Department of Energy: Information on Its Management of Costs and 
Liabilities for Contractors' Pension and Postretirement Benefit  
Plans (19-JUN-08, GAO-08-642R). 				 
                                                                 
For the past 60 years, the Department of Energy (DOE) and its	 
predecessors have carried out their national security,		 
environmental cleanup, and research and development missions	 
through management and operating (M&O) contracts and other site  
contracts for operations at DOE-owned facilities. DOE currently  
has 43 such contracts with private companies and nonprofit	 
organizations, including universities. Under the terms of these  
contracts, DOE reimburses contractors for the costs of providing 
pension and postretirement benefits--including health care,	 
dental, and life insurance benefit plans--for current and former 
employees and their beneficiaries. DOE is ultimately responsible 
for reimbursing its contractors for allowable pension and	 
postretirement benefit plan costs, and records a liability or	 
asset in its financial statements for the funded status--plan	 
obligations less plan assets--of these benefit plans. When these 
contracts are recompeted or expire, it is DOE's policy to ensure 
the continuation of these benefits--and the reimbursement of	 
related costs--for incumbent contractor employees and eligible	 
retirees by, for example, transferring benefit plan sponsorship  
responsibilities to a successor contractor or related company.	 
DOE's contractors sponsor pension plans for their employees,	 
including both traditional pension plans, known as "defined	 
benefit" plans, and 401(k) or similar plans, known as "defined	 
contribution" plans. DOE reimburses contractors on a		 
pay-as-you-go basis for the amount needed to meet the employer's 
annual share of these costs, and these benefit obligations will  
represent an ongoing liability to DOE. In 2007, DOE's financial  
statements reported that contractors contributed $387 million and
$334 million to defined benefit pension and postretirement plans,
respectively. Since September 1996, DOE Order 350.1, Contractor  
Human Resource Management Programs, has set forth DOE's policy	 
for oversight of contractors' pension and other benefit plans. In
particular, Order 350.1 requires that DOE determine whether	 
contractors' benefits costs are reasonable. In April 2006, in	 
response to its large and growing pension and postretirement	 
liabilities for contractor employee benefits, DOE issued Notice  
351.1, Contractor Employee Pension and Medical Benefits Policy.  
Under Notice 351.1, DOE would have continued to reimburse	 
contractors for the allowable benefit costs of existing 	 
"incumbent" employees and eligible retirees, but the Notice would
have limited DOE's reimbursement for new "nonincumbent" employees
to the costs of "market-based" pension and health benefit plans. 
The joint explanatory statement that accompanies the Consolidated
Appropriations Act, 2008, directed us to assess the adequacy of  
DOE's analysis of pension and medical liabilities. In response,  
and in consultation with your staffs, we are providing		 
information on (1) DOE's analysis supporting its approval of the 
April 2006 policy changes contained in Notice 351.1, (2) DOE's	 
liabilities broken out by contractors' defined benefit pension	 
and postretirement plan components and among its M&O and other	 
site contracts, and (3) DOE's recent actions to manage its future
costs and liabilities.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-642R					        
    ACCNO:   A82438						        
  TITLE:     Department of Energy: Information on Its Management of   
Costs and Liabilities for Contractors' Pension and Postretirement
Benefit Plans							 
     DATE:   06/19/2008 
  SUBJECT:   401(k) plans					 
	     Agency missions					 
	     Allowable costs					 
	     Contract administration				 
	     Contract oversight 				 
	     Contractor payments				 
	     Contractor personnel				 
	     Cost analysis					 
	     Cost control					 
	     Cost reimbursement contracts			 
	     Data collection					 
	     Documentation					 
	     Employee retirement plans				 
	     Employees						 
	     Financial analysis 				 
	     Financial management				 
	     Financial statements				 
	     Internal controls					 
	     Management and operating contracts 		 
	     Pension plan cost control				 
	     Pensions						 
	     Personal liability (legal) 			 
	     Program evaluation 				 
	     Program management 				 
	     Retirement 					 
	     Retirement benefits				 
	     Strategic planning 				 

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GAO-08-642R

   

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GAO-08-642R: 

United States Government Accountability Office: 
Washington, DC 20548:

June 19, 2008:

The Honorable Byron L. Dorgan: 
Chairman: 
The Honorable Pete V. Domenici:  
Ranking Member: 
Subcommittee on Energy and Water Development: 
Committee on Appropriations: 
United States Senate:

The Honorable Peter J. Visclosky: 
Chairman: 
The Honorable David L. Hobson:  
Ranking Member: 
Subcommittee on Energy and Water Development: 
Committee on Appropriations: 
House of Representatives:

Subject: Department of Energy: Information on Its Management of Costs 
and Liabilities for Contractors' Pension and Postretirement Benefit 
Plans:

For the past 60 years, the Department of Energy (DOE) and its 
predecessors have carried out their national security, environmental 
cleanup, and research and development missions through management and 
operating (M&O) contracts and other site contracts for operations at 
DOE-owned facilities. DOE currently has 43 such contracts with private 
companies and nonprofit organizations, including universities. Under 
the terms of these contracts, DOE reimburses contractors for the costs 
of providing pension and postretirement benefits--including health 
care, dental, and life insurance benefit plans--for current and former 
employees and their beneficiaries. DOE is ultimately responsible for 
reimbursing its contractors for allowable pension and postretirement 
benefit plan costs, and records a liability or asset in its financial 
statements for the funded status--plan obligations less plan assets--of 
these benefit plans. When these contracts are recompeted or expire, it 
is DOE's policy to ensure the continuation of these benefits--and the 
reimbursement of related costs--for incumbent contractor employees and 
eligible retirees by, for example, transferring benefit plan 
sponsorship responsibilities to a successor contractor or related 
company.

DOE's contractors sponsor pension plans for their employees, including 
both traditional pension plans, known as "defined benefit" plans, and 
401(k) or similar plans, known as "defined contribution" plans. For 
defined benefit plans, DOE's private sector contractors must comply 
with the Employee Retirement Income Security Act of 1974 (ERISA), which 
establishes minimum funding standards for the amounts that private 
sector plan sponsors must set aside in advance to pay benefits when 
they are due.[Footnote 1] For postretirement health care and other 
benefits, DOE's contractors typically do not set aside funds in advance 
because, unlike funding pension benefits, there are generally no 
requirements and few incentives to do so. As a result, DOE reimburses 
contractors on a pay-as-you-go basis for the amount needed to meet the 
employer's annual share of these costs, and these benefit obligations 
will represent an ongoing liability to DOE. In 2007, DOE's financial 
statements reported that contractors contributed $387 million and $334 
million to defined benefit pension and postretirement plans, 
respectively. In 2007, DOE also reported a net liability of $69.5 
million for defined benefit pensions and $10.3 billion for 
postretirement benefits. This net liability represents the present 
value of the estimated future benefit payments that will be made to 
contractor employees and retirees less the assets that have been set 
aside to cover these payments.

Since September 1996, DOE Order 350.1, Contractor Human Resource 
Management Programs, has set forth DOE's policy for oversight of 
contractors' pension and other benefit plans. In particular, Order 
350.1 requires that DOE determine whether contractors' benefits costs 
are reasonable. To help make this determination, Order 350.1 requires 
that contractors benchmark the value or cost of their total benefit 
package by conducting either a benefit value or cost study that 
compares the value or costs of its total benefit package to those of at 
least 15 comparable organizations. DOE Order 350.1 states that if a 
contractor's total benefit value or cost study score exceeds 105 
percent of its comparison group, DOE may require a corrective action 
plan to align the score to the comparison group; however, in the past 
DOE has not required several contractors to implement corrective action 
plans.

In April 2006, in response to its large and growing pension and 
postretirement liabilities for contractor employee benefits, DOE issued 
Notice 351.1, Contractor Employee Pension and Medical Benefits Policy. 
Under Notice 351.1, DOE would have continued to reimburse contractors 
for the allowable benefit costs of existing "incumbent" employees and 
eligible retirees, but the Notice would have limited DOE's 
reimbursement for new "nonincumbent" employees to the costs of "market- 
based" pension and health benefit plans. A pension plan was deemed 
"market-based" when, among other things, the plan was a defined 
contribution plan. However, in June 2006, DOE suspended this notice and 
subsequently decided not to reissue it in response to stakeholder and 
congressional concerns. Order 350.1 remains DOE's controlling policy 
for reimbursing contractors' pension and postretirement benefit costs.

The joint explanatory statement that accompanies the Consolidated 
Appropriations Act, 2008, directed us to assess the adequacy of DOE's 
analysis of pension and medical liabilities.[Footnote 2] In response, 
and in consultation with your staffs, we are providing information on 
(1) DOE's analysis supporting its approval of the April 2006 policy 
changes contained in Notice 351.1, (2) DOE's liabilities broken out by 
contractors' defined benefit pension and postretirement plan components 
and among its M&O and other site contracts, and (3) DOE's recent 
actions to manage its future costs and liabilities.

To provide information on DOE's analysis supporting its approval of the 
policy changes in Notice 351.1, we reviewed information DOE provided to 
us in response to our request for any supporting documentation and 
decision documents related to the policy changes. We also interviewed 
DOE officials. To provide information on the distribution of DOE's 
liabilities for contractor pension and postretirement plans, we 
reviewed plan data supporting the components of DOE's liabilities 
reported in its fiscal year 2004-2007 financial statements, 
documentation of the work performed by independent auditors on DOE's 
liabilities for those years, the trends in plan liabilities and costs, 
and information DOE provided to us in support of plan changes whose 
impact on plan obligations were reflected in fiscal years 2006 and 
2007. We also interviewed DOE officials. To provide information on 
DOE's actions to manage future liabilities, we reviewed relevant 
provisions in recently competed contracts, and we interviewed cognizant 
DOE officials. Based on information that DOE provided to us, we also 
compiled a list of contractors whose most recent benefit value study 
score exceeded 105 percent of the average of their comparison group. In 
addition, we reviewed our recent reports on DOE contractors' pension 
and postretirement benefits.[Footnote 3]

In doing this work, we limited our review to DOE's policies for 
reimbursing allowable contractor benefit costs. We also did not audit 
or verify data provided by DOE or its contractors for individual 
benefit plan activity and balances, although we determined that these 
data were in the aggregate consistent with amounts and other 
information in DOE's financial statements and sufficiently reliable for 
our purposes. In addition, we did not audit or verify the amount or 
timing of payments by DOE to its contractors for allowable benefit 
costs or any other costs. Further, the limited number of plan changes 
we reviewed did not provide a basis for a conclusion on DOE's internal 
controls over benefit plan changes. Our review of DOE's actions to 
manage future costs and liabilities did not include identifying all 
actions DOE may have taken or evaluating the nature, extent, or effect 
of any such actions. Finally, we neither verified the accuracy of the 
results of the benefit value studies, nor did we evaluate contractors' 
conformance with DOE's requirements and guidance for performing such 
studies. We conducted our work from October 2007 through June 2008 in 
accordance with generally accepted government auditing standards. These 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives.

We briefed your staffs on the results of this work on March 3, 2008, 
and March 13, 2008. This report transmits the briefing slides, which 
consist of high-level talking points and were not designed to represent 
an exhaustive review of the issues discussed. (See encl. I.) In a 
separately issued report, we are providing you with detailed 
information regarding the funded status of individual contractor 
pension and other postretirement benefits calculated using DOE- 
prescribed actuarial assumptions and the results of individual 
contractor benefit value studies performed in accordance with DOE 
policy and procedure guidance. Because DOE believes that the funded 
status and benefit value scores of contractor benefit plans may be 
proprietary, we removed information from this report that could 
associate a funded status amount or benefit value score with a 
particular facility or contractor.

Results in Brief:

DOE officials told us that the decisions underlying the policy changes 
in its April 2006 Notice 351.1 were informed over a period of years by 
the trends in cost reimbursements, budgetary uncertainties, and by 
consulting actuaries and others, including DOE Inspector General 
reports and our reports. The documentation DOE provided us demonstrates 
that it recognized the historical and possible future trend of its 
liabilities and costs related to contractor benefit plans. However, DOE 
officials acknowledged that there was no formal compiled record or 
summary analysis of the documentation and factors considered before 
Notice 351.1 was issued. We found that the documentation provided to us 
contained only limited evidence that DOE had considered policy 
alternatives, the sensitivities of stakeholders to the policy choices 
reflected in Notice 351.1, or the near-and long-term financial and 
mission impacts of the changes made. Further, the decision document 
reflecting the Deputy Secretary's approval of Notice 351.1 did not 
include the basis on which approval was recommended. However, DOE 
officials told us that issuance of the Notice adequately demonstrated 
evidence of internal consideration and senior level-approval of Notice 
351.1.

