The Department of Energy passed on a plan to offer early retirement incentives to Hanford contractor employees because of the cost, said DOE officials.
The decision was based on the nation's overall fiscal climate and the "call heard from the electorate on fiscal reduction," said Merle Sykes, chief business officer for DOE's Office of Environmental Management.
After the early retirement proposal was rejected, Hanford contractors CH2M Hill Plateau Remediation Co. and Mission Support Alliance announced plans to lay off about 1,600 workers. A reduction in employees is needed as the last of $1.96 billion in economic stimulus money is spent this fall.
The early retirement package plus costs of laying off additional employees was estimated at $140 million to $150 million, Sykes said. That compared to the $30 million severance costs that are estimated without the early retirement package, she said. Health care benefits would add additional cost.
The early retirement proposal would have increased pension plan liabilities, putting it in what the Pension Protection Act categorizes as "endangered" status, Sykes said. The act covers private pension plans and the U.S. government backstops the pension plan for Hanford workers, so there would have been no default, she said.
However, it could have lead to limited options, such as not allowing retiring employees to take lump sum payments instead of regular retirement checks.
DOE considered the additional costs of having to retrain employees that the early retirement offer might have avoided, Sykes said.
However, it was concerned that younger workers are more mobile and even if they were retained because older workers retired, they might not have remained at Hanford long-term.
The trend of younger workers being more mobile across the nation in all fields is reflected at Hanford, Sykes said.
The average annual attrition rate at Hanford is 5 percent, but the attrition rate is higher among younger workers and lower among older workers, said Colin Jones, a DOE senior policy adviser.
A large portion of the newer workers chose a retirement plan option that allows them to collect benefits in a 401k-style plan rather than a defined benefit plan, Jones said.
He sees that as an indication that they want to be able to take the accrued savings with them when they leave, he said.
Not all workers are eligible for the traditional retirement plan at Hanford because of policy changes in recent years.
Workers who took jobs created with economic stimulus money knew that the money would be gone by fall of this year.
But one of the planned benefits of the American Recovery and Reinvestment Act was to offer training to new workers that would be valuable as they looked for jobs in other industries after recovery act money was spent, Sykes said.
Across the DOE environmental management complex, people are volunteering to leave at higher than anticipated rates, Sykes said.
Some might have been waiting to resign to take advantage of the severance pay offered with voluntary layoffs, Jones said.
CH2M Hill and Mission Support Alliance workers who are laid off, either voluntarily or involuntarily, will receive severance of a week's pay for every year worked up to 20 years.
DOE officials struggled with the decision on whether to offer early retirement incentives for a long time, weighing the value of benefits to contractors and to the taxpayer, Sykes said.