Fore Note: As the economy continues to struggle, many feel that federal, state and local governments have failed to understand the situation and have continued to grow and spend. Below is a story about at least one government affiliated operation that is taking the tough steps necessary to stay afloat. Maybe other government operations could learn from their actions.

ORNL squeezes benefits to cut costs

By Frank Munger
OAK RIDGE — As part of ongoing, multiple efforts to reduce costs and prepare for a "sustained period of budget pressure," Oak Ridge National Laboratory Director Thom Mason announced on Wednesday additional restructuring of the employee benefits program.

Mason sent a four-page memo to staff outlining final actions on employee benefits, including changes to the pension plan and medical and health plans.

Generally speaking, the changes mean ORNL salaried employees will be sharing more of the costs and, in some cases, may receive benefits that aren't quite as good.

"It does represent an increasing cost burden to the employees," Mason said.

The ORNL director said the changes were reviewed exhaustively by lab contractor UT-Battelle and its board of governors, as well as the U.S. Department of Energy. The changes are an attempt the cut costs while remaining competitive with other research institutions for recruiting and retaining top talent.

The lab will retain its traditional pension plan, although the way the benefits are calculated will be altered in the future. In addition, all salaried employees — including the existing work force as well as new hires — will have mandatory contributions to make the pension costs affordable.

ORNL also plans to reinstate matching contributions to the 401(k) savings plan, which had been suspended, but the maximum match will be less than before the suspension.

The lab is changing the medical plans offered to employees for 2013, with one of the options being a new "high-deductible health plan." In addition, there are changes in the prescription drug plan, putting more emphasis on generics and mail-in drug orders, and employees will have to pick up a greater share of the drug costs.

The costs of operating the Oak Ridge lab have been higher than average among other national lab and research institutions, Mason said.

The changes, including earlier personnel reductions and reorganizations, should bring the lab's costs in line with its peers and make the lab more competitive in the future, he said.

Union workers are not affected by the changes. Benefits for ORNL's hourly workers are covered by their bargaining agreement and will have to be addressed in future negotiations, Mason said.

Below is the letter ORNL employees received pertaining to their benefits.

Positioning for the Future -- Suspension of Matching Contributions to 401(k) Savings Plan and Changes to Paid Leave Policy

As we continue our efforts to position Oak Ridge National Laboratory to deal with a period of significant budget pressures, we have secured approval from the U.S. Department of Energy to make some changes to our retirement benefits package and our paid leave policy.

Suspension of Matching Contributions to 401(k) Savings Plan

Retirement benefits offered to UT-Battelle employees include both an employer-funded pension plan and a 401(k) savings plan.  Because of historically low interest rates and volatile market conditions, we are facing unprecedented funding requirements for the pension plan.  Although voluntary contributions in FY10 and FY11 reduced our pension liability by several million dollars, we are projecting a payment of approximately $95 million in FY12.

UT-Battelle currently matches employee contributions to the 401(k) savings plan at 100% of the first 2% of pay that an employee contributes to the plan and 50% of the next 4% of pay, for a maximum matching contribution of 4% of pay.  Effective with the first payroll after December 1, 2011, we will suspend UT-Battelle’s matching contributions to the 401(k) savings plan for all non-bargaining unit employees.  The amount that would have been required for these contributions (approximately $1 million per month) will be redirected to reduce our pension liability.  We regret having to take this action, but our analysis indicates that it is necessary to meet our funding obligations without further negative impacts on staff or programs.  We will restore competitive matching contributions to the 401(k) savings plan when business conditions improve, although the percentage of employee contributions that we elect to match may change.  We will assess the Laboratory’s financial situation before December 31, 2012, and make a decision on reinstatement and structure of our matching contributions going forward. 

Participating in the savings plan is an effective way for employees to enhance their future financial security, and we strongly encourage you to continue your own contributions.  You can review and change contribution amounts and allocations by logging on to the savings plan website at or by calling Charles Schwab at 1-800-777-4015.

Changes to Paid Leave Policy

Beginning January 2, 2012, we will establish a new Business Quarter shift for exempt staff, replacing the current Business Month shift.  This will provide additional flexibility in balancing workload demands (project deadlines, billable hour targets, etc.) with personal responsibilities.  Also beginning January 2, 2012, we will replace our current policies on sick leave and personal leave with a paid leave policy, providing exempt (monthly) employees with 3 days per year and non-exempt (weekly) employees, who are not eligible for the Business Quarter shift, with 6 days per year for occasional absences associated with illness, injury, or personal business.  The Incidental Absence Code for non-exempt employees will be eliminated at this time.  These changes (which will have no effect on vacation, jury duty, funeral leave, or short-term disability policies) are expected to produce savings of about $3.4 million per year.  Implementation details will be available on December 1, 2011.  

 Continuing Efforts to Reduce Cost

We continue to seek effective ways of streamlining the Laboratory’s operations, reducing our overhead costs, and controlling the cost of benefits.  Additional changes to the benefits package are under consideration, and details will be announced as soon as possible.  As always, your support and continued commitment to ORNL and its mission will be vital to our future success.