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Taxpayers on the Hook for Retiree Costs for Federal Contractors
Fox Business ^ | June 10, 2011 | Elizabeth MacDonald

Posted on 06/10/2011 10:04:37 PM PDT by Tolerance Sucks Rocks

A surprising new government report shows that taxpayers have been footing the bill for retiree benefits not just for federal workers, but for independent freelance contractors who do work for the government as well.

And no one is watching the store to see if your tax dollars are being wasted.

Taxpayers for years have been covering private contractors' retiree costs for things like pensions and health care, even though these workers are not on the federal payroll.

Taxpayers also cover these retiree costs for contractors' spouses, too, and in some cases if contractors want to retire early (at age 50), just like regular federal workers, many can then get taxpayer-funded coverage, says an official at the Government Accountability office.

For the Department of Energy alone, overall this coverage cost taxpayers $6.8 billion over the last 10 years, according to the new GAO report recently sent to Congress. Nine out of ten dollars spent on the DOE's annual budget goes towards contracts, including contractor retiree benefits.

The problem is, the GAO tells FOX Business it only knows about this problem at the DOE -- no one in government knows, or is tracking with regular, transparent reports to Congress, the tax money going out the door for these costs at other agencies, like the Pentagon, Homeland Security, the National Institutes of Health, or NASA.

The lion's share of the DOE’s workforce is private contractors, most of whom work in the nuclear energy sector. DOE has the largest private contractor workforce in the federal government.

“We can't speak for other contractors, but what we found at DOE is that these numbers were not transparent to Congress and recommended they be more transparent,” the GAO tells FOX Business.

(Excerpt) Read more at foxbusiness.com ...


TOPICS: Business/Economy; Front Page News; Government; News/Current Events
KEYWORDS: benefits; contractors; pensions; taxes; taxpayers; unexpected

1 posted on 06/10/2011 10:04:42 PM PDT by Tolerance Sucks Rocks
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To: Tolerance Sucks Rocks
Taxpayers for years have been covering private contractors' retiree costs for things like pensions and health care, even though these workers are not on the federal payroll.

The private sector is being gang raped by government.

2 posted on 06/10/2011 10:07:55 PM PDT by dragnet2 (Diversion and evasion are tools of deceit)
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To: Tolerance Sucks Rocks

These must be awful “special” contractors. I worked eleven years as a contractor for the Air Force and got nothing like that. Oh yeah, they paid my company X amount of money, which a small part went to a hospitalization plan as long as I worked, and my company matched three percent of my salary to a 401K plan. Otherwise, I didn’t get this kind of deal they suggest.

If some government idiots rigged up a great contract for their buddies....then it ought to be investigated and laid out. The guys who signed for the government...should be let go or never allowed to participate in contracts again.


3 posted on 06/10/2011 10:11:59 PM PDT by pepsionice
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To: pepsionice

I have a 401(k) plan, which the company matches at 20%. But this sounds like something quite different.


4 posted on 06/10/2011 10:13:25 PM PDT by Tolerance Sucks Rocks (I hate politically correct sorosmonkey superheroes!)
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To: dragnet2

“The private sector is being gang raped by government.”

Except for the private sector in bed with the government. This practice is most likely related to labor cartels. I smell another labor cartel fleecing of taxpayers.

Government accounting is either absent or deliberately deceptive. The corruption never ends.


5 posted on 06/10/2011 10:14:38 PM PDT by businessprofessor
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To: Tolerance Sucks Rocks; All

It’s hard to believe we’re being driven into the ground by a group that’s so crude. But the nazi’s were surprised they ever gained power.


6 posted on 06/10/2011 10:18:17 PM PDT by TwoSwords (The Lord is a man of war, Exodus 15:3)
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To: TwoSwords

“What Good Fortune for the State that people do not think!”
Adolph Hitler - 1933


7 posted on 06/10/2011 10:21:45 PM PDT by unkus
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To: businessprofessor
“The private sector is being gang raped by government.” Except for the private sector in bed with the government

Right, except for hand picked certain contractors, cousins, good friends, family, insiders etc...

Bet the rent, if ya follow the money, these "contractors" no doubt are connected one way or another to someone in government.

8 posted on 06/10/2011 10:23:05 PM PDT by dragnet2 (Diversion and evasion are tools of deceit)
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To: unkus

squared, considering our population.


9 posted on 06/10/2011 10:28:28 PM PDT by TwoSwords (The Lord is a man of war, Exodus 15:3)
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To: dragnet2

We call that the FBI jobs

Friends, Brothers and In Laws


10 posted on 06/10/2011 10:30:28 PM PDT by CornBred
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To: pepsionice

>> These must be awful “special” contractors.

Agreed. Something stinks.


11 posted on 06/10/2011 10:31:49 PM PDT by Gene Eric (*** Jesus ***)
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To: pepsionice

I’m a DoD contractor with a private company. My “retirement” is what I’ve contributed to my 401k. My company did some matching long ago,
but that was discontinued to hold the line on healthcare costs. The
government isn’t contributing squat to my retirement resources.


