of factors). Under the formula in place before Dec. 19, 2000, the maximum multiplier was 1.5 percent of High-5 average earnings.
The revised pension plan formula applies to Sandians whose retirement dates are on or after Dec. 19, 2000. The new formula will provide most Sandia employees with larger — sometimes substantially larger — pension checks when they retire. Because the new formula is designed to encourage employees to extend their Sandia careers into their early 60s and beyond, a small number of employees — especially those who plan to retiree before age 55 — may not fare as well under the new plan as under the old one. Those employees will have the option of retiring under the old formula through Dec. 19, 2005. At the end of that five-year period, a final calculation will be made under the old formula and employees will be guaranteed a pension of at least that amount in the future. (The Non-Qualified Pension Plan for directors and above will be discontinued for those who retire on or after Dec. 19, 2000, due to the increase in the Retirement Income Plan formula.)
In an ad hoc adjustment for retirees and surviving spouses who left prior to Dec. 19, 2000, the fixed portion of pension benefits will be increased by 15 percent across the board. That increase takes effect Jan. 1, 2002, and will be reflected in the May 2002 pension checks from Prudential.
Here are other key benefit changes, as outlined in Paul’s letter to employees and retirees.
- Effective immediately, charges for survivor annuity coverage will be reduced for future pensioners. For example, the charge applied to a 50 per cent surviving spouse annuity for a service pension will be reduced from 7 percent to 5 percent. Survivor annuity charges for current retirees who elected the coverage will be reduced effective Jan. 1, 2002.
- Medical care premium-sharing rates for employees who retire on or after Jan. 1, 2003, will vary based on their years of service at retirement as shown in the following table: Years of service Premium share 30 or more 10 percent 25-29 15 percent 20-24 25 percent 15-19 35 percent 10-14 45 percent Individual premium cost sharing amounts will be determined by applying the applicable percentage from this table against the average costs of providing health care for a peer group of Sandia retirees and their families.
- Effective Jan. 1, 2003, Sandia’s non-HMO medical care plans will change the way they coordinate benefit payments with Medicare so that Medicare- and non-Medicare-eligible retirees will receive comparable reimbursements for medical expenses from all sources. To limit out-of-pocket expenses that may result from this change, Sandia’s Two Option Plan will implement an annual stop-loss equal to $250 per individual or $500 per family. The new Sandia Intermediate and Basic medical plan options will have larger stop-loss amounts.
- Effective Jan. 1, 2003, the premiums paid by the surviving spouse of a deceased retiree for continued medical care coverage will be reduced from 100 percent to 50 percent of the cost of coverage.
- Employees who retire on or after Jan. 1, 2009, will initially receive post-retirement life insurance equal to one times pay up to a maximum of $100,000. This amount will be reduced by 10 percent per year from ages 66-70 until it stabilizes at 50 percent of final pay up to a maximum of $50,000.