Pension Agency Faces a New Front

Discussion in 'UPS Retirement Topics' started by my2cents, May 26, 2005.

  1. my2cents

    my2cents Guest

    Pension Agency Faces a New Front
    Multiemployer Plans Saw
    Deficits Jump 50% in '04;
    Industry, Unions Are Split

    Staff Reporter of THE WALL STREET JOURNAL
    May 26, 2005; Page B2

    WASHINGTON -- As the government wrestles with strategies to deal with failed pension plans sponsored by troubled companies such as UAL Corp.'s United Airlines, big problems in many multiemployer plans have been argely overlooked.

    Lawmakers say they recognized only recently that Congress also must address financial turmoil in this separate segment of government-backed pension plans, which covers about 10 million workers in several industries.

    Meanwhile, industry and union coalitions pushing Congress to take action are fighting among themselves over how far lawmakers should go to shore up the plans, with United Parcel Service Inc. on one side and supermarket chains on the other.

    Both single- and multiemployer defined-benefit plans pay retirees a set monthly amount depending on years of service. Companies in both plans pay premiums to the federal Pension Benefit Guaranty Corp. in exchange for certain retirement-benefit guarantees.

    The White House has been largely concerned with failing steel, airline and auto-parts companies that have dumped billions of dollars of pension liabilities on the PBGC, which estimates that the whole universe of single-employer plans have liabilities that exceed assets by $450 billion.

    Of growing concern, however, are multiemployer retirement plans underfunded by $150 billion in 2004, a 50% jump in the deficit from the year before, the federal insurer reported.

    Multiemployer plans were set up so that workers who tend to move from employer to employer within various unionized industries could maintain retirement-benefit plans negotiated under a common union contract. A total of 1,600 multiemployer plans are paid for by 65,000 mostly small companies with 10 million unionized workers in such industries as trucking, construction and grocery-store chains.

    As old-line industries like trucking companies consolidated, many multiemployer plans have gone into the red. The reason: fewer surviving employers with a declining number of active workers are responsible for the plans' growing rolls of retirees.

    Rep. John Boehner (R., Ohio), chairman of the Education and the Workforce Committee, says the seriousness of problems in the multiemployer plans require fixes to be included in his pension-overhaul bill, which is expected to be introduced in early next month.

    Industry and union representatives have been meeting with lawmakers promoting plans to bolster funding and to strengthen weak disclosure requirements. But how far Congress should go has created a rift among two powerful lobbying groups.

    On one side is a coalition of multiemployer plans led by United Parcel Service. The Food Marketing Institute, which represents supermarket-chain companies, has offered a competing proposal.

    UPS, which participates in 22 multiemployer pension plans, has been looking for years for ways to lower its pension costs. For instance, it is a member of the Central States Pension Fund, which alone had liabilities of $30 billion and assets of $15 billion at the end of 2003, according to an Internal Revenue Service report.

    The situation has brought together once-fierce adversaries to find a legislative solution. During a strike against UPS in 1997, the International Brotherhood of Teamsters turned back the delivery service's attempt to withdraw from multiemployer plans in order to form its own single-employer pension fund. The plans would have been unable to survive without a big prosperous contributing member such as UPS.

    UPS has shifted away from the strategy of getting out of multiemployer plans and has pushed for reform as a member of a large coalition that includes the Teamsters and the National Coordinating Committee for Multiemployer Pension Plans, primarily a union trade group.

    The coalition is pushing proposals on Capitol Hill aimed at requiring multiemployer plans that are funded at 65% or less to increase employer contributions and to develop a broad reorganization plan to raise funding above 80% within 10 years.

    According to a copy of the coalition's blueprint, employers through collective bargaining would have broader discretion to cut nonbasic retirement benefits, such as early-retirement benefits and life insurance. It also would allow UPS to protect its employees from cutbacks if the company would make higher-than-required payments into affected pension plans.

    Meanwhile, the Food Marketing Institute has focused on requiring less seriously impaired pension plans -- funded between 80% and 65% -- to take remedial actions to prevent more serious financial deterioration down the road.

