LANS Total Compensation Proposal to NNSA by epmd

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									LANS Total Compensation
   Proposal to NNSA

      February 14, 2006




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Summary of the LANS Total Compensation Design
and Strategy as Proposed to NNSA
■ Retiree health & welfare (medical, dental, etc.) for current retirees
■ Total Compensation Plan 1 (TCP1):
   Substantially equivalent pay & benefits package for transferring
   employees (not including inactive vested transferring employees)
    • Pay practices
    • Active employee health and welfare, i.e., medical, dental, etc. (H&W)
    • Defined benefit pension plan
    • Defined contribution pension plan 401(k) – replaces 457(b), 401(a)
      DC and 403(b) Tax-Deferred Annuity Plan
    • Retiree health & welfare (medical, dental, etc.) – applies to future
      TCP1 retirees
    • Substantially equivalent plan compliance with contract


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Summary of the LANS Total Compensation Design
and Strategy as Proposed to NNSA

■ Total Compensation Plan 2 (TCP2):
  Market-driven pay & benefits package for new hires and
  other transferring employees
   • Pay practices
   • Active employee health and welfare benefits, i.e. medical,
     dental, etc. (H&W)
   • Retiree health & welfare (medical, dental, etc.) – applies to future
     TCP2 retirees
   • Defined contribution pension plan 401(k) – TCP2
   • Market-driven plan compliance with contract


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Summary of the LANS Total Compensation Design
and Strategy as Proposed to NNSA

Definitions:
■ “No change” means “Plan or policy will have no change except
   change in organization name(s), i.e., UC LANL to LANS”

■ “Will replicate” means “the benefit delivered will not change but the
   plan document wording will be modified as required to comply with
   legal requirements associated with the change from a governmental
   (public) plan to a private sector plan”

■ “ERISA” means “Employee Retirement Income Security Act of 1974”




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Retiree Health and Welfare Plans for current retirees
(No open enrollment requirement for transition on June 1, 2006*)
Provision         Current UC Retiree H&W Plans Future LANS TCP1 Retiree H&W Plan
Retiree Medical      Select EPO                     Will replicate.* Payment of premiums will be to LANS,
                     Options PPO                    LLC
                     Options PPO National
                     Options PPO Out-of-Area Plan   *There are 41 LANL retirees/spouses in the following plans:
                     Core New Mexico                       PacifiCare of CA HMO
                     Kaiser CA HMO                         PacifiCare of NV HMO
                     Kaiser Mid-Atlantic HMO               Kaiser Mid-Atlantic HMO
                     Kaiser South                          Kaiser CA HMO
                     Health Net HMO                        Health Net HMO
                     PacifiCare of CA HMO           These vendors are not willing to offer LANS a contract due
                     PacifiCare of NV HMO           to low enrollment. These 41 retirees will need to enroll in
                     PacifiCare Behavioral Health   another plan. LANS HR will contact these retirees and
                                                     assist them in making this change.
Retiree Dental     Dental PPO                       Dental PPO: Will replicate
                   PMI (HMO-style benefits not      Delta Dental/PMI: Only two retirees are enrolled Can not
                      available in New Mexico)       replicate. Dental PPO remains available
Retiree Legal      Voluntary plan                   Will replicate
Accidental D&D     Voluntary plan                   Will replicate


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Total Compensation Package 1 (TCP 1)
Summary of LANS TCP1 Pay Practices

Provision                                                        LANS TCP1 Pay Practices
Compensation structure                                           No change from UC-LANL

Holidays                                                         No change from UC-LANL

Vacation accrual rates & maximum accrual limits for              No change from UC-LANL
pre -12/1/92 hires and post -12/1/92 hires
Sick leave accrual rate                                          No change from UC-LANL

Tribal leave, jury duty, court leave & community service leave   No change from UC-LANL

Special Allowances (Nevada Test Site Permanent Duty &            No change from UC-LANL
Temporary Duty allowances, TA-55 Retention Pay and the
Isolation Allowance)
Overtime pay                                                     No change from UC-LANL

Shift differential                                               No change from UC-LANL



