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Thursday, August 19, 2010
Sandia Labs Cuts Pensions
By John Fleck
Copyright © 2010 Albuquerque Journal
Journal Staff Writer
Sandia Labs on Wednesday announced cuts in future retirees' benefits as the nuclear weapons research center attempts to reduce a $2 billion pension liability.
"We have some significant cost challenges associated with our pension plan," Sandia human resources chief John Slipke said in an interview.
The reduction, which will affect employees leaving after Jan. 1, 2012, is the second major move by Sandia to deal with the costs of health and retirement benefits in the past year. In September, Sandia announced a reduction in future retirement health benefits.
The pension cuts come eight years after Sandia changed pension benefits in the opposite direction. In 2002, when Sandia's retirement accounts were flush with cash, retirees received a 15 to 25 percent pension increase.
The situation today is different. To make up a shortfall in money needed to meet future benefit requirements, Sandia will need to pump $300 million a year into the pension plan from 2012 to 2014, with a total of $2 billion needed between now and 2020 to meet the estimated pension fund obligations for the 12,900 current and future retirees eligible for benefits under Sandia's pension plan, Slipke said.
Slipke blamed the current problems on the market volatility in recent years, which has reduced the value of the money set aside for future pensions. Sandia officials said the 2002 increase played no role in creating the current pension system deficit.
The changes announced Wednesday apply only to workers hired before Jan. 1, 2009. Workers who joined Sandia after that are eligible for a different, less lucrative retirement plan.
Under the old plan, workers' retirement pay used a formula based on years of service, age and the three highest years' salary. The new formula will use the average of all years' salary after Jan. 1, 2012, meaning that after 2015, retirement pay would be less than under the current system.
Under the changes, an employee retiring in 2015 after 28 years of service, with a final salary of $111,000 would see his or her retirement drop from $52,200 a year to $48,600 a year, according to Sandia.
The change will save $380 million from 2011 to 2020.
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