As of September 30, 2007, benefit obligations for DOE contractors' 
defined benefit pension and postretirement plans were approximately 
$27.5 billion and $10.5 billion, respectively. With assets of $27.4 
billion and $161.6 million, the resulting net funded status (net 
liability) was $69.5 million and $10.3 billion for the pension and 
postretirement benefit plans, respectively. The funded status of DOE 
contractor benefit plans can change from one year to the next as 
benefits accrue and are paid, and due to other factors. The 
contractors' methods for funding these benefit costs--generally either 
by setting aside funds while employees are working (pension) or on a 
pay-as-you-go basis after employees have retired (postretirement 
benefits other than pensions)--directly impact the funded status of the 
plan. Other factors that can cause the funded status of defined benefit 
plans to fluctuate from one year to the next include changes in plan 
experience, such as returns on plan assets that are different from what 
was assumed, and changes to the benefits that employees receive or the 
portion of benefit costs borne by the employer. For example, the net 
funded status of contractor pension plans changed from an underfunding 
of $4.5 billion in fiscal year 2006 to an underfunding of $69.5 million 
in fiscal year 2007 due in large measure to a significant increase in 
the returns on plan investments. Because postretirement benefits are 
not generally funded in advance of being paid, these benefit 
obligations will represent an ongoing liability to DOE. From fiscal 
years 1997 to 2007, the net funded status of contractor postretirement 
benefits generally declined from an underfunding of $5.0 billion to an 
underfunding of $10.3 billion.

Since 2005, DOE has awarded 14 contracts that contain new provisions 
designed to limit pension and postretirement benefits for new employees 
to no more than 105 percent of comparable organizations. While this 
focus on the benefits of new employees is similar to Notice 351.1, 
DOE's current policy and practices do not require that contractors 
offer defined contribution pension plans to new employees in order for 
contractors to be reimbursed for benefit costs. Rather, DOE requires 
that new employees receive a total benefits package that does not 
exceed the 105 percent benchmark. In so doing, DOE continues to follow 
the Order 350.1 provision that could limit reimbursement if a 
contractor's total benefit value or cost study score for all benefits 
exceeds the 105 percent benchmark of the comparison group, but is 
applying this provision primarily to new employees. For contractors 
with benefit scores in excess of this benchmark, the contractor may 
choose to establish a second tier of benefits for new employees or make 
changes to their benefit plans to align with the market. For recently 
awarded contracts, contractors at DOE's National Nuclear Security 
Administration and Office of Environmental Management facilities have 
generally established separate benefit plans for new employees, which 
usually do not include a defined benefit pension plan. Recent contracts 
awarded by DOE's Office of Science have generally retained a single set 
of benefit plans for all contractor employees because the benefit value 
scores for these plans were near the 105 percent benchmark. DOE expects 
that implementing Order 350.1 in this way will not substantially affect 
the department's pension and postretirement benefits costs and 
liabilities for the next 20 to 30 years because the requirements are 
directed at new employees typically hired at the beginning of their 
careers. Incumbent employees--those hired before a contract's award and 
eligible retirees--will continue to receive their existing benefits or 
a substantial equivalent.

Agency Comments and Our Evaluation:

We provided DOE with a draft of this report for its review and comment. 
In written comments, DOE stated that the draft report correctly 
reflects the status of departmental policy regarding reimbursement of 
contractor employee benefits for its 43 management and operating and 
other site contracts. However, DOE disagreed with the implication that 
the issuance of Notice 351.1, Contractor Employee Pension and Medical 
Benefits Policy, was not based on considered analysis. Specifically, 
DOE stated that while the department had not compiled a "formal record" 
of its work leading up to the issuance of that Notice, it had provided 
us with considerable documentation of its concerns about the growing 
liability of DOE for contractor employee benefit costs. DOE noted that 
upward trends in its reimbursement of contactor employee benefits and 
the department's heightened concern were evidenced by annual actuarial 
reports prepared by DOE's contractors, various communications within 
DOE, two letters provided to the Congress, and other documents that DOE 
had provided to us. DOE believes that in the aggregate, these documents 
show that a great deal of considered work and analysis formed the basis 
for issuance of Notice 351.1. We disagree. We believe that the 
materials that DOE provided did not include a comprehensive assessment 
of existing DOE policies, an analysis of the potential impacts of 
alternative strategies for managing contractor benefit plan 
liabilities, or an indication of the information that DOE management 
relied on in developing the Notice 351.1 policy changes. These 
materials contained only limited evidence that DOE had considered 
policy alternatives, the sensitivities of stakeholders to the policy 
choices reflected in Notice 351.1, or the near-and long-term financial 
and mission impacts of the changes made despite the importance of these 
changes to DOE's policy on contractor employee pension and medical 
benefits. For example, not even the decision document reflecting the 
Deputy Secretary's approval of Notice 351.1 included the basis on which 
approval was recommended. The bottom line is that the connection 
between what DOE cites as evidence of its concerns and its policy 
changes as reflected in Notice 351.1 is not readily apparent from the 
documents DOE provided us. (See encl. X for DOE's comments and our 
response.) DOE also provided technical comments, which we have 
incorporated as appropriate.

We are sending copies of this report to the Secretary of Energy and 
interested congressional committees. We will also provide copies to 
others on request. In addition, this report will be available at no 
charge on the GAO Web site at [hyperlink, http://www.gao.gov].

If you or your staffs have any questions on the matters discussed in 
this report, please contact Mark Gaffigan at (202) 512-3841 or 
[email protected] or Jeanette Franzel at (202) 512-9471 or 
[email protected]. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. Major contributors to this report were Richard Cheston and 
Robert Owens (Assistant Directors), Scott Heacock, Scott McNulty, H. 
Donald Campbell, Frederick Evans, Aaron Johnson, Alison O'Neill, and 
Barbara Timmerman. 

Signed by: 

Mark E. Gaffigan: 
Director, Natural Resources and Environment:

Signed by: 

Jeanette M. Franzel: 
Director, Financial Management and Assurance:

Enclosures (10):

[End of section]

Enclosure I: Briefing Slides: 

Department of Energy: Information on Its Management of Costs and 
Liabilities for Contractorsï¿½ Pension and Postretirement Benefit Plans: 

Subcommittee on Energy and Water Development: 
Committee on Appropriations: 
United States Senate and House of Representatives: 

U.S. Government Accountability Office: 

March 2008: 

Background: Reimbursement of Contractor Pension and Postretirement 
Benefit Costs: 

* For the past 60 years, the Department of Energy (DOE) and its 
predecessors have carried out their missions through management and 
operating (M&O) and other site contracts for operations at DOE-owned 
facilities. DOE currently has 43 contracts for these facilities that 
cost over $16 billion annually. 

* DOE contractors generally provide their employees with pension plans, 
health care benefit plans, and other postretirement benefits. DOE 
contractors typically offer their employees a traditional pension plan, 
known as a ï¿½defined benefitï¿½ plan, and some contractors offer a 
ï¿½defined contributionï¿½ pension plan, such as a 401(k) plan. Contractors 
also offer their employees postretirement benefits other than pensions, 
including health care, dental, and life insurance benefits. 

* DOE reimburses these contractors for the costs of providing pension 
and postretirement benefits to current and former employees and their 
beneficiaries. DOE is ultimately responsible for reimbursing its 
contractors for the allowable costs of these plans. DOE records a 
liability or asset in its financial statements for the funded 
statusï¿½plan obligations less plan assetsï¿½of contractor benefit plans. 

* DOEï¿½s policy on the establishment, funding, administration, and 
oversight of welfare and pension benefit plans by its contractors is 
set forth in Order 350.1, Contractor Human Resource Management 
Programs, first issued in September 1996. Order 350.1 requires that 
contractor benefit plans meet guidelines set forth in the Federal 
Acquisition Regulation and the cost principles of DOEï¿½s own acquisition 
regulation in order for benefit costs under cost reimbursement 
contracts to be deemed reasonable and allowable and therefore 
reimbursable. 

* Order 350.1 also requires that contractors perform periodic studies 
comparing the value or costs of their employee benefit plans to those 
of a group of comparable organizations and that the relative value or 
cost of their plans be below certain limits. 

* Under Order 350.1, DOE determines whether contractorsï¿½ benefits costs 
are reasonable and allowable and therefore reimbursable by having 
contractors benchmark their total benefit package by using one of the 
following:

- Benefit Value Study: compares the value of total benefits offered by 
the contractor, such as qualified pension plans and health benefits, 
with the value of total benefits of at least 15 comparable 
organizationsï¿½at most 20 percent of these organizations can be DOE 
contractors. A national actuarial consulting firm makes this comparison 
every 3 years. 

- U.S. Chamber of Commerce Employee Benefit Survey Comparison (cost 
study): an annual analysis of the cost of benefits on a per capita 
basis compared with the costs reported in the annual U.S. Chamber of 
Commerce Employee Benefits Study. 

* Order 350.1 states that if the value or cost of a contractorï¿½s total 
benefit package exceeds 105 percent of the average of the comparison 
group, the DOE contracting officer may require a Corrective Action Plan 
that identifies changes that would bring the benefits into conformance 
with the comparison group. 

* Some DOE contracts currently exceed the 105 percent threshold but do 
not have Corrective Action Plans in place. (See encl. II.) 

* The allowability of costs incurred by educational institutions, 
including benefit costs, are governed by the cost principles in OMB 
Circular A-21, Cost Principles for Educational Institutions rather than 
DOE Order 350.1. Some universities are the M&O contractors of DOE 
laboratories. For example, the University of California operates 
Lawrence Berkeley National Laboratory, and Stanford University operates 
the Stanford Linear Accelerator Center. 

* DOE Order 350.1 states that reimbursable contributions for defined 
benefit pension plans shall not exceed the greater of (1) the planï¿½s 
unfunded current liability as defined by the Employee Retirement Income 
Security Act of 1974 (ERISA) or (2) the amount required to satisfy the 
ERISA minimum funding standard. 

* ERISA establishes minimum funding standards for the amounts that plan 
sponsors must set aside in order to fund defined benefit pension 
obligations. These prefunding requirements apply to private sector DOE 
contractors that offer defined benefit pensions. 

* Defined benefit pension plans sponsored by state and local 
governments, such as the University of California retirement plan, are 
exempt from most ERISA requirements. However, these pension plans are 
generally governed by state and local laws that also typically provide 
for setting aside funds to pay for future pension benefits when they 
are due. 

* Unlike defined benefit pension plans, there are no federal law 
requirements and few incentives for private sector employers to prefund 
other postretirement benefits, including postretirement health care 
benefit plans. Similarly, there are generally no requirements for state 
and local governments to prefund government-sponsored postretirement 
benefit plans. 

* Typically, plan sponsors do not prefund postretirement health 
benefits.DOE contractors generally pay for postretirement health and 
other benefit plans on a pay-as-you-go basis (PAYGO). In turn, DOE 
reimburses contractors under PAYGO for the amount needed to meet the 
employerï¿½s annual share of these costs. 

* DOEï¿½s policy in Order 350.1 for both contractor pension and 
postretirement benefit plans is to continue to reimburse the costs of 
benefits earned by existing plan participants subsequent to contract 
termination or expiration, according to the approved benefit plans and 
on a funding basis most reasonable to DOE. 

* Consistent with Order 350.1, DOEï¿½s M&O and other site contracts also 
generally provide that in the event of contract termination or 
expiration DOE will provide for benefit continuation and reimbursement 
of related costs through the existing contractor or a replacement 
contractor. 