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Active Employee Health and Welfare Plans (TCP1)
(No open enrollment requirement for transition on June 1, 2006*)
Provision   Current UC H&W Plans             Future LANS TCP1 H&W Plans
Medical      Select EPO                     Will replicate*
             Options PPO
             Options PPO National           *There are 5 active employees in the
             Options PPO Out-of-Area Plan   following plans:
             Definity Health - NM                 PacifiCare of CA HMO
             Core New Mexico                      PacifiCare of NV HMO
             Kaiser CA HMO                        Kaiser Mid-Atlantic HMO
             Kaiser Mid-Atlantic HMO              Kaiser CA HMO
             Kaiser South                         Health Net HMO
             Health Net HMO                 These vendors are not willing to offer a
             PacifiCare of CA HMO           contract due to low enrollment. These 5
             PacifiCare of NV HMO           employees will need to enroll in another
             PacifiCare Behavioral Health   plan. LANS HR will contact the affected
                                             employees.

Dental       Dental PPO                     Will replicate
Vision       Basic vision                   Will replicate

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Active Employee Health and Welfare Plans (TCP1)
(No open enrollment requirement for transition on June 1, 2006 )

Provision           Current UC H&W Plans                         Future LANS TCP1 H&W Plan
Life                 Basic life                                 Will replicate
                     Core life
                     Supplemental life (voluntary plan)
                     Basic dependant life (voluntary plan)
                     Expanded dependant life (voluntary plan)
Accidental Death     Voluntary plan                             Will replicate
and
Dismemberment
Short-term           Basic STD                                  Will replicate
disability           Supplemental STD (voluntary plan)
Long-term            Supplemental LTD (voluntary plan)          Will replicate
disability (LTD)
Flexible spending    Healthcare Reimbursement Account           Will replicate; account balances will
accounts             Dependant Care Account                     roll over to LANS


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Active Employee Health and Welfare Plans (TCP1)
(No open enrollment requirement for transition on June 1, 2006 )

Provision              Current UC H&W Plans                Future LANS TCP1 H&W Plans
Tax-savings insurance  Section 125 plan – permits         Will replicate
plan (TIP)              medical, dental & other H&W
                        benefit premiums to be paid with
                        pre-tax earnings
Auto & home            Voluntary plan                     No change
insurance
Legal                  Voluntary plan                     No change


UC tuition waiver       Family members of UC              No change; Regents have approved
                       employees who live outside of       extending this waiver to LANS
                       California can attend UC school     employees
                       and pay in-state tuition
Scholarshare program 529 savings plan                      No change



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Total Compensation Package 1 (TCP1)
Active Employee Health and Welfare Plans

Provision             Current UC H&W Plans              Future LANS TCP1 H&W Plans
Employee tuition     Reimbursement for certain          No change
reimbursement        educational expenses
Savings bond program Purchase bonds through payroll     No change
                     deductions
Home loans           Employee mortgage program          No change
Employee Assistance   Counselors for employees reside   Will replicate
Plan                  on-site at Los Alamos
Business travel       Basic business travel accident    No change
accident insurance    insurance




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Total Compensation Package 1 (TCP1)
Defined Benefit Pension Plan (PP1)
   ■ The LANS Defined Benefit Plan (PP1) will be a replication of
     the UCRP to the maximum degree possible under IRS &
     ERISA regulations
   ■ LANS is required to “consider amending Pension Plan One
     to be consistent with any changes made by the Board of
     Regents … to the UCRP”




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Total Compensation Package 1 (TCP1)
Defined Benefit Pension Plan (continued)
Provision               Current UC Retirement           Future LANS Defined Benefit Plan (PP1)
                        Plan
Eligibility             Three tiers based on position   Will replicate
Vesting                 5 years (or age 62 if           Will replicate as well as add full vesting at
                        participated before 7/1/89)     the normal retirement age of 60 (ERISA
                                                        requirement)
Basic benefit formula   3 formulas in plan              Will replicate
Capital accumulation    Allows voluntary ad-hoc         Can not replicate due to ERISA rules
provision (CAP)         employer contributions
Service credit for      Credited at retirement          Will replicate
accumulated sick leave
Reciprocity with public Reciprocity with CalPERS,       Cannot replicate due to IRS regulations
sector plans            CalTRS, and several county
                        systems
Special service         Various buyback provisions      Can not replicate due to IRS rules
crediting rules

