CCAGW Calls for Review of Contractor Pensions

(Washington, D.C.) – Today, Tom Schatz, President of the Council for Citizens Against Government Waste (CCAGW), sent a letter to the members of Congress’ Joint Select Committee on Deficit Reduction recommending that they review how taxpayer dollars are being used to reimburse private contractors for certain pensions and benefits.  The Joint Select Committee is charged with identifying policies that would create at least $1.5 trillion in deficit reductions over the next ten years.  The letter reads in part:

“In April 2011, the Government Accountability Office (GAO) issued a report recommending the Department of Energy (DOE) comprehensively review how it manages contractor postretirement benefit costs.  Under federal accounting standards, the government is responsible for paying certain costs of these benefits, which include pensions and healthcare.  The GAO report noted that ‘DOE's costs for reimbursing contractor pension and other postretirement benefits have grown since 2000 and are projected to increase in coming years.’  Over the past 10 years, DOE's annual costs have ranged from $43 million in 2001 to $750 million in 2009.  They have increased by an average of 8 percent annually and should increase by 9 percent annually over the next five years.

“The GAO stated that ‘DOE has limited influence over contractor pension and other postretirement benefit costs.  For example, contractors sponsor benefit plans and, as a result, control the types of benefits offered to their employees and the strategies for investing pension plan assets.  DOE nevertheless ultimately bears the investment risk incurred by the contractors.’  This is a great deal for the companies but a raw deal for taxpayers.

“While the GAO has produced an estimate for DOE pension costs, there is no similar estimate for other agencies such as the Department of Defense (DOD), which uses many of the same contractors as DOE. While DOE relies on contractors for 90 percent of its workload and DOD has a much smaller percentage of its much larger budget going toward such expenditures, the liability for DOD contractors will also be in the tens of billions of dollars.

“A November 12, 2011 New York Times piece urged Congress to ‘stop reimbursing the costs of pensions and other retirement benefits at huge, and hugely profitable, defense contractors. Over 10 years, such a move could save an estimated $30 billion -- the amount by which these pensions are collectively underfunded.’ The article also noted that Lockheed Martin showed ‘reimbursements of $3.45 billion over the last five years: $3.1 billion came from United States taxpayers. During that period, the company generated $21.8 billion in operating profits.’

“As members of Congress look for ways to cut spending in the face of a massive $15 trillion national debt, contractor pensions must be on the chopping block; there has never been a more opportune time to demand that private sector, profitable companies take full responsibility for funding the pension plans of their employees.”

The Council for Citizens Against Government Waste (CCAGW) is the lobbying arm of Citizens Against Government Waste, the nation’s largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.