* For financial accounting purposes, DOE records an expense for the 
amount of cost reimbursements to contractors, including benefit plan 
costs. DOE also records a liability or asset in its financial 
statements for the funded status (plan obligations less plan assets) of 
contractor pension and postretirement plans in accordance with 
Statement of Financial Accounting Standards (SFAS) No. 158, Employersï¿½ 
Accounting for Defined Benefit Pension and Other Postretirement Plans. 
[Footnote 4] 

Background: Trends in the Funded Status of DOE Contractorsï¿½ Defined 
Benefit Pension and Postretirement Benefits, Fiscal Years 1997-2007: 

* From fiscal years 2001 through 2005, the funded status of 
contractorsï¿½ defined benefit plans declined rapidly. Further, as shown 
in figures 1 and 2 on the following pages: [Footnote 5] 

- The funded status of defined benefit pensions can fluctuate 
significantly from one year to the next. For example, the net funded 
status of contractor pension plans changed from an underfunding of $4.5 
billion in fiscal year 2006 to an underfunding of $69.5 million in 
fiscal year 2007. This change was primarily due to a significant 
increase in the returns on plan investments and an increase in the 
discount rate used to estimate the current value of expected benefit 
payments. 

- From fiscal years 1997 to 2007, the net funded status of contractor 
postretirement benefits generally declined from an underfunding of $5.0 
billion to $10.3 billion. These benefit obligations will represent an 
ongoing liability to DOE because, unlike defined benefit pensions, 
these benefits generally are not funded in advance of being paid. 

Figure 1: Funded Status of DOE Contractorsï¿½ Defined Benefit Pension 
Plans, Fiscal Years 1997-2007: 

[See PDF for image] 

This figure is a vertical bar graph depicting the following data: 

Year: 1997; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: $4.1 
billion. 

Year: 1998; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: $5.2 
billion. 

Year: 1999; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: $8.2 
billion. 

Year: 2000; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: $10.2 
billion. 


Year: 2001; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: $5.1 
billion. 

Year: 2002; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: -$1.0 
billion. 

Year: 2003; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: -$3.6 
billion. 

Year: 2004; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: -$4.1 
billion. 

Year: 2005; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: -$5.7 
billion. 

Year: 2006; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: -$4.5 
billion; 

Year: 2007; 
Funded Status of DOE Contractorsï¿½ Defined Benefit Pension Plans: -$0.1 
billion. 

Source: DOE. 

[End of figure] 

Figure 2: Funded Status of DOE Contractorsï¿½ Postretirement Benefit 
Plans, Fiscal Years 1997-2007: 

[See PDF for image] 

This figure is a vertical bar graph depicting the following data: 

Year: 1997; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$5.0 
billion. 

Year: 1998; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$5.3 
billion. 

Year: 1999; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$4.6 
billion. 

Year: 2000; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$5.4 
billion. 

Year: 2001; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$6.8 
billion. 

Year: 2002; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$8.3 
billion. 

Year: 2003; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$9.7 
billion. 

Year: 2004; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$9.9 
billion. 

Year: 2005; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$11.4 
billion. 

Year: 2006; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$11.3 
billion. 

Year: 2007; 
Funded Status of DOE Contractorsï¿½ Postretirement Benefit Plans: -$10.3 
billion. 

Source: DOE. 

[End of figure] 

Background: DOE Notice 351.1, Contractor Employee Pension and Medical 
Benefits Policy: 

* To address its growing liabilities and concerns about market 
volatility and cost unpredictability, in fiscal year 2005, DOE 
negotiated the terms for three contracts (the Idaho Cleanup Project, 
the Advanced Mixed Waste Treatment Project, and the Idaho National 
Laboratory) for a single site that limited DOEï¿½s benefit cost 
reimbursements for new, or ï¿½nonincumbent,ï¿½ employees to a market-based 
benefits package that included defined contribution pension plans. 

* In April 2006, DOE issued Notice 351.1, which laid out its policy for 
benefit cost reimbursements for all contractors. This notice: 

- distinguished between (1) incumbent employees, who were defined as 
eligible retirees and employees on the contractorï¿½s payroll prior to 
the date a market-based plan is established under the contract, and (2) 
new employees hired after this date; and; 

- stated that DOE would continue to reimburse contractors for the 
allowable benefit costs for existing benefits for incumbent employees, 
subject to applicable laws and regulations. 

* Notice 351.1 provided that DOE would reimburse contractors for 
ï¿½market-basedï¿½ pension and health benefit plans for new employees. 

- A pension plan was deemed ï¿½market-basedï¿½ if (1) the pension plan was 
a defined contribution plan and (2) the benefit value and per capita 
cost of the contractorï¿½s pension plan and the total benefit package did 
not exceed the comparison groupï¿½s average by more than 5 percent. 

- A health plan was deemed ï¿½market-basedï¿½ if the benefit value and per 
capita cost of the contractorï¿½s health plan and the total benefit 
package did not exceed the comparison groupï¿½s average by more than 5 
percent. 

* DOE stated that Notice 351.1ï¿½s goals were to improve DOEï¿½s 
stewardship of taxpayer dollars by (1) mitigating the cost growth 
associated with benefit liabilities, (2) moderating the volatility and 
improving the predictability of DOEï¿½s cost reimbursement obligations 
for benefits, (3) ensuring that costs for contractor employee pension 
and medical benefits are more consistent with market trends, and (4) 
ensuring fairness to incumbent contractor employees. 

* DOE suspended Notice 351.1 in June 2006 and decided not to reissue it 
in June 2007. 

* It is no longer DOEï¿½s policy to (1) limit contractorsï¿½ reimbursable 
pension benefit costs for new employeesï¿½ to defined contribution plans 
or (2) compare the value and cost of the individual pension and health 
plans of a contractor with those of its comparison group. 

* Order 350.1 remains DOEï¿½s controlling policy for reimbursing 
contractorsï¿½ pension and postretirement benefit costs. DOE continues to 
follow the Order 350.1 provision that could limit reimbursement if a 
contractorï¿½s total benefit value or cost study score for all benefits 
exceeds the 105 percent benchmark of the comparison group, but is 
applying this provision primarily to new employees. 

Objectives: 

The joint explanatory statement that accompanies the Consolidated 
Appropriations Act, 2008, directed us to assess the adequacy of DOEï¿½s 
analysis of pension and medical liabilities. Our objectives were to 
provide information on: 

* DOEï¿½s analysis supporting its approval of the April 2006 policy 
changes in Notice 351.1; 

* DOEï¿½s liabilities broken out by contractorsï¿½ defined benefit pension 
and postretirement plan components and among its M&O and other site 
contracts, and; 

* DOEï¿½s recent actions to manage its future costs and liabilities. 

Scope and Methodology: 

* Regarding DOEï¿½s analysis supporting its approval of the policy 
changes contained in Notice 351.1, we reviewed information DOE provided 
to us in response to our request for any supporting documentation and 
decision documents related to the policy changes. We also interviewed 
DOE officials. 

* Regarding the distribution of DOEï¿½s liabilities for contractor 
defined benefit pension and postretirement plans, we reviewed plan data 
supporting the components of DOEï¿½s liabilities reported in its fiscal 
year 2004-2007 financial statements, documentation of the work 
performed by independent auditors on DOEï¿½s liabilities for those years, 
the trends in plan liabilities and costs, and information DOE provided 
to us in support of plan changes whose impact on plan obligations were 
reflected in fiscal years 2006 and 2007. We also interviewed DOE 
officials. 

* Regarding DOEï¿½s actions to manage future costs and liabilities, we 
reviewed policies for reimbursement of contractor pension and 
postretirement benefit costs in DOE Order 350.1 and DOE Notice 351.1. 
We also reviewed the employee benefit plan clauses included in M&O and 
other site contracts that were awarded between January 2005 and March 
2008. We interviewed cognizant DOE officials to determine DOEï¿½s 
approach for revising contract clauses for pensions and postretirement 
benefits. Based on information that DOE provided to us, we also 
compiled a list of contractors whose most recent benefit value study 
score exceeded 105 percent of the average of their comparison group. 

* We conducted our work from October 2007 through June 2008 in 
accordance with generally accepted government auditing standards. These 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Limitations: 

* In doing this work, we limited our review to DOEï¿½s policies for 
reimbursing allowable contractor benefit costs. 

* We also did not audit or verify data provided by DOE or its 
contractors for individual benefit plan activity and balances, although 
we determined that these data were in the aggregate consistent with 
amounts and other information in DOEï¿½s financial statements and 
sufficiently reliable for our purposes. In addition, we did not audit 
or verify the amount or timing of payments by DOE to its contractors 
for allowable benefit costs or any other costs. 

* Further, the limited number of plan changes we reviewed did not 
provide a basis for a conclusion on DOEï¿½s internal controls over 
benefit plan changes. 

* Our review of DOEï¿½s actions to manage future costs and liabilities 
did not include identifying all actions DOE may have taken or 
evaluating the nature, extent, or effect of any such actions. Further, 
we neither verified the accuracy of the results of the benefit value 
studies, nor did we evaluate contractorsï¿½ conformance with DOEï¿½s 
requirements and guidance for the preparation of such studies. 

DOEï¿½s Analysis Supporting Approval of Policy Changes in Notice 351.1: 

* Because DOE is ultimately responsible for reimbursing its contractors 
for allowable pension and postretirement benefit plan costs and records 
a liability or asset in its financial statements for the plansï¿½ funded 
status, it is important that DOE effectively oversee and monitor these 
programs. 

* DOEï¿½s responsibility for overseeing and monitoring contractors is 
distributed across the organization and includes program, contracting, 
legal, financial, and other personnel at headquarters and site offices. 

* Standards for Internal Control in the Federal Government (GAO/AIMD-00-
21.3.1) provides guidance for managementï¿½s ongoing monitoring of an 
organizationï¿½s performance and the establishment and implementation of 
control activities to ensure that managementï¿½s directives are carried 
out. 

* A program of oversight and monitoring can provide DOE management with 
the information necessary to, among other things, establish and adjust 
benefit policies, evaluate the effectiveness of cost control and 
liability management strategies, and evaluate the near-and long-term 
affordability of benefit plans. 

* To understand DOEï¿½s process for making changes to contractor benefit 
policies, we requested DOE documentation of analyses conducted in 
support of the policy changes contained in its April 2006 Notice351.1. 
These changes included the limitation that beginning no later than 
March 1, 2007, DOE would only reimburse contractors for the cost of 
ï¿½market-basedï¿½ benefit programs, as defined in the Notice, for new 
employees. Market-based for pension plans meant that the plan was a 
defined contribution plan and the costs for the plan did not exceed 
market averages by greater than 5 percent. Health benefit plans were 
also considered market-based when costs did not exceed market averages 
by greater than 5 percent. 

* DOE officials told us that the decisions underlying the policy 
changes in Notice 351.1 were informed over a period of years by the 
trends in cost reimbursements, budgetary uncertainties, and by 
consulting actuaries and others, including DOE Inspector General 
reports and our reports. 

* In response to our request for any supporting documentation and 
decision documents related to the April 2006 Notice 351.1, DOE provided 
us with information dated as early as March 2005, including internal 
memoranda and briefings, tables and calculations of historical and 
projected contractor benefit costs and liabilities, and correspondence 
with members of Congress and a briefing paper for congressional 
committees. 

* This documentation demonstrates that DOE recognized the historical 
and possible future trend of its liabilities and costs related to 
contractor benefit plans. 

* However, DOE officials acknowledged that there was no formal, 
compiled record or summary analysis of the documentation and factors 
considered before Notice 351.1 was issued. 

* We found that the documentation provided to us contained only limited 
evidence that DOE had considered policy alternatives, the sensitivities 
of stakeholders to the policy choices reflected in Notice 351.1, or the 
near-and long-term financial and mission impacts of the changes made. 

* Further, the decision document reflecting the Deputy Secretaryï¿½s 
approval of Notice 351.1 did not include the basis on which approval 
was recommended. However, DOE officials told us that issuance of the 
Notice adequately demonstrated evidence of internal consideration and 
senior-level approval of Notice 351.1. 

Distribution of DOEï¿½s Liabilities for Contractorsï¿½ Defined Benefit 
Plans: 

* As of September 30, 2007, benefit obligations for DOE contractorsï¿½ 
defined benefit pension and postretirement plans were about $27.5 
billion and $10.5 billion, respectively. With assets of $27.4 billion 
and $161.6 million, the resulting net funded status (net liability) was 
$69.5 million and $10.3 billion for the pension and postretirement 
plans, respectively. 

