The Department of Energy, which has a long history of
using contractors and faces significant retirement health
benefits and pension costs for those employees, needs to
improve program oversight–starting with its funding
deficit, the General Accounting Office has said.
It said that as of September 30, 2003, DoE reported an
estimated $13.4 billion in unfunded contractor
postretirement health and pension benefits–a figure
that represents the present value of all benefits
attributed to employee service before September 30,
2003, minus the fair market value of assets dedicated
to the payment of retiree benefits.
DoE’s current focus on total benefits rather than
individual benefit components in evaluating benefits
does not fully recognize the differences in costs
between deferred benefit programs, such as pension and
postretirement health benefits, and other benefit
components, said GAO.
It said the distinction is important because changes to
pension and postretirement health benefits can have a
significant impact on DoE’s long-term costs and budgetary
needs.
To illustrate the point, it pointed out that “a one
percent increase in a contractor employee’s current
year vacation benefits has less impact on DoE’s
long-term costs and budgetary needs than a one percent
increase in postretirement pension or health benefits,
which have a continuous and compounding effect as they
are paid out in each year of retirement.”
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