    While House and Senate staff says pension-overhaul bills will address multiemployer-plan problems, the PBGC is more concerned about the alarming number of single-employer plans it has taken over recently, including plans from United Airlines that were $6.6 billion underfunded.

    While the PBGC is on the hook to pay about $45,000 to retirees from single-employer plans it takes over, the agency is obligated to contribute about $12,000 per worker for multiemployer plans that fail.

    If a multiemployer plan becomes insolvent both the surviving companies and PBGC share in the financial burden of paying benefits that in many cases would be cut by 66%. "Everyone gets hurt," says Michael Mathis, Teamsters' director of government affairs in Washington.
  2. my2cents

    my2cents Guest

    Stumbled upon the article below on my vacation reading today. Had to take a timeout from other activities to post it. Anyway, one wonders what the name of the coalition is and if a website is available for reading the blueprint. recently added a segment called "Multiemployer Pension Plans: Navigating Turbulent Waters." This section offers some insight, but no coalition blueprint. Will have to check for bills and for any possible upcoming hearings. IMO, this is good news because it shows that all parties concerned are constructively working towards a long range positive solution for chronically underfunded multiemployer pension plans.
  3. wkmac

    wkmac Guest

    Interesting article M2C. Thanks for the post and heads up on this.
  4. wkmac

    wkmac Guest

    I'm sure the potential for benefit cuts will raise some neckhairs but what peaks my interest is the 2nd sentence above where it sez UPS could make higher payments into effected pension systems. Would this be a part of a partition idea floated a couple of years ago? Also would the higher than required payments only be for UPSers or would it also spread over the the other company members? No idea to the answers on my part but just throwing out a couple of questions that came to mind while reading the article.
  5. teddyr

    teddyr Guest

    Yes, interesting article, but nothing new on the multi emp. pension dilemma. It is a drain on UPS and its employees. To get ride of it would be great for the Co. and its employees but bad for all the other teamsters who leech off UPS dollars. The IBT will fight tooth and nail to keep it.
  6. ok2bclever

    ok2bclever Guest

    "other teamsters who leech off UPS dollars" that type of inaccurate drivel does get a pretty good reception here, but it's still inaccurate.

    Just like the "IBT will fight tooth and nail. . ."

    Try reading the part about UPS and "a large coalition that includes the Teamsters" before spouting the "bad Teamsters" crap.

    The Teamsters know that as goes UPS, so goes the Teamsters in this day and age.

    It was refreshing to read "has been looking for years for ways to lower its pension costs" very telling and truthful, rather than that "we are concerned about our employees future welfare" pablum we mostly have heard about for the last few years.

    The "broader discretion to cut nonbasic retirement benefits" will be something to keep an eye on as far as what this entails.

    The "It also would allow UPS to protect its employees from cutbacks if the company would make higher-than-required payments into affected pension plans" seems to lean towards a partitioning move that would favor us.

    Say it is so!

    Thanks for the info my2cents.

    Of course the
  7. isdrone

    isdrone Guest

    ok2b et al.
    If UPS participated in a pension fund that was comprised of only UPSers, yes, it would lower pension costs without lowering benefits. If you remember in 97' the $3,000 at 30 years came from the company first. The union matched it. UPS's liabilities for these funds would be in the billions if the funds were insolvent. It is a shame that it has come to this, but there really is not a solution that will appease everyone - including non-UPS Teamsters.
  8. 1timepu

    1timepu Guest

    How many of you have a Pension of $3,800 a month? Our non multi emloyer pension provides this for us local UPS teamsters in Local 177, and only it is this amount cus it's for UPS employee's only!
  9. wkmac

    wkmac Guest

    I do agree that the pension situation does place UPS in harms way however a nuclear scenario would have to take place and the chances of that are minimal at best. At the same time I do believe we as UPSers covered by these multi pension plans should take note of this and keep this in mind and what it would do to us even on an individual level it this should occur. I believe the effect would not so much be to our retirement but it could very well effect our jobs depending on the severity.

    As for the 1997' offer, I just don't think any of us can really throw that around as set in stone. I do agree that the union matched the company offer to counter what the company did but let's look at it from several perspectives.