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Total Compensation Package 1 (TCP1)
Defined Benefit Pension Plan (continued)
Provision   Current UC Retirement Plan               Future LANS Defined Benefit Plan (PP1)
Forms of    Lump-sum cashout or default              Due to ERISA regulations and our DOE contract
payment     payment form:                            provisions, forms of payment will be simplified.
             Life annuity with 25% survivor         The following optional forms of payment will be
               continuance to “eligible survivors”   replicated:
               (50% for SS ineligible)               ▪ Life annuity
             Life annuity only if no eligible       ▪ 100%, 66 2/3% or 50% joint and contingent
               survivor at retirement date             annuities with spouse and/or dependents only
            Optional forms of payment:               ▪ 50% joint and survivor annuity with spouse
             Life annuity                             and/or dependents only
             100%, 66 2/3% or 50% J&C
             50% joint & survivor annuity with      Other considerations:
               spouse or domestic partner            ▪ The lump-sum cashout will be eliminated due to
            Only 75% (50% for SS ineligible)           a contract provision
            of basic benefit is payable in an        ▪ New plan will include ERISA spousal consent
            optional form elected by member.           requirements
            100% with spouse or domestic             ▪ The survivor continuance feature will also be
            partner.                                   eliminated


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Total Compensation Package 1 (TCP1)
Defined Benefit Pension Plan (continued)
Provision           Current UC Retirement Plan                 Future LANS Defined Benefit Plan
Survivor benefits   Various provisions depending upon          Will replicate, with some very limited reductions to
                    employee retirement eligibility            comply with ERISA death benefit rules

                                                               Benefits for all employees will be improved to
                                                               meet ERISA preretirement survivor minimum
                                                               requirements, which generally calls for minimum of
                                                               50% preretirement survivor benefit for spouse

                                                               These changes represent a net increase in value
Social Security     Social Security eligible-only:             Will replicate
supplement          $133 X service X age-based benefit
                    factor, payable to age 65
Normal retirement   Age 60 with 5 years of service             Will replicate
Early retirement    Age 50 with 5 years of service             Will replicate
Mandatory           Plan provisions exist in the UCRP for      Will replicate.
Employee            employee contributions. While allowed,     While allowed, no contributions are currently
Contributions       no contributions are currently required.   planned



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Total Compensation Package 1 (TCP1)
Defined Benefit Pension Plan (cont.)
Provision             Current UC Retirement Plan                          Future LANS Defined Benefit Plan
Disability benefit     5 years of service to be eligible                 Will replicate
                       Benefit is a percentage of final pay,             If unable to replicate in the LANS Defined
                        dependent on service                              Benefit Plan, will replicate in the long-term
                       Converts to retirement benefit upon eligibility   disability H&W benefit plan

Basic death benefit    $7,500 payable to beneficiary upon                Will replicate $7,500 death benefit and
                        member’s death                                    refund of employee contribution balance
                       Capital accumulation payment (CAP)
                        with interest                                     No provisions for CAP payments are
                       Refund of remaining unpaid balance of             required, since CAP accounts can not
                        employee contributions, with interest             be included in this plan
Cost-of-living         July 1 based on preceding year’s CPI              Will replicate
adjustments             (Los Angeles and San Francisco, February to
                        February)
                       100% of CPI increase up to 2%
                       75% of CPI increase over 4%
                       Maximum 6% COLA




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Total Compensation Package 1 (TCP1)
Defined Contribution Programs

Current UC Defined Contribution Program consists of three
plans:
■ 457(b) Deferred Compensation Plan (“457(b)”) (established in
  2004)
■ 401(a) Defined Contribution Plan (“401(a) DC”)
■ 403(b) Tax-Deferred Annuity Plan (“403(b) TDA”)


IRS regulations for governmental (public) plans vs. private
sector plans limit LANS to one Defined Contribution Plan:
■ 401(k) Defined Contribution Plan


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Total Compensation Package 1 (TCP1)
Defined Contribution Programs (continued)

Provision              Current UC Defined Contribution Plans           Future LANS TCP1 Defined
                                                                       Contribution Plan
Eligibility            All employees except students working <20       All employees eligible for TCP1, except
                       hours/week.                                     students working less than 20 hours/week.
Mandatory              401(a) DC Plan                                  401(a) DC plan cannot be replicated
employee pretax         Social Security eligible: 2% of covered
contributions            compensation to OASDI wage base, 4% in
                         excess, minus $19/month
                        Non-Social Security eligible: 3% of covered
                         compensation, minus $19/month
Voluntary employee     457(b) Plan                                     457(b) plan cannot be replicated
pretax contributions
                       403(b) Tax-Deferred Annuity Plan
                        “Normal” deferral, plus                       401(k) plan will replace the 403(b)
                        “Special” catch-up after 15 years of           “Normal” deferral, plus
                         service, plus                                  Age 50 catch-up
                        Age 50 catch-up                                Cannot replicate “Special” catch-up




