Central States fund invests $6.1 billion UPS payment

Discussion in 'UPS Retirement Topics' started by Channahon, Feb 19, 2008.

  1. Channahon

    Channahon New Member

    Thought this would be of interest to those of you in the Central States Pension fund.

    By Barry B. Burr
    Posted: February 18, 2008, 6:01 AM EST

    Teamsters Central States, Southeast & Southwest Areas Pension Fund, Rosemont, Ill., hired Mellon Capital Management Corp. to manage $5.4 billion in an S&P 500 index fund.

    The money is part of a $6.1 billion payment made by United Parcel Service Inc. to withdraw from the Teamsters fund, according to a filing with the U.S. District Court in Chicago. The UPS payment, made in December as part of an agreement to withdraw from the Teamsters fund, raised the Central States assets to $26.8 billion as of Dec. 31. Central States completed a restructuring earlier this month as a result of the payment.

    To fund the S&P 500 fund, $4.2 billion was allocated from the UPS payment and $1.2 billion was moved from Goldman Sachs Asset Management, New York, one of the Central States' two named fiduciaries.

    Another $900 million of the UPS money went to an existing Lehman Aggregate Bond index fund managed by Mellon, bringing it to a total of $5.4 million.
    The remaining $1 billion in UPS money went to Northern Trust Global Advisors Inc., Chicago, Central States' other named fiduciary.

    As a result of the restructuring, Goldman Sachs' assignment was reduced to $8.03 billion from $11.7 billion, while Northern Trust's assignment was raised to $8.03 billion from $5.55 billion. Both firms invest in domestic and international equity as well as real estate. Specific asset allocations weren't available.

    Mellon Capital Management, San Francisco — a unit of New York-based Bank of New York Mellon Corp. — now manages 20% of Central States assets in the S&P 500 fund and another 20% in the Lehman index fund, while Northern Trust and Goldman Sachs each run 30% of assets.

    Central States eventually plans to designate only one named fiduciary and will drop either Goldman Sachs or Northern Trust, according to court filings. Fund executives and court documents did not reveal which firm would be cut or provide a timeframe for the move. Assets from the terminated fiduciary will go to the surviving firm.

    Bank of New York Mellon was rehired by fund trustees as master custodian for the entire fund. The court transferred the authority to name the custodian from the named fiduciaries to the Central States trustees, according to court filings

    Central States estimates its pension plan was funded between 70% and 75% as of Jan. 1, after the UPS payment, according to a Central States quarterly financial report to participants. The Central States fund operates under U.S. District Court supervision through a consent decree dating to 1978 with the Department of Labor overseeing the integrity of the fund, which had been the target of corruption.
  2. Penguin

    Penguin New Member

    That S&P500 is good, but they can do better.
  3. satellitedriver

    satellitedriver Moderator Staff Member

    Thank You, UPS.
  4. scratch

    scratch Least Best Moderator Staff Member

    I second that, Satellite. Maybe there will something left in there for me when I retire.
  5. rod

    rod retired and happy

    Ear mark about 3/4 of a million bucks of that for me ( on second thought $3,000 X 12 =$36,000 X 30 years =$1,080,000). On second though make that about a million five just to be safe. :happy2:
  6. satellitedriver

    satellitedriver Moderator Staff Member

    Love your attitude, just watch out for the bus when you cross the street.
  7. rod

    rod retired and happy

    ya always have to be on the lookout for that friggin bus:punk:
  8. tieguy

    tieguy Banned

    i wonder if the s&p 500 is a good choice. Its difficult for pension managers to move the amount of money they manage quickly. Should the market turn sour they take a beating before they can pull out. I wonder if they would not do better investing in something more secure at a lesser rate.
  9. kenco80233

    kenco80233 New Member

    I hope they learned from past investment experiance,they do a better job investing this money.As a current retiree,I hope they make the right choices this time.
  10. tieguy

    tieguy Banned

    Are the new pension laws that started in january causing any problems?I'm hearing rumors of locals 639 and 355 having to make changes to slow down their disbursements.
  11. GoBrown???