12 posted on 06/10/2011 10:43:16 PM PDT by Myrddin
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To: CornBred

You bet!


13 posted on 06/10/2011 10:43:38 PM PDT by dragnet2 (Diversion and evasion are tools of deceit)
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To: Tolerance Sucks Rocks

20%, wow, must be gubn’mint related. My mother-in-law got a 100% match, then retired at 55. Her collections in the past three years already outweigh her 5 years of deposits including the taxpayer-funded 100% match.

Most companies match 1-6% in private sector companies in 401K’s.


14 posted on 06/10/2011 10:49:03 PM PDT by wac3rd (Somewhere in Hell, Ted Kennedy snickers....)
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To: Tolerance Sucks Rocks

The lion’s share of the DOE’s workforce is private contractors, most of whom work in the nuclear energy sector.

Well the choice is either get rid of all nuclear plants. That would save a bunch of money or pay these contractors a bit of money through medical benefits so they don’t go to the private sector where they will make a ton of money. You choice folks!


15 posted on 06/10/2011 11:03:38 PM PDT by napscoordinator
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To: dragnet2

How do you get that conclusion from the statement you quoted? It says that the *taxpayers* are picking up the tab for the *contractors’ pensions and benefits. There are a lot of private sector workers who wouldn’t mind getting “gang raped” with some benefits and pensions, themselves.


16 posted on 06/10/2011 11:05:46 PM PDT by worst-case scenario (Striving to reach the light)
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To: worst-case scenario

Bet the rent, if ya follow the money, these “contractors” no doubt are connected one way or another to someone in government.


17 posted on 06/10/2011 11:08:09 PM PDT by dragnet2 (Diversion and evasion are tools of deceit)
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To: worst-case scenario
There are a lot of private sector workers who wouldn’t mind getting “gang raped” with some benefits and pensions, themselves.

At who's expense?

Profits regardless of consequences, have all but left America dead on the floor.

18 posted on 06/10/2011 11:11:36 PM PDT by dragnet2 (Diversion and evasion are tools of deceit)
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To: Tolerance Sucks Rocks

AAAAAAHHHHHHHHHHHHHHHHH !!!!!!!!!!!!!!


19 posted on 06/11/2011 12:05:47 AM PDT by PieterCasparzen (Conservative Christian Capitalists - I encourage you to visit my Profile)
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To: Tolerance Sucks Rocks
i worked for DOE in the forrestal building as a contractor with SAIC from 1993-1995.

there was nothing like these benefits even mentioned. just standard rates, which were good but nothing compared to the west coast at the time.

then again, i was sub contracting to SAIC. this article could mean the direct contractor, in my case SAIC, and their employee benefits package.


20 posted on 06/11/2011 2:00:02 AM PDT by sten (fighting tyranny never goes out of style)
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To: Tolerance Sucks Rocks; pepsionice; Gene Eric
DOE bears the responsibility, according to its contracts, for reimbursing contractors for retiree benefits for an estimated 200,000 people, including 100,000 current and former contractor employees, and 100,000 beneficiaries of those employees, such as spouses.... In fiscal 2008 to 2009, such costs more than doubled, the GAO adds, because of a drop in the interest rate used to calculate contractors’ pension plan liabilities, and because the pension assets plunged in value as the overall market dropped due to the financial crisis.... As is the case across the board, volatile investment returns can drastically impact pension contributions for government contractors, and in turn taxpayer costs to cover them. "As a result, DOE ultimately bears the investment risk incurred by the contractor sponsoring the plan," the GAO said in its report. So the DOE, in order to reduce immediate contract costs, decided to take on the risk of interest rate fluctuations in pension plans. Not for 401k's, the employee keeps that risk, but in pensions. Most contractors would never notice this provision in their company's contract even if they ever got to read it.
21 posted on 06/11/2011 2:54:35 AM PDT by MontaniSemperLiberi (Moutaineers are Always Free)
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To: napscoordinator

The choice is simple. Do we believe in defined benefit plans (employer pensions) or in defined contribution plans (401k’s)?

No one is complaining about paying contractors for their work. People are complaining about the DOE signing a dumb contract and now having to make up for a stock market crash.


22 posted on 06/11/2011 2:57:55 AM PDT by MontaniSemperLiberi (Moutaineers are Always Free)
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To: MontaniSemperLiberi

Whoever signed off in DOE for this type of expense...ought to appear before congress...even if they did this twenty years ago. Neither Homeland Security or DOD would have signed off on a deal like this.


23 posted on 06/11/2011 4:26:32 AM PDT by pepsionice
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To: Tolerance Sucks Rocks

People are hired to do a job, and they are given a contract, and the contract pays them for the job, in various ways.

I work for a company. They hired me to do a job. In return, they pay me. They pay me a salary, they give me holidays, they give me vacation. They pay for most of my health benefits. They have a defined benefit retirement plan. They put money into my 401K. All of these are ways I am compensated for the work I do on their behalf.

