The Paducah Sun
The Paducah Sun

Tuesday, May 09, 2000 Paducah, Kentucky

USEC can pay more on cuts: DOE

By Bill Bartleman bbartleman@paducahsun.com--270.575.8650

The U.S. Department of Energy says there is sufficient money in the United States Enrichment Corp.'s pension fund to offer early retirement incentives to absorb many of the 621 job cuts planned at its uranium enrichment plants in Paducah and Portsmouth, Ohio.

DOE says that since USEC took control of the retirement fund last year, the fund has earned at least $36 million more than the amount needed to meet current and projected liabilities. The early retirement would cost about $7 million, DOE says.

However, Charles Yulish, USEC vice president of communications, says DOE is wrong about the pension fund revenue. He said a May 3 actuarial report on the pension fund says that if benefits are increased through early retirement offers, additional money would have to be placed into the fund, money that USEC doesn't have.

Energy Secretary Bill Richardson and congressmen from Ohio and Kentucky want USEC to use the early retirement incentive to reduce the impact of a plan to lay off 350 workers at Portsmouth and 271 at Paducah.

U.S. Sen. Mitch McConnell suggested in a recent letter to Richardson that funds be made available to offer up to six years of service credit to senior workers, the same as has been offered at DOE plants. DOE estimates that up to 150 workers would take advantage of the early retirement, reducing the number of newer workers who would be left without jobs.

Richardson agreed the incentive is needed, but said it is up to USEC to offer it through its pension fund, which he contends has more than enough to absorb the early retirement costs.

Terry Freese, a top DOE official in Washington, said there was $440 million in the retirement fund when it was transferred to USEC a year ago. He said there was an assumption the fund would earn $6 million this year, enough to meet projected liabilities. Freese said that USEC officials told him the earnings were $36 million more than projected.

Yulish, the USEC spokesman, said the earnings figure could be misleading.

"The money in the fund is invested ... and as the stock market goes up and down, the value of the fund changes," Yulish said. "If we were to offer benefits based on the market value, and the market declined, we wouldn't have the money to pay the benefits."

The day-to-day value of the fund is on paper, and not "money in the bank," said Yulish, adding that an actuarial study is the only way to determine the true value.

Yulish would not provide the Sun with a copy of a letter that accompanied the actuarial study. However, he read a reporter one sentence that stated: "The plan received no surplus pension assets over and above the pension benefit liabilities as so determined. Any pension benefit enhancement increases the pension fund liability."

DOE's Freese said actuarial studies are based on conservative assumptions, and not the actual performance of the fund. He hasn't seen the USEC study, but assumed it was based on conservative estimates of 5 percent revenue, and not the reality of the 20 percent earned this year.

Freese agreed that the value changes with the rise and fall of the stock market. However, he said it is highly unlikely that the value would fall below the level needed to fund an early retirement plan.

A congressional investigative committee has weighed in on the debate and, based on DOE comments, asked the USEC board of directors to intervene and approve the early retirement plan over the objectives of USEC Chief Executive Officer Nick Timbers.

U.S. Rep. Bart Stupak, D-Mich., the ranking Democrat on the House Commerce Committee's Oversight and Investigations Subcommittee, sent a letter to USEC Board Chairman James R. Mellor. U.S. Rep. Ed Whitfield, who represents western Kentucky, and U.S. Rep. Ted Strickland, who represents southern Ohio, are members of the subcommittee and endorsed the letter.

If USEC and DOE continue to disagree on the value of the pension fund, the committee has offered to intervene and help to resolve the dispute.

However, the issue must be resolved quickly to affect the recent layoffs announced by USEC. Workers have until May 24 to decide if they want to accept a severance package that includes a cash payout of up to $17,500 plus heath insurance benefits, retraining funds and relocation funds.

USEC said the layoffs will begin taking effect on July 14.