Table: 

Components of funded status: Benefit obligations[A]; 
Pension plans: ($27,512.9) million; 
Postretirement plans: ($10,318.6) million. 

Components of funded status: Assets[B]; 
Pension plans: $27,443.4 million; 
Postretirement plans: $161.6 million. 

Components of funded status: Funded status (Net liability); 
Pension plans: ($69.5) million; 
Postretirement plans: ($10,480.2) million. 

Source: GAO analysis of DOE and plan data. 

[A] Benefit obligations represent the actuarial present value of 
benefits attributable to employee service prior to the valuation date. 

[B] Accounting standards require that plan assets, such as equity and 
debt securities, be valued at fair value.

[End of table] 

* Enclosures III and IV provide the Distribution of the Funded Status 
of Defined Benefit Pension and Postretirement Plans for Fiscal Years 
2007ï¿½2004. 

* As discussed in the background section, DOE reimburses its 
contractors for allowable pension and postretirement benefit costs. 
Contractorsï¿½ methods for funding these benefit costs ï¿½generally either 
by setting aside funds while employees are working (pension) or on a 
PAYGO basis after employees have retired (postretirement) ï¿½directly 
impact the funded status of the plans. 

* The funded status ï¿½net (liability) or net asset ï¿½of DOE contractor 
benefit plans can change from one year to the next as benefits accrue 
and are paid. The funded status can also change due to other factors, 
including: 

- the amount of contractor contributions; 

- changes in actuarial assumptions, such as the interest rate used to 
discount expected future benefits to a present value; 

- plan experience, such as actual health care costs and returns on 
pension plan investments that are different than what was assumed; and; 

- changes to benefits that employees receive or the portion of benefit 
costs borne by the employer. 

Distribution of DOEï¿½s Liabilities for Contractorsï¿½ Defined Benefit 
Plans: Pension: 

* The net liability of DOE contractorsï¿½ defined benefit pension plans 
at the end of fiscal year 2007 was $69.5 million. However, as shown in 
the table on the next page, 12 plans are overfunded and 34 plans are 
underfunded. 

- Of the 12 overfunded plans, 11 are sponsored by National Nuclear 
Security Administration (NNSA) and Office of Science contractors. These 
plans represent 98 percent of the $1.9 billion in pension overfunding, 
with the plans for three facilities representing 56 percent of the 
total overfunding. 

- Of the 34 underfunded plans, 9 are sponsored by Office of 
Environmental Management contractors. These plans represent 61 percent 
of the $2.0 billion in total pension underfunding, with the plans for 
two facilities representing 57 percent of the total underfunding. 

* Enclosure V provides the Components of the Funded Status of Defined 
Benefit Pension Plans for Fiscal Year 2007. 

* Enclosure VI provides the Distribution of the Number of Defined 
Benefit Pension Plan Participants as of October 1, 2006. 

* Enclosure VII provides the Distribution of the Funded Status of 
Defined Benefit Pension Plans by DOE Organization for Fiscal Years 
2007ï¿½2004. 

Table: Components of the Reported Funded Status of DOEï¿½s Contractorsï¿½ 
Defined Benefit Pension Plans and Other Plan Information: Dollars in 
millions (except where stated otherwise): 

Components of funded status: Benefit obligations; 
As of September 30, 2007, All plans: ($27,512.9); 
As of September 30, 2007, Overfunded plans: ($16,741.1); 
As of September 30, 2007, Underfunded plans: ($10,771.8). 

Components of funded status: Assets; 
As of September 30, 2007, All plans: $27,443.4; 
As of September 30, 2007, Overfunded plans: $18,647.9; 
As of September 30, 2007, Underfunded plans: $8,795.5. 

Components of funded status: Funded status ï¿½Net (liability) asset; 
As of September 30, 2007, All plans: ($69.5); 
As of September 30, 2007, Overfunded plans: $1,906.8; 
As of September 30, 2007, Underfunded plans: ($1,976.3). 

Other plan information: Number of plans; 
As of September 30, 2007, All plans: 46; 
As of September 30, 2007, Overfunded plans: 12; 
As of September 30, 2007, Underfunded plans: 34. 

Other plan information: Number of participants (active/total, in 
thousands)[A]; 
As of September 30, 2007, All plans: 77.7/180.0; 
As of September 30, 2007, Overfunded plans: 28.4/75.0; 
As of September 30, 2007, Underfunded plans: 49.3/105.0. 

Other plan information: Employer contributions; 
As of September 30, 2007, All plans: $387.4; 
As of September 30, 2007, Overfunded plans: $1.1; 
As of September 30, 2007, Underfunded plans: $386.3. 

Other plan information: Employee contributions; 
As of September 30, 2007, All plans: $3.0; 
As of September 30, 2007, Overfunded plans: $0.2;  
As of September 30, 2007, Underfunded plans: $2.8. 

Other plan information: Benefit payments; 
As of September 30, 2007, All plans: $1,311.5; 
As of September 30, 2007, Overfunded plans: $847.6; 
As of September 30, 2007, Underfunded plans: $463.9. 

Source: GAO analysis of DOE and plan data. 

[A] The number of participants are as of October 1, 2006. 

[End of table] 

Distribution of DOEï¿½s Liabilities for Contractorsï¿½ Defined Benefit 
Plans: Postretirement: 

* DOEï¿½s contractors sponsor various postretirement benefit plans. 
According to DOE, as of September 30, 2007, these included health (41 
contractors), dental (19 contractors), life insurance (23 contractors), 
and Medicare Part B premium reimbursement (5 contractors). 

* The net liability of DOE contractorsï¿½ postretirement benefit plans at 
the end of fiscal year 2007 was $10.3 billion. This figure is net of 
$161.6 million in assets, $120.6 million of which is attributable to a 
life insurance plan for employees of a single facility. 

* Enclosure VIII provides the Distribution of the Funded Status of 
Defined Benefit Postretirement Plans by DOE Organization for Fiscal 
Years 2007ï¿½2004. 

Distribution of DOEï¿½s Liabilities for Contractorsï¿½ Defined Benefit 
Plans: Approval of Plan Changes: 

* A key control step in monitoring contractorsï¿½ benefit plans is the 
requirement that contractors provide DOE with documentation in advance 
for its review that shows the impact proposed plan changes have on 
employer contributions and relative benefit values, according to DOE 
officials. 

* To understand DOEï¿½s process for approving plan changes, we reviewed 
the documentation supporting four plan changes whose financial effects 
were reflected in DOEï¿½s fiscal year 2006 and 2007 financial statements. 
For these four plan changes: one increased pension obligations by 
almost $4 million (0.2 percent of plan obligations), one reduced 
retiree health obligations by $105.8 million (7.8 percent of plan 
obligations), and two reduced retiree life insurance obligations by a 
total of $112.3 million (5.5 percent of plan obligations). 

* DOE provided us with information submitted by contractors to support 
plan changes, including the following required by Order 350.1: (1) the 
effect of the plan change on the contract net benefit value or per 
capita benefit costs, (2) the dollar estimate of savings or costs, and 
(3) the basis for determining the estimated savings or costs. 

* DOE approved all the requested plan changes in the limited sample 
that we reviewed; however, the documentation provided to us did not 
clearly reflect the basis on which DOE made its decisions to approve 
these plan changes. 

DOEï¿½s Actions to Manage Future Contractor Employee Benefit Costs and 
Liabilities: 

* DOE suspended Notice 351.1 in June 2006. It is no longer DOEï¿½s policy 
to restrict reimbursements for contractorsï¿½ benefit costs for new 
employees only if: 

- these employees participate in a ï¿½market-basedï¿½ pension plan, which 
the Notice defined as a defined contribution plan; and; 

- the benefit value and cost study scores of individual pension and 
health benefit plans for these employees do not exceed the 105 percent 
benchmark of the comparison group. 

* Order 350.1 remains DOEï¿½s controlling policy for reimbursing 
contractorsï¿½ pension and postretirement benefit costs. In addition, 
recent contracts: 

- define ï¿½market-basedï¿½ benefits to mean that all new employeesï¿½ 
benefits do not exceed 105 percent of the comparison groupï¿½s average 
total benefit value and cost study scores, and; 

- direct contractors to perform a benefit value study every 2 years and 
a cost study annually to determine if contractor employeesï¿½ pensions 
and benefits are market based. 

* DOE has awarded 14 M&O and other site contracts that contain these 
new provisions for pension and postretirement benefits. DOE contractors 
have used different approaches to conform with DOEï¿½s contract 
provisions: 

- Contractors with benefit value scores well above the 105 percent 
benchmark have generally established two tiers of benefits: one market-
based benefits plan for new employees and the existing plan or an 
equivalent for incumbents. 

- Contractors with benefit value scores close to the 105 percent 
benchmark have generally not established a second tier for new 
employees, but rather have slightly modified existing benefits for all 
employees. DOE has approved these modified benefits plans. 

* Of the 14 contracts with the new provisions, NNSA awarded 2, 
Environmental Management awarded 6, and the Office of Science awarded 
6. (See encl. IX.) 

- The two NNSA contractors have created a new second tier of benefits 
for new employees that provide 401(k)-defined contribution pension 
plans and eliminate the contractorï¿½s contribution to postretirement 
health benefits. 

- The six Environmental Management contractors have generally created a 
new second tier of benefits for new employees, usually involving a 
defined contribution pension plan. 

- The six Office of Science contractors generally have not established 
a second tier of benefits for new employees. Contractors already had 
benefit value scores which were below or slightly over the 105 percent 
benchmark. 

* DOEï¿½s primary goal is to make employee benefits costs more 
predictable because, according to DOE officials, recent fluctuations in 
costs for contractorsï¿½ employee pension benefits had made it difficult 
for DOE to reasonably estimate these costs when developing its annual 
budget proposals. 

* DOE expects that these new provisions will not substantially affect 
pension and postretirement benefits costs and liabilities for the next 
20 to 30 years because (1) they are only being included when contracts 
are being recompeted and (2) these changes are directed at new 
employees. Incumbentsï¿½eligible retirees and employees on a contractorï¿½s 
payroll before the new contractï¿½s effective dateï¿½will continue to 
receive their existing benefits, or a substantial equivalent. However, 
if the incumbent employeesï¿½ total benefits package is over the 105-
percent benchmark, the contractor may be required to submit and 
implement a Corrective Action Plan. 

[End of enclosure] 


Enclosure II: DOE Contracts with Benefit Value Scores that Exceed DOE 
Order 350.1's Benchmark of 105 Percent:

Facility: Los Alamos National Laboratory; 
Responsible DOE Office: NNSA; 
Date of most recent benefit value study[B]: January 2006; 
Is a Corrective Action Plan in place? No. DOE reported that the benefit 
value score for market-based benefits included both new employee 
benefits and some incumbent employee benefits. When incumbent benefits 
are removed from the calculation, the benefit value score is below the 
105 percent benchmark.

Facility: Lawrence Livermore National Laboratory; 
Responsible DOE Office: NNSA; 
Date of most recent benefit value study[B]: May 2007; 
Is a Corrective Action Plan in place? No. NNSA is waiting for results 
of future Benefit Value Study in summer 2008.

Facility: Sandia National Laboratories; 
Responsible DOE Office: NNSA; 
Date of most recent benefit value study[B]: February 2006; 
Is a Corrective Action Plan in place? No. NNSA has requested additional 
information on contractor's benefits.

Facility: Hanford site[A]; 
Responsible DOE Office: Environmental Management; 
Date of most recent benefit value study[B]: August 2006; 
Is a Corrective Action Plan in place? Yes.

Facility: Oak Ridge Environmental Management; 
Responsible DOE Office: Environmental Management; 
Date of most recent benefit value study[B]: March 2005; 
Is a Corrective Action Plan in place? Yes.

Facility: Argonne National Laboratory; 
Responsible DOE Office: Science; 
Date of most recent benefit value study[B]: August 2007; 
Is a Corrective Action Plan in place? No. Contractor raised employee 
contribution to health care premiums instead.

Facility: Fermi National Accelerator Laboratory; 
Responsible DOE Office: Science; 
Date of most recent benefit value study[B]: June 2007; 
Is a Corrective Action Plan in place? Contractor is currently 
developing Corrective Action Plan.

