The national space agency plans to spend about half a billion dollars next year to replenish the pension funds of the contractor who supplied thousands of workers at the space shuttle program.
The shuttle program accounts for a majority of the activity of United Space Alliance, originally a joint venture of Boeing and Lockheed Martin. With the demise of the shuttle program, United Space Alliance will be left with no source of income to maintain his pension plan afloat. Thus, the company wants to end his family pension, covering 11,000 workers and retirees, and to continue as smaller, more nimble competition for the sake of other contracts.
Normally, a company that has lost a vital contract would have little choice but to declare bankruptcy and ask the federal insurer, the Pension Benefit Guaranty Corporation, to seize his pension. But the profits of the insurance limits, which means not everyone gets as much as they had promised. United Space Alliance Plan also allows participants to retire as a single check and includes the retiree health benefits, none of which are authorized by the insurer plans.
United Space Alliance, however, has a few token from another public agency to pay the bill. The National Aeronautics and Space Administration said in its contract with the company that it will cover its pension costs "insofar as they are not eligible due and reasonable." NASA interprets this to include the cost of terminating its pension plans outside of bankruptcy.
The pension fund now has about half the amount needed. President's budget proposal for fiscal year 2012 request of $ 547.9 million for NASA to provide the rest. Almost 3 percent of the total budget of the agency and about what's Science Mission Directorate at NASA spent last year on all grants and subsidies to the study of climate change , planetary systems and the origins of life in the universe.
"We know that it is the duty of NASA to fund this, and NASA do it," said a spokesman for the space agency, Michael Curie.
Other federal agencies have promised to pay the annual pension cost of contracting - the Department of Energy, for example, for companies that operate nuclear sites - and some government auditors have warned for years that investment control is lacking and the potential costs were underestimated. This seems to be the first time, however, that the main contract has expired a company and an agency had to bear the cost of terminating its plans.
Although NASA has been reimbursed the contractor for the annual pension contributions, he had nothing to say about how the money was invested. United Space Alliance put most money into stocks.
The net will be exceptionally costly because of market conditions. While United Space Alliance has made its contribution required each year, the fund has lost nearly 200 million in the market turmoil of 2008 and 2009. When interest rates are very low, as they were, the cost of promises increasing rapidly, thus creating a larger deficit.
The injection of funds is also prepared at a time when some members of Congress demanding cuts in spending and threatening to block anything that could be interpreted as a taxpayer bailout.
"It is unfortunate that it happens in this financial environment," said Bill Hill, assistant administrator of NASA's assistant for the Space Shuttle.
He said he hoped that Congress would appropriate the money before the fiscal year ended Sept. 30. If not, he said, NASA will have to divert funds from activities related to space.
Already, United Space Alliance has had five rounds of layoffs, falling to about 5,600 employees from a peak of 10,500. Its workers have conducted a wide range of jobs for the space shuttle program, mostly in Florida.
Beth Robinson, CFO of NASA, said that while United Space Alliance has gone bankrupt at this point, the agency went after retired NASA for some of the costs. She said the contract was issued during a booming stock market, with a clause saying that the plans must end with a surplus, the extra money would go to NASA. At the time, nobody expected them to end with a deficit.
The cost of cancellation may fluctuate depending on market conditions as Congress considers what to do.
Tracy E. Yates, a spokesman for United Space Alliance, said the company could not predict the outcome. "However, we have not seen or heard anything to date that indicates that NASA will not receive funding this obligation," she said.
The shuttle program accounts for a majority of the activity of United Space Alliance, originally a joint venture of Boeing and Lockheed Martin. With the demise of the shuttle program, United Space Alliance will be left with no source of income to maintain his pension plan afloat. Thus, the company wants to end his family pension, covering 11,000 workers and retirees, and to continue as smaller, more nimble competition for the sake of other contracts.
Normally, a company that has lost a vital contract would have little choice but to declare bankruptcy and ask the federal insurer, the Pension Benefit Guaranty Corporation, to seize his pension. But the profits of the insurance limits, which means not everyone gets as much as they had promised. United Space Alliance Plan also allows participants to retire as a single check and includes the retiree health benefits, none of which are authorized by the insurer plans.
United Space Alliance, however, has a few token from another public agency to pay the bill. The National Aeronautics and Space Administration said in its contract with the company that it will cover its pension costs "insofar as they are not eligible due and reasonable." NASA interprets this to include the cost of terminating its pension plans outside of bankruptcy.
The pension fund now has about half the amount needed. President's budget proposal for fiscal year 2012 request of $ 547.9 million for NASA to provide the rest. Almost 3 percent of the total budget of the agency and about what's Science Mission Directorate at NASA spent last year on all grants and subsidies to the study of climate change , planetary systems and the origins of life in the universe.
"We know that it is the duty of NASA to fund this, and NASA do it," said a spokesman for the space agency, Michael Curie.
Other federal agencies have promised to pay the annual pension cost of contracting - the Department of Energy, for example, for companies that operate nuclear sites - and some government auditors have warned for years that investment control is lacking and the potential costs were underestimated. This seems to be the first time, however, that the main contract has expired a company and an agency had to bear the cost of terminating its plans.
Although NASA has been reimbursed the contractor for the annual pension contributions, he had nothing to say about how the money was invested. United Space Alliance put most money into stocks.
The net will be exceptionally costly because of market conditions. While United Space Alliance has made its contribution required each year, the fund has lost nearly 200 million in the market turmoil of 2008 and 2009. When interest rates are very low, as they were, the cost of promises increasing rapidly, thus creating a larger deficit.
The injection of funds is also prepared at a time when some members of Congress demanding cuts in spending and threatening to block anything that could be interpreted as a taxpayer bailout.
"It is unfortunate that it happens in this financial environment," said Bill Hill, assistant administrator of NASA's assistant for the Space Shuttle.
He said he hoped that Congress would appropriate the money before the fiscal year ended Sept. 30. If not, he said, NASA will have to divert funds from activities related to space.
Already, United Space Alliance has had five rounds of layoffs, falling to about 5,600 employees from a peak of 10,500. Its workers have conducted a wide range of jobs for the space shuttle program, mostly in Florida.
Beth Robinson, CFO of NASA, said that while United Space Alliance has gone bankrupt at this point, the agency went after retired NASA for some of the costs. She said the contract was issued during a booming stock market, with a clause saying that the plans must end with a surplus, the extra money would go to NASA. At the time, nobody expected them to end with a deficit.
The cost of cancellation may fluctuate depending on market conditions as Congress considers what to do.
Tracy E. Yates, a spokesman for United Space Alliance, said the company could not predict the outcome. "However, we have not seen or heard anything to date that indicates that NASA will not receive funding this obligation," she said.