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Total Compensation Package 1 (TCP1)
Defined Contribution Programs (continued)

■ LANS employees will now be subject to private sector vs. public
  sector plan rules for maximum allowable pretax savings:
   • Maximum employee pretax savings opportunities are reduced to 401(k) rules
     vs 403(b) and 457(b) rules, see below for 2006 limits

   Sample Employee    Public Sector Plans - 403(b) and 457(b)   Private Sector Plans – 401(k)
                                    Maximums                             Maximum
   Under age 50                      $30,000                              $15,000
   Age 50 and older                  $40,000                              $20,000

■ Also mandatory pretax contributions in the 401(a) DC Plan
  cannot be replicated (2% for most employees)



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Total Compensation Package 1 (TCP1)
Defined Contribution Programs (continued)
Provision               Current UC Defined Contribution Plans             Future LANS TCP1 Defined
                                                                          Contribution Plan
Voluntary employee      401(a) DC Plan - only                             ■ Will provide after-tax contributions in
after-tax contributions  After-tax contributions permitted per payroll     401(k) plan
                          deduction agreement, limited only by 415(c)     ■ Pretax and after-tax contributions are
                                                                            combined for the IRS contribution limit
                                                                            of $44,000
                                                                          ■ Opportunity to contribute will be
                                                                            reduced
Rollover contributions All plans allow rollovers                          401(k) plan can accept rollovers from all
                                                                          UC plans
Vesting                 Immediate                                         Same
Withdrawals/in-         Both the 403(b) TDA and 457(b) plan allow for:    Will replicate the 403(b) plan hardship
service distributions    Hardship withdrawals                            rules in the new 401(k)
                         Limited in-service withdrawals
Distributions on        Members may elect distributions to begin any      Will replicate
severance from          time after severance. Distributions must begin
employment              as needed to meet IRS minimum distribution
                        requirements.

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Total Compensation Package 1 (TCP1)
Defined Contribution Programs (continued)

Provision        Current UC Defined                    Future LANS TCP1 Defined Contribution
                 Contribution Plans                    Plan
Forms of         Various forms of payment,             Will replicate lump sums and installments.
payment          including partial distributions and   Currently evaluating the need for other
                 purchase of annuity                   distribution options
Investment       Participant-directed                  A range of investment options will be offered.
options           Core funds (UC funds available)     Cannot replicate current UC Core fund
                  Mutual funds                        investments
                  Brokerage window

Death benefits    Lump sum                            Will replicate
                  Beneficiary may request annuity
                   purchase
Employee loans   403(b)                                Will replicate the 403(b) loan provisions in the
                  Standard loan provisions            new 401(k) plan



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Total Compensation Package 1
Retiree Health and Welfare Plan
(Applies to future TCP1 retirees)
Provision         Current UC Retiree H&W Plans                                         Future LANS TCP1
                                                                                       Retiree H&W Plan
Retiree Medical    Eligibility: Receiving monthly (UCRP) income with 10 years of      Will replicate
                    service at retirement or with five years and meeting Rule of 75,
                    i.e., Age + Service ≥ 75
                   Maximum employer contributions are service-based. (100% of
                    maximum employer contribution after 20 years or hired pre-1990,
                    5% increments between 10 and 20 years, 50% with 5-9 years
                    AND age & service of 75+, 0% under 5 years.)
                   Dependant coverage: eligible adult family member and
                    eligible child
                   Survivor coverage: Yes
Retiree Dental     Contributions: Same as medical plan above                          Will replicate
                   Dependant Coverage: Eligible adult family member and
                    eligible child
                   Survivor Coverage: Yes

Retiree Legal      Voluntary plan                                                     Will replicate
Retiree            Voluntary plan                                                     Will replicate
Accidental D&D