Facility: Lawrence Berkeley National Laboratory; 
Responsible DOE Office: Science; 
Date of most recent benefit value study[B]: June 2006; 
Is a Corrective Action Plan in place? No. Contractor is not required to 
implement Corrective Action Plan per OMB Circular A-121.

Facility: Thomas Jefferson National Accelerator Facility; 
Responsible DOE Office: Science; 
Date of most recent benefit value study[B]: November 2007; 
Is a Corrective Action Plan in place?: No.

Source: DOE contractor benefit value studies.

[A] The Hanford site includes the following four site contracts: River 
Corridor Closure, 222-S Analytical Laboratory Services and Testing, 
Project Hanford Management, and River Protection Tank Farm.

[B] We are not providing the reported benefit value scores for these 
facilities because DOE believes that this information may be 
proprietary. 

[End of table]

[End of enclosure]

Enclosure III: Distribution of the Funded Status of Defined Benefit 
Pension Plans for Fiscal Years 2007-2004 (Dollars in millions): 

Facility number[A]: 1; 
Fiscal years: 2007: ($672.49); 
Fiscal years: 2006: ($964.96); 
Fiscal years: 2005: ($1,175.93); 
Fiscal years: 2004: ($987.43).

Facility number[A]: 2; 
Fiscal years: 2007: ($457.30); 
Fiscal years: 2006: ($632.53); 
Fiscal years: 2005: ($688.31); 
Fiscal years: 2004: ($622.25).

Facility number[A]: 3; 
Fiscal years: 2007: (134.46); 
Fiscal years: 2006: ($279.03); 
Fiscal years: 2005: ($328.26); 
Fiscal years: 2004: ($299.65).

Facility number[A]: 4; 
Fiscal years: 2007: ($104.18); 
Fiscal years: 2006: ($157.21); 
Fiscal years: 2005: ($178.46); 
Fiscal years: 2004: ($138.77).

Facility number[A]: 5; 
Fiscal years: 2007: ($84.06); 
Fiscal years: 2006: ($85.79); 
Fiscal years: 2005: ($79.42); 
Fiscal years: 2004: ($74.05).

Facility number[A]: 6; 
Fiscal years: 2007: ($75.35); 
Fiscal years: 2006: ($157.72); 
Fiscal years: 2005: ($223.45); 
Fiscal years: 2004: ($220.83).

Facility number[A]: 7; 
Fiscal years: 2007: ($56.56); 
Fiscal years: 2006: ($116.32); 
Fiscal years: 2005: ($132.57); 
Fiscal years: 2004: ($117.77).

Facility number[A]: 8; 
Fiscal years: 2007: ($56.02); 
Fiscal years: 2006: ($201.67); 
Fiscal years: 2005: ($290.49); 
Fiscal years: 2004: ($227.56).

Facility number[A]: 9; 
Fiscal years: 2007: ($53.80); 
Fiscal years: 2006: ($91.73); 
Fiscal years: 2005: ($113.90); 
Fiscal years: 2004: ($91.33).

Facility number[A]: 10; 
Fiscal years: 2007: ($48.15); 
Fiscal years: 2006: ($72.48); 
Fiscal years: 2005: ($84.82); 
Fiscal years: 2004: ($72.29).

Facility number[A]: 11; 
Fiscal years: 2007: ($46.24); 
Fiscal years: 2006: ($148.93); 
Fiscal years: 2005: ($189.88); 
Fiscal years: 2004: ($115.76).

Facility number[A]: 12; 
Fiscal years: 2007: ($43.41); 
Fiscal years: 2006: ($88.65); 
Fiscal years: 2005: ($101.82); 
Fiscal years: 2004: ($94.95).

Facility number[A]: 13; 
Fiscal years: 2007: ($15.60); 
Fiscal years: 2006: ($25.32); 
Fiscal years: 2005: ($30.34); 
Fiscal years: 2004: ($25.82).

Facility number[A]: 14; 
Fiscal years: 2007: ($14.37); 
Fiscal years: 2006: ($33.81); 
Fiscal years: 2005: ($52.48); 
Fiscal years: 2004: ($40.59).

Facility number[A]: 15; 
Fiscal years: 2007: ($12.03); 
Fiscal years: 2006: ($26.80); 
Fiscal years: 2005: ($29.66); 
Fiscal years: 2004: ($29.92).

Facility number[A]: 16; 
Fiscal years: 2007: ($11.45); 
Fiscal years: 2006: ($33.49); 
Fiscal years: 2005: ($30.08); 
Fiscal years: 2004: ($52.18).

Facility number[A]: 17; 
Fiscal years: 2007: ($5.77); 
Fiscal years: 2006: ($27.20); 
Fiscal years: 2005: ($25.81); 
Fiscal years: 2004: ($16.22).

Facility number[A]: 18; 
Fiscal years: 2007: ($2.88); 
Fiscal years: 2006: ($4.63); 
Fiscal years: 2005: ($7.43); 
Fiscal years: 2004: ($5.60).

Facility number[A]: 19; 
Fiscal years: 2007: ($0.03); 
Fiscal years: 2006: ($0.08); 
Fiscal years: 2005: ($0.13); 
Fiscal years: 2004: ($0.18).

Facility number[A]: 20; 
Fiscal years: 2007: $0.20; 
Fiscal years: 2006: $0.17; 
Fiscal years: 2005: $0.18; 
Fiscal years: 2004: $0.19.

Facility number[A]: 21; 
Fiscal years: 2007: $14.74; 
Fiscal years: 2006: ($777.81); 
Fiscal years: 2005: ($959.35); 
Fiscal years: 2004: ($409.09).

Facility number[A]: 22; 
Fiscal years: 2007: $30.18; 
Fiscal years: 2006: $18.46; 
Fiscal years: 2005: $16.14; 
Fiscal years: 2004: $20.40.

Facility number[A]: 23; 
Fiscal years: 2007: $105.36; 
Fiscal years: 2006: ($105.55); 
Fiscal years: 2005: ($183.16); 
Fiscal years: 2004: ($137.94).

Facility number[A]: 24; 
Fiscal years: 2007: $278.48; 
Fiscal years: 2006: $29.49; 
Fiscal years: 2005: ($20.30); 
Fiscal years: 2004: $10.62.

Facility number[A]: 25; 
Fiscal years: 2007: $392.84; 
Fiscal years: 2006: ($194.61); 
Fiscal years: 2005: ($411.72); 
Fiscal years: 2004: ($176.15).

Facility number[A]: 26; 
Fiscal years: 2007: $466.19; 
Fiscal years: 2006: ($540.55); 
Fiscal years: 2005: ($593.87); 
Fiscal years: 2004: ($310.48).

Facility number[A]: 27; 
Fiscal years: 2007: $536.63; 
Fiscal years: 2006: $219.52; 
Fiscal years: 2005: $195.21; 
Fiscal years: 2004: $118.20.

Facility number[A]: Total; 
Fiscal years: 2007: ($69.53); 
Fiscal years: 2006: ($4,499.23); 
Fiscal years: 2005: ($5,720.11); 
Fiscal years: 2004: ($4,117.40).

Source: DOE and plan data.

[A] DOE currently has 43 contracts for operations at DOE-owned 
facilities. The names of these facilities and other information that 
could identify a particular facility or contractor have been removed 
because DOE believes that the plans' funded status may be proprietary. 
Further, the funded status of all contractor plans was combined for 
purposes of reporting by facility. Consequently, there are facilities 
for which the overfunding and underfunding of different plans are 
netted even though the assets of one plan generally cannot be used to 
pay the benefits and other expenses of another plan. The data in this 
enclosure are presented in ascending order based on fiscal year 2007 
funded status amounts. Data for facilities with a zero funded status 
for each of the fiscal years presented are not reflected in this 
enclosure. The facility numbers in this enclosure do not necessarily 
correspond to the same facilities as numbered in the report's other 
enclosures. 

[End of table]

[End of enclosure]

Enclosure IV: Distribution of the Funded Status of Defined Benefit 
Postretirement Plans for Fiscal Years 2007-2004: (Dollars in millions): 

Facility number[A]: 1; 
Fiscal years: 2007: ($1,545.92); 
Fiscal years: 2006: ($1,731.87); 
Fiscal years: 2005: ($1,704.73); 
Fiscal years: 2004: ($1,467.22).

Facility number[A]: 2; 
Fiscal years: 2007: ($1,251.09); 
Fiscal years: 2006: ($1,407.46); 
Fiscal years: 2005: ($1,215.83); 
Fiscal years: 2004: ($972.53).

Facility number[A]: 3; 
Fiscal years: 2007: ($1,246.11); 
Fiscal years: 2006: ($1,388.01); 
Fiscal years: 2005: ($1,333.26); 
Fiscal years: 2004: ($974.72).

Facility number[A]: 4; 
Fiscal years: 2007: ($1,099.62); 
Fiscal years: 2006: ($1,153.63); 
Fiscal years: 2005: ($1,243.23); 
Fiscal years: 2004: ($916.69).

Facility number[A]: 5; 
Fiscal years: 2007: ($859.05); 
Fiscal years: 2006: ($885.46); 
Fiscal years: 2005: ($924.70); 
Fiscal years: 2004: ($897.11).

Facility number[A]: 6; 
Fiscal years: 2007: ($650.97); 
Fiscal years: 2006: ($733.34); 
Fiscal years: 2005: ($768.20); 
Fiscal years: 2004: ($773.18).

Facility number[A]: 7; 
Fiscal years: 2007: ($567.97); 
Fiscal years: 2006: ($606.03); 
Fiscal years: 2005: ($639.84); 
Fiscal years: 2004: ($640.85).

Facility number[A]: 8; 
Fiscal years: 2007: ($410.24); 
Fiscal years: 2006: ($463.21); 
Fiscal years: 2005: ($567.48); 
Fiscal years: 2004: ($579.05).

Facility number[A]: 9; 
Fiscal years: 2007: ($398.10); 
Fiscal years: 2006: ($433.74); 
Fiscal years: 2005: ($437.67); 
Fiscal years: 2004: ($373.63).

Facility number[A]: 10; 
Fiscal years: 2007: ($353.36); 
Fiscal years: 2006: ($392.37); 
Fiscal years: 2005: ($365.66); 
Fiscal years: 2004: ($287.56).

Facility number[A]: 11; 
Fiscal years: 2007: ($322.57); 
Fiscal years: 2006: ($323.24); 
Fiscal years: 2005: ($355.51); 
Fiscal years: 2004: ($319.46).

Facility number[A]: 12; 
Fiscal years: 2007: ($242.30); 
Fiscal years: 2006: ($295.05); 
Fiscal years: 2005: ($329.13); 
Fiscal years: 2004: ($302.16).

Facility number[A]: 13; 
Fiscal years: 2007: ($195.99); 
Fiscal years: 2006: ($202.55); 
Fiscal years: 2005: ($214.24); 
Fiscal years: 2004: ($178.81).

Facility number[A]: 14; 
Fiscal years: 2007: ($179.47); 
Fiscal years: 2006: ($201.76); 
Fiscal years: 2005: ($217.63); 
Fiscal years: 2004: ($229.83).

Facility number[A]: 15; 
Fiscal years: 2007: ($143.45); 
Fiscal years: 2006: ($155.19); 
Fiscal years: 2005: ($162.73); 
Fiscal years: 2004: ($159.76).

Facility number[A]: 16; 
Fiscal years: 2007: ($116.38); 
Fiscal years: 2006: ($123.30); 
Fiscal years: 2005: ($176.38); 
Fiscal years: 2004: ($155.81).

Facility number[A]: 17; 
Fiscal years: 2007: ($111.52); 
Fiscal years: 2006: ($113.62); 
Fiscal years: 2005: ($115.85); 
Fiscal years: 2004: ($99.67).

Facility number[A]: 18; 
Fiscal years: 2007: ($98.36); 
Fiscal years: 2006: ($116.96); 
Fiscal years: 2005: ($113.49); 
Fiscal years: 2004: ($101.07).

Facility number[A]: 19; 
Fiscal years: 2007: ($93.74); 
Fiscal years: 2006: ($88.91); 
Fiscal years: 2005: ($63.36); 
Fiscal years: 2004: ($52.09).

