Pension Losses of Contractor Employees at Federal Institutions Can Be Reduced

In response to congressional concern about the pensions of employees working on Government service contracts and the fringe benefits of service contract employees, GAO reviewed the benefits in question.

There is no Government-wide policy regarding whether, or to what extent, Federal agencies should attempt to protect the pension benefits of contractor employees working at Federal installations. Although most workers on Federal service contracts that GAO reviewed were covered by pension plans, many had lost pension benefits because their employers had changed even though their jobs had not. Most service contract employees were not working for the same employer long enough to become vested employees with a nonforfeitable right to pension benefits. Earlier or immediate vesting could help improve employees' pension benefits. However, reducing the time required to vest would increase costs and reduce benefits to long-term employees. Further, this would not necessarily assure retirement benefits because employers may pay terminating employees a lump-sum equivalent of future pension benefits, and such payments may be spent rather than saved for retirement. For the major operating contracts that GAO reviewed, in most cases, the same contractors had been operating the facilities for long periods of time. Even when the contractors changed, employees' pensions were protected.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Franklin A. Curtis Team: General Accounting Office: Human Resources Division Phone: (202) 275-5451