When I am retired, the company will still be paying me my retirement benefits. I guess at that time someone can complain that the company took on the market risk of the cost of the benefits they provided me. Which they did — but if they didn’t, I’d have wanted more money to pay for those risks.

Or if no companies did that, there would be businesses that would spring up that would offer a defined benefit payout for premiums, kind of like whole life insurance. And then THAT company would assume the risk, and they would charge me what they thought that risk was.

So, apparently the government hires some long-term contractors, probably through contracting companies. It sounds like those companies get a contract, and the government as part of that contract assumed pension liability for the workers. Now that looks stupid because of the increased costs recently of the benefits; at other times it looks like a good deal.

If the government didn’t take that risk, the contracting company would have charged whatever they thought it would cost to assume that risk, just as I assume every defense contractor builds medical and pension overhead costs into the rates they charge government, and just as every car the government buys includes a cost the car companies think is necessary to pay their employee benefits, and every ream of paper, and every computer. I’m sure every building company that the government hires does the same.

It bothers me when people start talking about earned pension benefits as if they are government handouts. It happened a lot in the Wisconsin discussion. I’m all for getting the government to set more reasonable obligation limits in their contracting, but the contracts that already exist were agreed to with people for work those people performed, and they are not “handouts”, any more than any of your companies are giving you handouts when they let you take a vacation day, or pay your pension.


24 posted on 06/11/2011 7:13:12 AM PDT by CharlesWayneCT
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To: CharlesWayneCT

Nope, sorry, bad practice. With government-enforced collective bargaining it is too easy for CEO’s to game their profitability today by promising unaffordable pensions in the future. That leaves the companies uncompetitive long after the CEO has taken his compensation, including performance bonuses.

And in the public sector the situation is even worse. It’s in the interest of the government officials to give away the store today, with their constituents left holding the bag for decades and decades.

Defined benefit programs are rife for fatal organizational mismanagement.


25 posted on 06/11/2011 7:22:00 AM PDT by 9YearLurker
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To: dragnet2
"The private sector is being gang raped by government."

Not really and not so much any more as defined benefit plans are being phased out. It's more complicated than this, but in a brief, when the Government enters into a cost type contract they sign up to pay the benefits in place at the company.

These benefits at larger companies used to almost always include defined benefits for pensions. You work so many years at such a salary and by formula you get $X dollars per month when you retire. The cost the Government pays is based on what additional benefit the employee earns that year plus a factor to account for the difference between the assumption made [asset returns on the pension trusts, life expectancy, turnover and others.]

Until recently, because the asset returns were higher than expected costs were lower and the Government paid little in the current year and the surplus was expected by the model to pay future cost.

Then the asset returns headed south, and retirees continued to live a little longer than expected.

Usually these continuing costs get paid by the next contract, but payments are mostly from the trust where the amounts were funded in the past.

However, there are also contract terms that specify that if a contractor stops contracting with the Government, that there be a final settlement. The Government was very big on this when pension surpluses common and changed the terms of contracts in 1995 to have this settlement apply to fixed price as well as cost type contract history.

There goes your tax dollars, but there is nothing nefarious about it. Just contracts and the attempt to have a final settlement of costs.

26 posted on 06/11/2011 8:31:04 AM PDT by R W Reactionairy ("Everyone is entitled to their own opinion ... but not to their own facts" Daniel Patrick Moynihan)
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To: R W Reactionairy
The private sector is being gang raped by government.

Not really and not so much any more

Bull shit..

27 posted on 06/11/2011 10:42:41 AM PDT by dragnet2 (Diversion and evasion are tools of deceit)
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To: dragnet2
Thanks for your thoughtful and well considered response.

The fact is that for a lot of years, major contractors’ 401(k) matching programs cost the taxpayer money while in most cases their defined benefit pension plans did not due to higher than expected trust returns. I described how defined benefit cost accounting works. I was not commenting on whether in general the taxpayer obtained good value from contractors.

28 posted on 06/11/2011 8:27:31 PM PDT by R W Reactionairy ("Everyone is entitled to their own opinion ... but not to their own facts" Daniel Patrick Moynihan)
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To: R W Reactionairy
I was not commenting on whether in general the taxpayer obtained good value from contractors

lol...And I'm talking about the federal government and government at all levels. The American people, other than those who may be government contractors, are being taken for a ride, due to ever expanding, over spending, controlling and corrupt government.

When I mentioned the private sector is being gang raped by government, this is *exactly* what is occurring, at every level, in nearly every city, every county, in every state including the fed. Most of this went unnoticed during good times, but now, the epic government waste, spending, corruption due to destructive, bad leadership within government, is finally coming into focus, as it's exactly what is causing the American decline.

29 posted on 06/11/2011 9:00:20 PM PDT by dragnet2 (Diversion and evasion are tools of deceit)
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To: R W Reactionairy
It's more complicated than this

BTW, I have no doubt about that, as everything government does is made intentionally complex and convoluted. Look no further than the U.S. tax codes.

30 posted on 06/11/2011 9:08:39 PM PDT by dragnet2 (Diversion and evasion are tools of deceit)
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