Facility number[A]: 20; 
Fiscal years: 2007: ($71.27); 
Fiscal years: 2006: ($80.25); 
Fiscal years: 2005: ($84.50); 
Fiscal years: 2004: ($80.42).

Facility number[A]: 21; 
Fiscal years: 2007: ($61.76); 
Fiscal years: 2006: ($62.12); 
Fiscal years: 2005: $0.00; 
Fiscal years: 2004: $0.00.

Facility number[A]: 22; 
Fiscal years: 2007: ($59.86); 
Fiscal years: 2006: ($84.72); 
Fiscal years: 2005: ($86.13); 
Fiscal years: 2004: ($78.39).

Facility number[A]: 23; 
Fiscal years: 2007: ($58.48); 
Fiscal years: 2006: ($83.63); 
Fiscal years: 2005: ($100.46); 
Fiscal years: 2004: ($86.76).

Facility number[A]: 24; 
Fiscal years: 2007: ($54.23); 
Fiscal years: 2006: ($56.38); 
Fiscal years: 2005: ($61.00); 
Fiscal years: 2004: ($54.59).

Facility number[A]: 25; 
Fiscal years: 2007: ($41.34); 
Fiscal years: 2006: ($43.28); 
Fiscal years: 2005: ($42.05); 
Fiscal years: 2004: ($37.64).

Facility number[A]: 26; 
Fiscal years: 2007: ($29.14); 
Fiscal years: 2006: ($34.37); 
Fiscal years: 2005: ($23.50); 
Fiscal years: 2004: ($26.88).

Facility number[A]: 27; 
Fiscal years: 2007: ($17.98); 
Fiscal years: 2006: ($24.10); 
Fiscal years: 2005: ($20.52); 
Fiscal years: 2004: ($13.01).

Facility number[A]: 28; 
Fiscal years: 2007: ($13.39); 
Fiscal years: 2006: ($19.41); 
Fiscal years: 2005: ($20.76); 
Fiscal years: 2004: ($19.49).

Facility number[A]: 29; 
Fiscal years: 2007: ($9.14); 
Fiscal years: 2006: ($10.02); 
Fiscal years: 2005: ($10.99); 
Fiscal years: 2004: ($10.61).

Facility number[A]: 30; 
Fiscal years: 2007: ($8.10); 
Fiscal years: 2006: ($9.38); 
Fiscal years: 2005: ($9.55); 
Fiscal years: 2004: ($7.83).

Facility number[A]: 31; 
Fiscal years: 2007: ($8.00); 
Fiscal years: 2006: ($9.44); 
Fiscal years: 2005: ($18.05); 
Fiscal years: 2004: ($12.37).

Facility number[A]: 32; 
Fiscal years: 2007: ($5.61); 
Fiscal years: 2006: ($7.27); 
Fiscal years: 2005: ($12.81); 
Fiscal years: 2004: ($9.52).

Facility number[A]: 33; 
Fiscal years: 2007: ($4.71); 
Fiscal years: 2006: ($5.41); 
Fiscal years: 2005: ($4.74); 
Fiscal years: 2004: ($3.79).

Facility number[A]: 34; 
Fiscal years: 2007: ($0.06); 
Fiscal years: 2006: ($0.12); 
Fiscal years: 2005: ($0.16); 
Fiscal years: 2004: ($0.19).

Facility number[A]: 35; 
Fiscal years: 2007: $10.64; 
Fiscal years: 2006: $9.57; 
Fiscal years: 2005: $9.70; 
Fiscal years: 2004: $10.24.

Facility number[A]: Total; 
Fiscal years: 2007: ($10,318.64); 
Fiscal years: 2006: ($11,336.03); 
Fiscal years: 2005: ($11,434.44); 
Fiscal years: 2004: ($9,912.45).

Source: DOE and plan data.

[A] DOE currently has 43 contracts for operations at DOE-owned 
facilities. The names of these facilities and other information that 
could identify a particular facility or contractor have been removed 
because DOE believes that the plans' funded status may be proprietary. 
The data in this enclosure are presented in ascending order based on 
fiscal year 2007 funded status amounts. Data for facilities with a zero 
funded status for each of the fiscal years presented are not reflected 
in this enclosure. The facility numbers in this enclosure do not 
necessarily correspond to the same facilities as numbered in the 
report's other enclosures. 

[End of table]

[End of enclosure]

Enclosure V: Components of the Funded Status of Defined Benefit Pension 
Plans for Fiscal Year 2007: (Dollars in millions)

Facility number[A]: 1; 
Funded status: Benefit obligation: ($2,126.58); 
Funded status: Assets: $1,454.09; 
Funded status: Net: ($672.49).

Facility number[A]: 2; 
Funded status: Benefit obligation: ($1,555.38); 
Funded status: Assets: $1,098.08; 
Funded status: Net: ($457.30).

Facility number[A]: 3; 
Funded status: Benefit obligation: ($1,103.29); 
Funded status: Assets: $968.83; 
Funded status: Net: ($134.46).

Facility number[A]: 4; 
Funded status: Benefit obligation: ($450.11); 
Funded status: Assets: $345.93; 
Funded status: Net: ($104.18).

Facility number[A]: 5; 
Funded status: Benefit obligation: ($62.37); 
Funded status: Assets: ($21.69); 
Funded status: Net: ($84.06).

Facility number[A]: 6; 
Funded status: Benefit obligation: ($471.56); 
Funded status: Assets: $396.21; 
Funded status: Net: ($75.35).

Facility number[A]: 7; 
Funded status: Benefit obligation: ($437.27); 
Funded status: Assets: $380.71; 
Funded status: Net: ($56.56).

Facility number[A]: 8; 
Funded status: Benefit obligation: ($829.44); 
Funded status: Assets: $773.42; 
Funded status: Net: ($56.02).

Facility number[A]: 9; 
Funded status: Benefit obligation: ($361.78); 
Funded status: Assets: $307.98; 
Funded status: Net: ($53.80).

Facility number[A]: 10; 
Funded status: Benefit obligation: ($315.85); 
Funded status: Assets: $267.70; 
Funded status: Net: ($48.15).

Facility number[A]: 11; 
Funded status: Benefit obligation: ($723.47); 
Funded status: Assets: $677.23; 
Funded status: Net: ($46.24).

Facility number[A]: 12; 
Funded status: Benefit obligation: ($338.34); 
Funded status: Assets: $294.93; 
Funded status: Net: ($43.41).

Facility number[A]: 13; 
Funded status: Benefit obligation: ($61.15); 
Funded status: Assets: $45.55; 
Funded status: Net: ($15.60).

Facility number[A]: 14; 
Funded status: Benefit obligation: ($121.22); 
Funded status: Assets: $106.85; 
Funded status: Net: ($14.37).

Facility number[A]: 15; 
Funded status: Benefit obligation: ($65.87); 
Funded status: Assets: $53.84; 
Funded status: Net: ($12.03).

Facility number[A]: 16; 
Funded status: Benefit obligation: ($86.02); 
Funded status: Assets: $74.57; 
Funded status: Net: ($11.45).

Facility number[A]: 17; 
Funded status: Benefit obligation: ($37.36); 
Funded status: Assets: $31.59; 
Funded status: Net: ($5.77).

Facility number[A]: 18; 
Funded status: Benefit obligation: ($19.23); 
Funded status: Assets: $16.35; 
Funded status: Net: ($2.88).

Facility number[A]: 19; 
Funded status: Benefit obligation: ($0.03); 
Funded status: Assets: $0.00; 
Funded status: Net: ($0.03).

Facility number[A]: 20; 
Funded status: Benefit obligation: ($0.42); 
Funded status: Assets: $0.62; 
Funded status: Net: $0.20.

Facility number[A]: 21; 
Funded status: Benefit obligation: ($5,012.96); 
Funded status: Assets: $5,027.70; 
Funded status: Net: $14.74.

Facility number[A]: 22; 
Funded status: Benefit obligation: ($110.47); 
Funded status: Assets: $140.65; 
Funded status: Net: $30.18.

Facility number[A]: 23; 
Funded status: Benefit obligation: ($1,338.10); 
Funded status: Assets: $1,443.46; 
Funded status: Net: $105.36.

Facility number[A]: 24; 
Funded status: Benefit obligation: ($1,561.92);
Funded status: Assets: $1,840.40; 
Funded status: Net: $278.48.

Facility number[A]: 25; 
Funded status: Benefit obligation: ($3,624.98); 
Funded status: Assets: $4,017.82; 
Funded status: Net: $392.84.

Facility number[A]: 26; 
Funded status: Benefit obligation: ($5,349.04); 
Funded status: Assets: $5,815.23; 
Funded status: Net: $466.19.

Facility number[A]: 27; 
Funded status: Benefit obligation: ($1,348.72); 
Funded status: Assets: $1,885.35; 
Funded status: Net: $536.63.

Facility number[A]: Total; 
Funded status: Benefit obligation: ($27,512.93); 
Funded status: Assets: $27,443.40; 
Funded status: Net: ($69.53).

Source: DOE and plan data.

[A] DOE currently has 43 contracts for operations at DOE-owned 
facilities. The names of these facilities and other information that 
could identify a particular facility or contractor have been removed 
because DOE believes that the plans' funded status may be proprietary. 
Further, the funded status of all contractor plans was combined for 
purposes of reporting by facility. Consequently, there are facilities 
for which the overfunding and underfunding of different plans are 
netted even though the assets of one plan generally can not be used to 
pay the benefits and other expenses of another plan. The data in this 
enclosure are presented in ascending order based on net funded status 
amounts. Data for facilities with a zero funded status for each of the 
fiscal years presented are not reflected in this enclosure. The 
facility numbers in this enclosure do not necessarily correspond to the 
same facilities as numbered in the report's other enclosures. 

[End of table]

[End of enclosure]

Enclosure VI: Distribution of the Number of Defined Benefit Pension 
Plan Participants as of October 1, 2006:

Facility number[A]: 1; 
Active: 6,611; 
Retired, disabled, and other beneficiaries: 4,552; 
Terminated, vested, and other: 9,509; 
Total: 20,672.

Facility number[A]: 2; 
Active: 9,123; 
Retired, disabled, and other beneficiaries: 5,068; 
Terminated, vested, and other: 3,937; 
Total: 18,128.

Facility number[A]: 3; 
Active: 9,655; 
Retired, disabled, and other beneficiaries: 6,261; 
Terminated, vested, and other: 1,682; 
Total: 17,598.

Facility number[A]: 4; 
Active: 6,913; 
Retired, disabled, and other beneficiaries: 5,282; 
Terminated, vested, and other: 2,832; 
Total: 15,027.

Facility number[A]: 5; 
Active: 4,825; 
Retired, disabled, and other beneficiaries: 7,654; 
Terminated, vested, and other: 1,808; 
Total: 14,287.

Facility number[A]: 6; 
Active: 7,476; 
Retired, disabled, and other beneficiaries: 4,381; 
Terminated, vested, and other: 1,698; 
Total: 13,555.

Facility number[A]: 7; 
Active: 5,087; 
Retired, disabled, and other beneficiaries: 4,241; 
Terminated, vested, and other: 1,058; 
Total: 10,386.

Facility number[A]: 8; 
Active: 4,784; 
Retired, disabled, and other beneficiaries: 3,714; 
Terminated, vested, and other: 1,529; 
Total: 10,027.

Facility number[A]: 9; 
Active: 2,707; 
Retired, disabled, and other beneficiaries: 4,852; 
Terminated, vested, and other: 1,476; 
Total: 9,035.

Facility number[A]: 10; 
Active: 2,409; 
Retired, disabled, and other beneficiaries: 3,215; 
Terminated, vested, and other: 2,497; 
Total: 8,121.

Facility number[A]: 11; 
Active: 0; 
Retired, disabled, and other beneficiaries: 3,976; 
Terminated, vested, and other: 3,796; 
Total: 7,772.

Facility number[A]: 12; 
Active: 3,754; 
Retired, disabled, and other beneficiaries: 1,530; 
Terminated, vested, and other: 1,297; 
Total: 6,581.

Facility number[A]: 13; 
Active: 2,933; 
Retired, disabled, and other beneficiaries: 1,327; 
Terminated, vested, and other: 1,116; 
Total: 5,376.

Facility number[A]: 14; 
Active: 2,275; 
Retired, disabled, and other beneficiaries: 1,282; 
Terminated, vested, and other: 1,114; 
Total: 4,671.