    Was it sincere or a ploy to scuttle the impending strike? This offer was literally a midnight offer in the sense it was at the last minute and there were way to many unanswered questions with the whole proposal. On it's face it looked good but it just had some blank spots that no one had answers for. UPS should have thrown this out weeks earlier but that was complicated by the fact that bothsides were in agreement no information or news from contract talks would be made public. I happen to be in absolute complete disagreement with this approach which both sides still maintain but they've agreed to it so there you go. It could probably be said bothsides live and die by that sword.

    Secondly, UPS knew the fragile state the various pensions were headed in and this is where it gets cloudy and will depend on your attitude toward the company. On the one hand you have the argument the company saw the trouble and wanted to watch out for and protect us and came up with this idea to do it. Then you have the position the company saw the huge liability they faced and what it would do to them and yes even us and wanted to get out. Thirdly, by controlling the entire pension fund they could limit the cost and drive up the bottomline and lastly they could muddy the water enough to fragment the strike and maybe kill it before it even began.

    Now the offer played well down here in the south because quite frankly we don't have a history of union involvment like other parts of the country so the loyality to a union isn't that great to begin with. We just want what we can get and it makes no difference to much from whom we get it. Couple that with at the time there was a huge drive among at least the membership down here to get CS to raise the retirement benefits and they had fastly sat on their hands in doing so. In hindsight maybe they should have sat harder but what's done is done. I personally believe the benefits were raised as a result of the UPS offer but let's look at it another way.

    I also believe UPS knew full good and well what the current and future state of affairs were with CS and other funds and that any increase could and would result in future problems. Now there's no way UPS could know that starting about 2 years later (1999') the investment bubble would burst, 9/11 would happen and oil prices and medical costs would go through the roof so in fairness to them the negative impact they were expecting may have been either much further out or at a much lesser rate. It's obvious their actions in the last couple of years has taken on a greater accelerated rate of trying to lessen any negative impact should the situation grow far worse than it already is. I can understand and appreciate that. Now regardless of all this UPS played a chessgame and frankly made a pretty good move if you factor out the chaos from 99' on but the point is their effort no matter the motive did in a certain way help accelerate where we are now. I won't say they set out to do this as I'll give them the benefit of doubt that beyond not getting the pension, they knew it was a longshot at best, they were also trying to drive the funds to just where they are right now. I don't believe that is what they were after. However in hindsight based on demographic information they had via the trustees it was clear a storm was on the near horizon. You might even go as far to say that their offer back in 97' was irresponsible but I won't say that myself. Just knowing where we are today and the fact that they had access to info we may or may not have had could give rise to that charge from some quarters.

    What's the real answer. Go back up and read the 4 issues I listed and I believe in some shape or form the real answer is some combination of all 4. Many of these issues are married to one another as I also believe it possible to provide us with a greatand very secure retirement while saving the company huge amounts of money shorterm and longterm. Can and will that happen? I don't have that answer but I will say this, the window of opportunity is open right now but it will close at some point. UPS sits in the catbird seat the longer it goes because like OK2BC I also believe UPS via legislation will limit it's exposure and the problem will grow worse and the benefits will be cut more. When they are cut more so will UPS' offer to take it over. We are IMO about to enter a phase of trying to catch a falling knife and not matter what you do you're gonna get cut!

    (Message edited by wkmac on May 27, 2005)
  10. sawman

    sawman Guest

    "employers through collective bargaining would have broader discretion to cut nonbasic retirement benefits."

    Sounds to me like this would give the employers the right to cut benifits in funds that are doing well, in order to shore up failing funds.
  11. sawman

    sawman Guest


    We can't trust the Teamsters any more than we can trust big brown.
    The Teamsters told us that they would match any offer that the company made, and all along they knew that they didn't have the money to match the offer.
    Why did they do this?
    To keep us from demanding that the companies offer be put up for a vote.
    My point is, the Teamsters knew that they were screwing us in order to keep us from jumping ship by going with the company offer. Not to mention that the teamsters refused to let this offer go to a vote so that we could decide for ourselves.
  12. wkmac

