An agreement reached after collaborative negotiations between the University of California, the Department of Energy’s National Nuclear Security Administration and Los Alamos National Security, LLC, paved the way for the transfer Monday (April 2) of pension plan assets, valued at $1.279 billion as of June 1,2006, from UC’s retirement plan (UCRP) to LANS’ defined benefit pension plan.
The entities utilized their own separate registered actuaries, ERISA attorneys and staff. DOE and NNSA acted as a mediator for all parties and solicited the Internal Revenue Service for its opinion and approval of the asset transfer.
Regents of the university, DOE and NNSA and the LANS Board of Governors Executive Committee previously had mutually agreed on the pension asset transfer.
Glenn Kizer, Los Alamos’ Chief Financial Officer (CFO) said numerous details needed to be resolved before the asset transfer could take place. “We needed to understand the contractual requirements that UC had with DOE. Once we understood their contract, which included the requirement that the LANS plan be left compliant with IRS regulations, we had our actuary review the UC actuarial calculations to assess the validity of the $1.279 billion result.
“As opposed to simply reviewing the reports, our actuary basically re-created the calculations using the UC assumptions, such as discount factors, retirement ages, and disability projections, in order to confirm the accuracy of the $1.279 billion result,” Kizer continued. Additionally, he said LANS also had to review the investment performance of the assets from June 1, 2006 to March 30, 2007, to ensure proper allocation of any gains or losses during that time period.
The nine-month time period to execute the transfer was a long and cautious process due to the fact that the transfer of pension assets from a public plan to a private plan is a first for any company, for DOE, and for the IRS, Kizer said. “My responsibility as chairman of the LANS Benefits and Investment Committee is to all Laboratory employees and retirees in the retirement plan. We wanted to minimize the potential of future contributions to supplement the plan if at all possible,” said Kizer.
The Internal Revenue Service, in a letter to NNSA, said the proposed asset transfer meets IRS regulations. "The transfer of assets and liabilities from the University of California Retirement Plan to the Los Alamos National Security, LLC Defined Benefit Pension Plan will satisfy the [minimum funding] requirements of section 414 (l) of the [IRS] code," James Holland of the IRS wrote in a March 23 letter to David Boyd of NNSA.
Officials from NNSA, UC, and LANS signed a formal asset transfer agreement March 19 in Washington, D.C.
Kizer said the next steps for LANS include placing the assets with the recently selected LANS investment managers. ”I am very pleased with the way the Benefits and Investment Committee assisted by Watson Wyatt Investment Consulting, has selected highly qualified investment managers, and how Mellon Bank, our pension plan trustee, planned the transfer of assets with recognized banking institutions and kept the sales or buying commissions to a minimum,” Kizer said.
“Upon receipt of assets we will have a fully funded pension plan and all future LANS retirees will be paid from the LANS plan assets,” said Lou Polito of Benefits (HR-B). “Now increased focus can be placed on the 401(k) plan both in terms of offerings and education to LANL employees on investment options.”