Facility number[A]: 15; 
Active: 2,827; 
Retired, disabled, and other beneficiaries: 899; 
Terminated, vested, and other: 548; 
Total: 4,274.

Facility number[A]: 16; 
Active: 3,018; 
Retired, disabled, and other beneficiaries: 835; 
Terminated, vested, and other: 272; 
Total: 4,125.

Facility number[A]: 17; 
Active: 996; 
Retired, disabled, and other beneficiaries: 636; 
Terminated, vested, and other: 466; 
Total: 2,098.

Facility number[A]: 18; 
Active: 31; 
Retired, disabled, and other beneficiaries: 656; 
Terminated, vested, and other: 787; 
Total: 1,474.

Facility number[A]: 19; 
Active: 841; 
Retired, disabled, and other beneficiaries: 148; 
Terminated, vested, and other: 448; 
Total: 1,437.

Facility number[A]: 20; 
Active: 0; 
Retired, disabled, and other beneficiaries: 653; 
Terminated, vested, and other: 774; 
Total: 1,427.

Facility number[A]: 21; 
Active: 216; 
Retired, disabled, and other beneficiaries: 522; 
Terminated, vested, and other: 281; 
Total: 1,019.

Facility number[A]: 22; 
Active: 172; 
Retired, disabled, and other beneficiaries: 263; 
Terminated, vested, and other: 488; 
Total: 923.

Facility number[A]: 23; 
Active: 549; 
Retired, disabled, and other beneficiaries: 108; 
Terminated, vested, and other: 195; 
Total: 852.

Facility number[A]: 24; 
Active: 332; 
Retired, disabled, and other beneficiaries: 143; 
Terminated, vested, and other: 342; 
Total: 817.

Facility number[A]: 25; 
Active: 112; 
Retired, disabled, and other beneficiaries: 33; 
Terminated, vested, and other: 212; 
Total: 357.

Facility number[A]: 26; 
Active: 51; 
Retired, disabled, and other beneficiaries: 0; 
Terminated, vested, and other: 52; 
Total: 103.

Facility number[A]: 27; 
Active: 0; 
Retired, disabled, and other beneficiaries: 8; 
Terminated, vested, and other: 0; 
Total: 8.

Facility number[A]Total; 
Active: 77,697; 
Retired, disabled, and other beneficiaries: 62,239; 
Terminated, vested, and other: 40,214; 
Total: 180,150.

Source: DOE and plan data.

[A] DOE currently has 43 contracts for operations at DOE-owned 
facilities. The names of these facilities and other information that 
could identify a particular facility or contractor have been removed 
because DOE believes that the number of plan participants may be 
proprietary. Further, the participants of all contractor plans were 
combined for purposes of reporting by facility. The data in this 
enclosure are presented in descending order based on total 
participants. Data for facilities with a zero funded status for each of 
the fiscal years presented are not reflected in this enclosure. The 
facility numbers in this enclosure do not necessarily correspond to the 
same facilities as numbered in the report's other enclosures.

[End of table]

[End of enclosure]

Enclosure VII: Distribution of the Funded Status of Defined Benefit 
Pension Plans by DOE Organization for Fiscal Years 2007-2004: 

[See PDF for image] 

This figure is a vertical bar graph depicting the following data 
(dollars in millions): 

Fiscal year: 2007; 
Office of Environmental Management: ($1,206); 
NNSA: $838; 
Office of Science: $512; 
Other: ($214). 

Fiscal year: 2006; 
Office of Environmental Management: ($1,722); 
NNSA: ($2,139); 
Office of Science: ($121); 
Other: ($517). 

Fiscal year: 2005; 
Office of Environmental Management: ($2,009); 
NNSA: ($2,802); 
Office of Science: ($257); 
Other: ($651). 

Fiscal year: 2004; 
Office of Environmental Management: ($1,738); 
NNSA: ($1,555); 
Office of Science: ($210); 
Other: ($614). 

Source: GAO analysis of Department of Energy and plan data. 

[End of figure] 

[End of enclosure]

Enclosure VIII: Distribution of the Funded Status of Defined Benefit 
Postretirement Plans by DOE Organization for FY 2007-2004:

[See PDF for image] 

This figure is a vertical bar graph depicting the following data 
(dollars in millions): 

Fiscal year: 2007; 
Office of Environmental Management: ($2,451); 
NNSA: ($4,592); 
Office of Science: ($1,874); 
Other: ($1,401). 

Fiscal year: 2006; 
Office of Environmental Management: ($2,746); 
NNSA: ($5,048); 
Office of Science: ($2,026); 
Other: ($1,516). 

Fiscal year: 2005; 
Office of Environmental Management: ($2,897); 
NNSA: ($4,929); 
Office of Science: ($2,138); 
Other: ($1,470). 

Fiscal year: 2004; 
Office of Environmental Management: ($2,648); 
NNSA: ($3,962); 
Office of Science: ($1,909); 
Other: ($1,393). 

Source: GAO analysis of Department of Energy and plan data. 

[End of figure] 

[End of enclosure]

Enclosure IX: DOE's Contracts that Contain the New Pension and 
Postretirement Benefit Provisions:

These contracts contain language defining market-based benefits to mean 
that new employees' total benefits do not exceed 105 percent of the 
comparison group's average total benefit value score along with 
directing that the contractors conduct a benefit value study every 2 
years and a cost study annually.

Responsible DOE Office: NNSA; 
Facility: Los Alamos National Laboratory; 
Award date: June 1, 2006.

Responsible DOE Office: NNSA; 
Facility: Lawrence Livermore National Laboratory; 
Award date: May 8, 2007.

Responsible DOE Office: Environmental Management; 
Facility: Portsmouth Remediation; 
Award date: January 10, 2005.

Responsible DOE Office: Environmental Management; 
Facility: Portsmouth Infrastructure; 
Award date: March 16, 2005.

Responsible DOE Office: Environmental Management; 
Facility: Paducah Infrastructure; 
Award date: March 16, 2005.

Responsible DOE Office: Environmental Management; 
Facility: Paducah Remediation; 
Award date: December 27, 2005.

Responsible DOE Office: Environmental Management; 
Facility: West Valley Demonstration Project; 
Award date: June 29, 2007.

Responsible DOE Office: Environmental Management; 
Facility: Savannah River Site; 
Award date: January 10, 2008.

Responsible DOE Office: Science; 
Facility: Oak Ridge Institute for Science and Education; 
Award date: December 21, 2005.

Responsible DOE Office: Science; 
Facility: Thomas Jefferson National Accelerator Facility; 
Award date: April 14, 2006.

Responsible DOE Office: Science; 
Facility: Argonne National Laboratory; 
Award date: July 31, 2006.

Responsible DOE Office: Science; 
Facility: Fermi National Accelerator Laboratory; 
Award date: November 1, 2006.

Responsible DOE Office: Science; 
Facility: Ames Laboratory; 
Award date: December 4, 2006.

Responsible DOE Office: Science; 
Facility: Oak Ridge Protective Services; 
Award date: May 3, 2007.

Source: DOE.

Note: Since January 2005, DOE has awarded eight additional management 
and operating (M&O) or other site contracts that do not contain both of 
DOE's new pension and postretirement benefit provisions: the Idaho 
Advanced Mixed Waste Treatment Plant, Idaho Cleanup Project, Idaho 
National Laboratory, Nevada Test Site M&O, Nevada Test Site protective 
services, the Hanford 222-S Analytical Laboratory Services and Testing, 
Hanford River Corridor Closure, and Lawrence Berkeley National 
Laboratory. As of March 2008, DOE was competing five additional 
contracts that contain these new pension and postretirement benefit 
provisions: Hanford Mission Support, Hanford Plateau Remediation, 
Hanford Tank Operations, Savannah River Liquid Waste Contract, and 
National Renewable Energy Laboratory. 

[End of table]

[End of enclosure]

Enclosure X: Comments from the Department of Energy:

Note: GAO comments supplementing those in the report text appear at the 
end of this enclosure. 

Department of Energy: 
Washington, DC 20585: 

May 15, 2008: 

Mr. Mark E. Gaffigan: 
Director: 
Natural Resources and Environment: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Re: GAO Review of Department of Energy (DOE) Reimbursement of 
Contractor Employee Benefits: 

Dear Mr. Gaffigan:

Thank you for the opportunity for the DOE to review the draft letter 
and accompanying enclosures from the Government Accountability Office 
(GAO) to the Chairmen and Ranking Members of the Senate and House 
Subcommittees on Energy and Water Development ("GAO Letter"). In 
addition to the draft GAO Letter, we also have reviewed the draft 
slides that GAO used to brief the subcommittees in March 2008 ("GAO 
Slides").

Pursuant to discussions between our staff members, we have provided 
suggested comments on these documents. Many of these suggestions were 
meant to clarify information presented as well as make the presentation 
of the same information in various places consistent. We also provided 
comments in the text of the letter to explain some suggestions.

In addition, pursuant to agreement with your office, GAO will redact 
information as agreed on by GAO and DOE in draft Enclosures Ill, IV, V, 
VI and on page 22 of the GAO Slides for versions of these documents 
made publicly available. This is because these documents contain 
information that may be considered confidential and/or proprietary and 
thus may not be available to the public because it may be protected by 
one or more exemptions under the Freedom of Information Act. GAO also 
agrees that any unredacted versions of these documents that are 
submitted to Congress will contain appropriate markings to the effect 
that the marked information being submitted may be considered 
confidential and/or proprietary and should not be further disseminated. 
[See comment 1] 

Further, please be advised that for draft Enclosures VII and VIII, DOE 
did not verify the funded status of pension and Post Retirement 
Benefits (PRB) plans by program. For financial statement purposes, DOE 
compiles individual contractor pension and PRB benefit plan information 
by contractor plan rather than by program. [See comment 2] 

DOE would also like to point out that throughout the draft GAO Letter, 
the accompanying enclosures and the draft GAO Slides, the "funded 
status" of DOE contractor defined benefit pension plans is reported as 
a single amount, both for each site and for the Department as a whole 
for Fiscal Years (FY) 2004-2007. It is misleading to report the funded 
status as a single amount for DOE sites at which one or more 
contractors sponsor more than one defined benefit pension plan. For 
example, where a site has two defined benefit pension plans, one of 
which is overfunded and the other is underfunded, reporting the funded 
status only as a single amount is misleading because the overfunding of 
one defined benefit pension plan cannot be used to offset the 
underfunding of a separate defined benefit pension plan. Thus, netting 
the two amounts is not an accurate reflection of DOE's obligation 
relating to the funded status of the underfunded plan. [See comment 3] 

On a larger scale, for example, in Enclosure III, the FY 2007 funded 
status for the total of DOE contractor defined benefit pension plans 
(i.e., underfunding of $69.53M) represents the net of the aggregate of 
the underfunded plans totaling approximately $2 billion and the 
aggregate of overfunded plans totaling approximately $1.9 billion. 
Another example is on page 2 of the draft GAO Letter which references 
"a net liability of $69.5M for defined benefit pensions ...." Though 
DOE also discloses the funded status for the total of contractor 
defined benefit plans, I want to make clear that the Department cannot 
offset underfunding in one contractor defined benefit pension plan with 
overfunding in another contractor defined benefit pension plan. 
Therefore, the true amount of underfunding of DOE's contractor defined 
benefit pension plans for FY2007 is approximately $2 billion, not 
$69.53 million. The Department is concerned that without additional 
explanation, readers of the GAO report may believe that the 
Department's total reported liability for DOE contractor defined 
benefit pension plans in FY 2007 is $69.53 million instead of 
approximately $2 billion.