    wkmac Guest

    I think the sky may be the limit on what they can do. Instead of cutting 1timepu's retirement of $3800 per month it maybe you and I no longer have dental and or vision coverage or we could see our co-pays go to $40 per visit and the retirement age raised to 70. UPS may start to fight raising the age any higher because none of us want to work that late in life at UPS nor does UPS want that either. The potential nightmare of work comp claims for that old of a workforce is scarey indeed not to mention the fact a 70 year old will take quite a few more steps to the door than a buff 30 something. Efficency is what drives UPS and this slaps that squarely in the face. UPS could push but could you imagine the nightmare of the public seeing UPS push and push 70 year olds who are here just to save their retirement and this explode into a PR nightmare of aged abuse? I know some TV lawyers just watering at the mouth on that thought. 70 year old driver group would require 2 to 3 times the people and vehicles as that of a group made up of 20 to 50 somethings so you know that cost has to be a nightmare to think about.

    We and UPS have a lot of common ground in this deal and you can agrue a great retirement package is good to the company's bottomline on a variety of fronts. How do you sell yourself as an employer getting the best people for a physical job in a work world that pays great money for far less physical work and then you tell the potential employee that he/she will have to work at this physical job until they are at or near 70 to get some retirement?

    You bet your sweet ass UPS is scratching the chin over that situation and what effect that would have in an every increasing tight market to get the best people. This thing has a ripple effect across the board way beyond just the retirement itself.
  13. wkmac

    wkmac Guest

    I don't disagree that the union knew just as much and like you I don't trust them anymore than UPS. Both are a business and in the end are out to protect themselves. This again is why I'd rather get my money up front from the company and put it away for myself but I know that is just not an option.

    At best I'd like to see a plan independent of both the union and the company but then again we're not ready for that option yet either. Until we try and catch the falling knife once or twice and get cut up then we won't be prepared to sitdown and discuss the other what-if scenarios out there.

    Even though we disagree on some points I do appreciate the fact you are trying to make people think about just one of those what-if scenarios. On the flip side, guys like OK2BC bring up another viewpoint that I appreciate to make sure as much as possible the cons are looked at along with the pros. Ironic how I used the term cons in relation to the defense from the union position. LOL! There was no pun intended but you gotta admit... oh let's just laugh and move on before I twist someone's thong!
  14. trickpony1

    trickpony1 Guest

    Well said.
    If the company does get control of the pension I imagine they will offer all of us with 25+ years a sweetheart deal to retire.
    Then they can hire a bunch of bouncey 23 year olds at 4-6 dollars less per hour and 3-5 weeks less vacation per year to replace us.
    Think of the money they will save.

    (Message edited by trickpony1 on May 27, 2005)
  15. wkmac

    wkmac Guest

    "hire a bunch of bouncey 23 year olds"

    BOUNCEY!!! Depending on what bounced I might hang around to watch that every day.

  16. teddyr

    teddyr Guest

    ok2bc. what is inaccurate about it? All the money ups invests goes into one big fund that supports all teamsters under that plan. UPS invests way more than their fair share to float that fund. Without UPS it would crash..Why do you think APWA conventions are crashed by non UPS teamsters? If they lose UPS contributions they get their benefit cut. UPS will seek out help to relieve the burden, and the IBT will assist to ease tensions. They know how valuable UPS is to the multi emp. pension. Dont forget that was a major issue in 97.

    (Message edited by teddyr on May 27, 2005)
  17. pretzel_man

    pretzel_man Guest

    It seems to me that the article was pretty accurate and fair.

    This line is important:

    "Multiemployer plans were set up so that workers who tend to move from employer to employer within various unionized industries could maintain retirement-benefit plans negotiated under a common union contract."

    I'm not sure how true this statement is of UPSers.

    A multi-employer fund to me seems like a big insurance policy. You pool money from various sources and payout to all stakeholders.

    It reduces risk overall, but those at the top end pay for the others...

  18. ok2bclever

    ok2bclever Guest

    teddyr, UPS pays in for their employees at the contribution level they negotiated and we get the appropriate benefit level from that.

    UPS does not pay for any other working Teamsters.

    Their employer does that part and contributes exactly at the contribution level that they negotiated and those employees get the appropriate benefit level for what their employer contributes at without any help or contributions from UPS.