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Section 1 - Total Compensation Package 1
Substantially Equivalent Plan Compliance
■ TCP1 objective is to provide a complete package of
  employee pay and benefits that is substantially equivalent in
  the aggregate compared to the UC LANL package
■ Substantially equivalent benefit plans will be provided by
  replicating the UC-LANL benefits program where possible
■ LANS TCP1 and the current UC LANL benefit plans have
  nominally the same relative value and are therefore
  substantially equivalent
   • Changes to preretirement survivor benefits required by ERISA will
     increase TCP1 value by about 0.2%.
   • Estimated value of reduced employee pretax savings opportunities
     and new Social Security taxes will reduce TCP1 value by about 0.5
     to 0.6%.
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Total Compensation Package 2 (TCP2)
LANS Benefit Design Policy Statement
  Provide a market-driven benefit plan for new hires, retired or
  retiring UC employees, and other LANS partner-company
  transferees referred to as Total Compensation Package 2 (TCP2).
  TCP2 shall not exceed 105% of market, aligned with peer
  companies and includes:
  ■ Access-only retirement medical plan
  ■ 401(k) plan with a matching company contribution plus an additional
     service-based company contribution and
  ■ Replicate the UC-LANL health and welfare plans
     (medical, dental, life, disability, etc.)



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Total Compensation Package 2 (TCP2)
Pay Practices and Health and Welfare Plans:
Same as TCP1
Provision                                       LANS TCP2 Pay Practices
Holidays, vacation, sick leave, tribal leave, Same as TCP1, no change
jury duty, court leave, community service from UC-LANL
leave, overtime pay, shift differential, etc.


Provision                                       LANS TCP2 Health and
                                                Welfare Benefit Plans
Medical, dental, vision, life, AD&D, short-     Same as TCP1
term disability, long-term disability, legal,
flex spending, UC tuition waiver, tuition
reimbursement, etc.

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Total Compensation Package 2
Retiree Health and Welfare Plan
(Applies to future TCP2 retirees)
Provision                        Proposed LANS TCP2 Post Retirement Medical and
                                 Dental
Retiree medical eligibility      Age 50 with 10 years of service at retirement or with five
                                 years and meeting “Rule of 75, i.e., Age + Service ≥ 75”
Medical plans offered            Same as TCP1
Employer medical contributions   None
Medicare Part B reimbursement    No
Dependant coverage               Same as TCP1
Survivor continuance             Yes
Dental eligibility               Same as retiree medical eligibility above
Dental plans offered             Same as TCP1
Employer dental contributions    Same as TCP1
Dependant coverage               Same as TCP1

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Total Compensation Package 2 (TCP 2)
Proposed TCP2 Defined Contribution 401(k) Plan
Provision                 Proposed LANS TCP2 401(k) Plan
Eligibility               Immediate eligibility for transfers eligible for TCP2; immediate
                          eligibility for LANS new hires, except students working less than 20
                          hours per week
Voluntary member          Allowed, up to IRS limitations on elective deferrals
pretax contributions       $15,000 for 2006, plus additional $5,000 catch-up for employees
                            age 50 and over
Voluntary member after- Allowed, up to IRS limitation on total contributions (including both
tax contributions       employer and employee) to the plan, $44,000 for 2006
Employer matching         100% match on first 6% of member voluntary contributions
contributions
Additional employer       Service-based contribution: 3.5% per year for 0-9 years of service,
nonmatching               4.5% for 10 -19 years of service, 5.5% for 20+ years of service
contributions
                                                                                                25
Total Compensation Package 2 (TCP2)
Proposed TCP2 Defined Contribution 401(k) Plan (cont.)
Provision               Proposed LANS TCP2 401(k) Plan
Investment options      Same as TCP1 401(k) plan
Rollover contributions Plan will accept qualified rollovers from 401(a), 403(b), and 457(b) &
                       401(k) plans
Vesting                 Immediate on all contributions
Withdrawals and in-     Standard hardship withdrawal provisions
service distributions    No other in-service distributions, except for rollovers and after-tax
                          contributions
                         Matching contributions not available for hardship

Distributions           Employees may elect distributions to begin any time after severance.
                        Distributions must begin as needed to meet IRS minimum distribution
                        requirements.
Loans                   Plan will include loan provisions consistent with TCP1 401(k)

                                                                                                  26
Section 3 – Contract Requirements and Compliance

■ Create total compensation package substantially equivalent to
  that provided by UC-LANL for transferring employees (not
  including inactive vested transferring employees).  Yes
■ Create market-driven total compensation package, for new
  hires and other transferring employees, that does not exceed
  105% of market compared to DOE approved comparator
  companies.  Yes
■ Provide substantially equivalent retiree medical and dental
  benefits for current retirees.  Yes


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