Overall, the Department believes that the draft report correctly 
reflects the status of Departmental policy regarding reimbursement of 
contractor employee benefits for 43 Management and Operating (M&O) and 
other site contracts. However, as discussed below, the Department 
disagrees with the draft report's implication that the issuance on 
April 27, 2006, of DOE Notice 351.1, Contractor Employee Pension and 
Medical Benefits Policy, was not based on considered analysis. [See 
comment 4] 

The Department's main concern with the proposed draft GAO Letter and 
draft GAO Slides are the descriptions of the basis for the issuance of 
DOE Notice 351.1, Contractor Employee Pension and Medical Benefits 
Policy on page 5 of the draft GAO Letter and page 20 of the draft GAO 
Slides. Under "Results in Brief' on page 5 of the draft GAO Letter, the 
first sentence states that "DOE officials told us that the decisions 
underlying the policy changes in it's April 2006 Notice 351.1 were 
formed over a period of years by the trends in cost reimbursements, 
budgetary uncertainties, and by consulting actuaries and others, 
include DOE Inspector General reports and our reports." This is a 
correct statement. However, we do not agree with GAO's conclusion that 
there is only "limited evidence" that DOE had considered policy 
alternatives, the sensitivities of stakeholders and the near- and long-
term financial and mission impacts of the proposed changes. While it is 
true that the Department did not compile a "formal record" of its work 
leading up to issuance of DOE Notice 351.1, the Department provided GAO 
with considerable evidence that DOE Notice 351.1 was the result of 
documented long-standing Departmental concerns about the growing 
liability of the Department for contractor employee benefit costs.

The upward trends in DOE's reimbursement of contractor employee 
benefits are well evidenced by the Statement of Financial Accounting 
Standards (SFAS) No. 87, "Employers Accounting for Pensions," and SFAS 
No.106, "Employers' Accounting for Postretirement Benefits Other Than 
Pensions" (both as amended by SFAS No. 158, "Employers' Accounting for 
Defined Benefit Pension and Other Postretirement Plans") reports which 
are provided each year by contractors to the Department and which were 
made available to the GAO for review. Among other documents, GAO was 
provided with a copy of a briefing package for the Secretary of Energy 
dated March 1, 2005, entitled: "Overview: DOE Contractor Pension and 
Post Retirement Benefit Liability." Among other information included in 
that package was a chart entitled "DOE Contractor Pension & Post 
Retirement Benefits Unfunded Projected Benefit Obligation Trend FY92-
FY04." It also included a chart entitled "Current DOE Costs for Pension 
Contributions and PRB Expenses" fiscal year for the years 2000 through 
2004 and estimated costs for 2005 and 2006.

GAO was also provided a copy of a letter dated August 10, 2005, from 
Secretary Bodman to Senator Pete V. Dominici, Chairman of the Senate 
Committee on Energy and Natural Resources, that referenced the 
Department's comprehensive assessment of Departmental policies 
regarding pension benefits and post-contract retiree medical benefits 
and the decision to develop "an overall long-term strategy to mitigate 
liability growth in existing plans and channel new contractor employees 
into cost predictable plans that are more consistent with current 
industry practice and trends." We also provided GAO with a copy of a 
briefing paper dated January 27, 2006, prepared for the Senate Energy 
and Natural Resources Committee and the Senate Energy and Water 
Development Subcommittee, entitled "DOE Facility Management Contractor 
Benefit Costs & Long Term Liabilities," which demonstrate that the 
Department - and Congress - were aware of and concerned about these 
long-term liabilities. In addition, we provided GAO with a February 18, 
2006, memorandum from the Director of the Office of Management to then 
Deputy Secretary Clay Sell, which stated as its purpose at the 
beginning "to report on the status of the Department's initiative to 
effect changes in contractor employee pension/health benefits policy." 
All of these documents show that a great deal of considered work and 
analysis formed the basis for issuance of DOE Notice 351.1.

We would also like to make two other comments. DOE does not "exempt" 
contracts from a Corrective Action Plan. [See comment 5] As noted on 
page 5 of the draft GAO Slide "Background: Reimbursement of Contractor 
Pension and Postretirement Benefit Costs," pursuant to DOE Order 350.1 
the Contracting Officer has discretion to determine whether such a plan 
is necessary. See also page 3 of the draft GAO Letter. In addition, the 
draft GAO Letter on page 6 discusses why the funded status of 
contractor employee defined benefit pension plans may fluctuate 
significantly from year to year. However, a key reason for such 
fluctuations is missing, which is that the market may go down 
significantly and unpredictably as well as up. [See comment 6] 

If you have any questions about the above information, please do not 
hesitate to contact me at 202-287-1310. 

Sincerely, 

Signed by: 

Edward R. Simpson: 
Director: 
Office of Procurement and Assistance Management: 

The following are GAO's comments on the Department of Energy's letter 
dated May 15, 2008.

GAO Comments:

1. In response to DOE's concern that the funded status and benefit 
value scores of contractor benefit plans may be proprietary, we have 
redacted from this report information that could associate a funded 
status amount or benefit value score with a particular facility or 
contractor.

2. We understand that for financial reporting purposes DOE compiles 
benefit plan information by contractor and not by program. We also 
understand that DOE did not verify our mathematical aggregation of the 
funded status of benefit plans according to the program offices 
responsible for overseeing the contractors that sponsor these plans. 
Our aggregations of funded status were based on a list of facilities 
and contractors and their associated program offices that DOE provided 
us. Although we did not audit or verify data provided by DOE or its 
contractors for individual benefit plan activity and balances, we did 
determine that plan data were, in the aggregate, consistent with 
amounts and other information in DOE's financial statements and, 
therefore, sufficiently reliable for our purposes.

3. We disagree with DOE's comment that it is misleading to report the 
funded status of DOE contractor defined benefit pension plans as a 
single amount. The funded status amounts we report represent a 
disaggregation of amounts previously reported by DOE for its 
contractors' pension and postretirement benefit plans in financial 
statements required by the Chief Financial Officers Act. Our reporting 
of funded status amounts for these liabilities by DOE facility and by 
DOE program provide accurate information at a point in time - subject 
to any limitations that may exist in the underlying data - on such 
amounts at the level it is presented. Further, the briefing slides 
present the benefit obligations, assets, and funded status of 
contractor pension plans separately for overfunded plans and 
underfunded plans at September 30, 2007 (see encl. I). This 
presentation clearly shows that the contractor pension benefit 
obligations to which DOE is committed to funding total $27.5 billion 
and that 34 of 46 contractor pension plans are underfunded by a total 
of almost $2 billion. We state in our report that we determined that 
these data were sufficiently reliable for our purposes. However, to 
address DOE's concern, we clarified enclosures III and V to state that 
the funded status of all contractor plans were combined for purposes of 
reporting by facility and that assets of one plan generally cannot be 
used to pay the benefits and other expenses of another plan.

4. Regarding DOE's disagreement with the implication that the issuance 
of Notice 351.1 was not based on considered analysis, we continue to 
believe that the materials that DOE provided to us contained only 
limited evidence that DOE had considered policy alternatives, the 
sensitivities of stakeholders to the policy choices reflected in Notice 
351.1 or the near-and long-term financial and mission impacts of the 
changes made. (See the Agency Comments and Our Evaluation section.) Not 
even the decision document reflecting the Deputy Secretary's approval 
of Notice 351.1 included the basis on which approval was recommended. 
The bottom line is that the connection between what DOE cites as 
evidence of its concerns and its policy changes as reflected in Notice 
351.1 is not readily apparent from the documents DOE provided us as 
shown by the following three items and by the timing of DOE's actions. 
First, DOE provided us with copies of contractor-prepared actuarial 
reports that, according to the department, amply document the upward 
trends in DOE's reimbursement of contractor employee benefits. However, 
the actuarial reports DOE provided to us consisted largely of 
historical quantitative information. The reports prepared by DOE's 
contractors demonstrated that DOE had a process for routinely compiling 
information necessary for its annual financial statements. Second, DOE 
provided us with March 2005 briefing slides used for a presentation to 
the Secretary of Energy entitled "Overview: DOE Contractor Pension and 
Post Retirement Benefit Liability" that included two charts with 
benefit program data. However, these two charts, as with the rest of 
the information in the briefing document, principally provided 
background and historical data and a listing of possible approaches for 
managing contractor benefit liabilities. No explanation was provided of 
how these data and approaches were considered in making the policy 
choices as reflected in Notice 351.1. Third, DOE provided us an August 
10, 2005, letter from the Secretary of Energy to the Chairman of the 
Senate Committee on Energy and Natural Resources that referred to a 
comprehensive assessment of departmental policies regarding pension 
benefits and post-contract retiree medical benefits and the decision to 
develop "an overall long-term strategy to mitigate liability growth in 
existing plans and channel new contractor employees into cost 
predictable plans that are more consistent with current industry 
practice and trends." However, DOE did not provide us with evidence of 
a completed comprehensive assessment.

Overall we found that the documentation that DOE provided to us was not 
responsive to our targeted request for documentation of analyses 
conducted in support of the policy changes contained in Notice 351.1. 
We found limited evidence of what should have been a process of 
thorough analysis of such an important issue as changes to DOE policy 
on contractor employee pension and medical benefits. We were provided 
historical accounting and actuarial information, general information 
about benefit program issues from industry specialists, DOE responses 
to queries from elected officials, and DOE internal briefing documents 
that provided overview information on contractors' pension and other 
postretirement benefit plans. However, the documents provided to us did 
not include a comprehensive assessment of existing DOE policies, an 
analysis of the potential impacts of alternative strategies for 
managing contractor benefit plan liabilities, or an indication of the 
information that senior DOE management may have relied on when 
developing the policy changes contained in Notice 351.1. As stated in 
our report, the documentation that DOE provided to us demonstrates that 
DOE recognized the historical and possible future trend of its 
liabilities and costs related to contractor benefit plans. However, we 
found no linkage between this basic awareness and the actions taken by 
DOE in Notice 351.1. Finally, the timing of DOE's actions on this 
matter is inconsistent with its assertion that considerable work and 
analyses was the basis for issuance of Notice 351.1. Two months after 
its April 2006 issuance, DOE suspended Notice 351.1. About 9 months 
later, in March 2007, DOE issued a notice in the Federal Register 
seeking for the first time public comment on DOE Contractor Employee 
Pension and Medical Benefits Challenge. In response to stakeholder and 
congressional concerns, DOE decided not to reissue Notice 351.1 in June 
2007.

5. We have revised the report to state that a DOE contracting officer 
may require a Corrective Action Plan if the value of an M&O 
contractor's benefit plans exceeds the 105-percent threshold set forth 
in Order 350.1.

6. We disagree with DOE's comment that we omitted market volatility as 
a key reason why defined benefit pension plans may fluctuate 
significantly from year to year. We have clearly cited market 
volatility as a reason for fluctuations in the funded status of DOE 
contractor defined benefit pension plans, both up and down. For 
example, the briefing slides state that the funded status of 
contractors' defined benefit plans declined rapidly from 2001 through 
2005 and that the funded status of defined benefit pensions can 
fluctuate significantly from one year to the next (see encl. I). The 
briefing slides also state that the funded status of such plans can 
change from one year to the next due to factors that include "returns 
on pension plan investments that are different than what was assumed." 

[End of enclosure] 

Footnotes: 

[1] DOE Order 350.1 states that reimbursable contractor costs for 
defined benefit pension plans shall not exceed the greater of (1) the 
plan's unfunded current liability as defined by ERISA or (2) the amount 
required to satisfy the ERISA minimum funding standard. Defined benefit 
pension plans sponsored by state and local governments, such as the 
University of California retirement plan, are exempt from most ERISA 
requirements. State and local laws generally govern these plans and 
typically require sponsors to set aside minimum amounts of funds for 
future pension payments when they are due.

[2] Pub. L. No. 110-161, 121 Stat. 1844 (2007).

[3] GAO, Department of Energy: Certain Postretirement Benefits for 
Contractor Employees Are Unfunded and Program Oversight Could be 
Improved, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-539] 
(Washington, D.C.: Apr. 15, 2004) and Department of Energy: Additional 
Opportunities Exist for Reducing Laboratory Contractors' Support Costs, 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-897] (Washington, 
D.C.: Sept. 9, 2005).

[4] DOE implemented SFAS No. 158 in fiscal year 2007. This standard 
amends SFAS No. 87, Employersï¿½ Accounting for Pensions, and SFAS No. 
106, Employersï¿½ Accounting for Postretirement Benefits Other Than 
Pensions. Prior to this standard the liability or asset an entity was 
required to report on its financial statements did not include certain 
deferred costs or credits, obligations or assets, and losses or gains. 

[5] The amounts for each fiscal year in figures 1 and 2 reflect the net 
funded status of DOE contractorsï¿½ benefit plans as required by SFAS No. 
158. 

[End of section] 

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