Magazine article Nation's Cities Weekly

Energy Department Proposal Could Undermine Public Sector Pensions

Magazine article Nation's Cities Weekly

Energy Department Proposal Could Undermine Public Sector Pensions

Article excerpt

A U.S. Department of Energy (DOE) proposal could undermine city, county and state public pensions by placing certain constraints on the types of pensions that DOE would pay for when letting public and private sector contracts.

The proposal, which was published in the Federal Register by DOE's Office of Management on April 27, 2007, would limit pension benefits that public and private sector contractors may provide to new employees to Defined Contribution or DC plans.

State and local government agencies that contract with DOE would no longer be permitted to implement their Defined Benefit (DB) plans for new workers paid for through DOE contracts unless the secretary of energy determined that the plan was operating efficiently and within a specific cost structure defined by the DOE.

If the secretary refused to certify a DB plan, the state and local government affected would be required to take on the administrative burdens and transition costs associated with freezing existing DB plans and operating a new DC plan for future employees involved in contract work with the DOE.

The National League of Cities and nearly 20 other public sector employer and labor organizations expressed their opposition to this plan in a letter to the Office of Procurement and Assistance Management dated May 11, 2007.

The letter underscored the importance of DB plans to state and local government workers.

Noting that "the proposal is simply bad public policy," the letter goes on to say that "it is irresponsible for an agency of the federal government to limit the type of benefits a public or private contractor may provide its employees. …

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