    IF a company goes out of business it's employees stop earning any more retirement credit, but what they have earned was payed for by their company, not one penny from UPS.

    IF a company goes out of business it's employees don't suddenly go to the head of the class and get thirty years credit and retire with UPS paying the balance.

    IF a company is paying a lower contribution level (bracket) the employee earns (and is paid upon retirement) a lower benefit level.

    UPS does not pay a penny to raise those employees to a higher benefit level.

    So no non-UPS employees are "leaching" off of UPS.


    Where UPS's increasing liability occurs is because the fund was set up with insufficient funding in relationship to the benefits paid out (UPS was involved in this decision both in making the "offer" that the Teamsters matched in '97 and by being a participating member of the board of trustees to the pension.

    This does not make UPS the only one to screw up, but it also doesn't leave them innocent with clean hands either.

    They were part of the development of the problem and they legally have to be part of the solution.

    When a company involved goes bankrupt ALL the remaining companies (not just UPS) are held liable for the increasing financial liabilities the plan incurs.

    The problem for UPS is it is by far the largest, richest, most likely to survive the longest company in the plan and if the dominoes continue to fall UPS's liabilities continue to rise, but that has nothing to do with the retirees or former workers of other companies.

    It is simply a result of a plan with lousy financial infrastructure.

    Would a retirement plan with strictly UPS employees be better for UPS?

    Of course, UPS employees demographically are far younger as a group than Teamster workers in general and the plan would only get in trouble if UPS became financially insolvent and they wouldn't have any reason to care whether it was in trouble or not at that point anyway.

    However, it doesn't mean it would necessarily be better for us for UPS to "take us out of the current plan".

    Those of us who have any significant time in the Teamster pension funds will be negatively impacted by a UPS pull out because of the current insecure financial shape of the fund.

    Take away the most financially secure contributor and of course it would be nothing but damning to the fund.

    Unfortunately, there are no simple answers that will "fix" it for us so that we are guaranteed what we have been promised and also frees up UPS from their current liability obligations.

    I certainly understand why UPS wants to get out from under the liability.

    I believe UPS AND the Teamsters are likely to get legistlative relief at our expense.

    When push comes to shove we are likely to come out on the short end between the "promised" workers and the corporation.

    Also, I am not necessarily convinced of the sincerity of the UPS '97 offer or what loopholes would have been involved, especially after seeing what "credit" my part-time years of UPS pension will pay me compared to what they have "said" and led one to believe and what they still do to the part-timers between 25 and out and 30 and out who are under a UPS pension.

    Nor do I give UPS the credit of being as clairvoyant as many here have espoused about the fund's financial future.

    UPS is a very competent company I believe if they had been that fully aware of what was to come they would have made a far more concerted and effective effort to convert us over at that time.

    Pman, that is true about the "insurance" angle when the situation ends up "calling in" the insurance as the current situation is beginning to.

    Wkmac, we are in agreement that history shows the Teamsters have more "Cons" than "Pros". , but we still need a union.
  19. wkmac

    wkmac Guest

    With the years of history and the overall mindset at UPS on both sides I regretfully agree with your above statement. I don't believe it needs to be that way but I see nothing in the future that would make me think anything else is possible. The top down micro managing style coupled with the natural combative mindset overall is firmly entrenched and even the newer college wonders being hired are fed the line we can't be trusted on top of their own mindset that they know everything and we trench warriors know nothing and without their enlightened leadership our company would go bankrupt.

    Also, even with all the talk from the company I'm not so sure they don't want a union around and they own the Teamsters so with all the talk about non-UPS Teamsters crashing APWA meeting don't be shocked to see company roadblocks if this APWA effort really starts to take off. Sounds crazy I know but life is full of crazy relationships and when the rubber meets the road we might just start to see just how in love Teamsters and UPS are with one another.

  20. mattwtrs

    mattwtrs Guest

    wkmac, you are so right about UPS needing the union as much as the hourly employees. The good stewards help make managements everyday decisions make sense to all when the dust settles in the end. Everyone can't agree all the time but working safely and providing the best service is all that matters.