    GoBrown??? New Member

    im so glad the central states are making out with this new contract b/c all the guys and gals in the northeast region got screwed. this new contract sucks for us
  12. wkmac

    wkmac Well-Known Member

    Good point Tie but here's (JMO) what I think is going on. According to the article, CS took $5.4 bil to Mellon and the S&P, not all $6.1 bil so I'd guess that the $.7 bil was used for current and near term needs and placed in more ready/low risk investments for the more immediate payouts. The larger portion is invested in obviously greater risk but greater return assets to be used in years ahead when more of us who have years in CS will begin to retire. For me I'll have 26 years in CS and I'm another 13 years from starting that draw so that's 13 years to build for.

    The good news, UPSers who retire before age 65 years will draw no money from CS and so this gives time to CS to used the $6.1 bil to replenish itself so when we hit 65 and CS becomes primary, the funds are there at which time CS will move needed funds to short term low risk in order to meet the liability.

    I think UPS knows that had they let this thing go into 08' that the $6.1 bil figure would be cheap compared to what the gov't might order and the IBT also knew it was very real that the gov't would tell them that they toploaded the wage side on the last several contracts to boost up dues amounts to shore up the union's financial house. In turn, they would order some of our wages to be taken to shore up pension costs so that you had a perfect storm in effect. The company would be out probably close to $10 bil plus, the union having to reduce monthly dues because the UPS hourlies having to give up several dollars per hour (obviously graduated based on amount of time of service) to redirect to the pension fund and a workforce :censored2: to no end at both the company and the union as they look for someone to blame. At least that's how I see it anyway. I know those outside the CS area are not happy about the delay payraise and I happen to believe they have every right to be that way. These guys are being punished for something beyond them but that aside, I believe had things been left on their own and ERISA had kicked in, that $.35 annual 6 month delay for the contract (progressive increase not withstanding) wage pay would look like chump change. I don't think it impossible to have seen a minimum of a $2 plus wage transfer to the pension across the board so IMO what looks bad now could have really looked a lot worse.

    Barring real market and economic difficulties over the next 15 to 20 years as the bulk of this amount is left to grow, this solution may workout pretty good for both sides. CS when a lot of us in 15 or so year start hitting 65 may be in position to handle our entire pension payouts and UPS is completely off the hook under some scenarios. UPS in the meantime covers a lot of upfront costs but wins on the backend as they control all the pension in about 25 years as it relates to CS and there is no more connection so to speak.

    It was a rather creative solution in which CS was put in postiion to get itself back on track but over the longhaul UPS gets completely out from under this multi-employer pension plan that they've been wanting to for years.

    As to specific locals having problems and rumors of? If they are under the 80% funding threshold, it's probable that the heat is on.

    BTW Tie: Good to see you posting again and I mean that!

    It got so bad that Trick and 705 had to go on meds for depression they missed you so bad!
  13. mrvngrdns

    mrvngrdns New Member

    Actually, the monies sent from UPS to the Central States Pension Fund can be broken down as follows.....

    4.2 billion to Mellon Capitol Management
    900 million to Lehman Aggregate Bond Index Fund
    1 billion to Northern Trust Global Advisors

    United Parcel Services contribution is about 22-23% of the total asset of CS, so any questions regarding the allocation of assets has to concern the total assets of CS, not just the contribution of UPS.

    It's impossible from the article to determine the breakdown of Central States total portfolio, but I'm sure that Mellon has many highly paid "geniuses" to decide what percentage should be allocated to the domestic stock market, the international stock market, bonds, real estate, cash holdings, etc.

    I'm all for full disclosure of pension fund investments, and for rules prohibiting risky investments, such as using derivatives. For too long, us pensioners have been left in the dark regarding how our pension funds are invested. I'm not a member of CS, but a retiree in Local 710, which I understand is also underfunded. I can only hope that my pension is invested in a safe, secure manner in the future.

    I would have no problem with the asset allocation that CS has chosen to invest the 6.1 billion.
  14. wkmac

    wkmac Well-Known Member

    Very well said!!!!!

    You'd make a good trustee!
  15. mrvngrdns

    mrvngrdns New Member

    Thanks wkmac....but I think I'm content to just bowl twice a week!!:happy2:
  16. wkmac

    wkmac Well-Known Member

    I would bowl but until someone invents a gutter that doesn't jump out in front of my ball all the time, I'll go elsewhere!

  17. mrvngrdns

    mrvngrdns New Member

    Bowling is an easy sport to do when you drink beer....if I see 20 pins, I figure I can at least knock down 10!
  18. LKLND3380

    LKLND3380 Active Member

    I am guessing UPS can not start preloaders above $8.50 to recover this 6.1 million...

    Next preloaders will ONLY get 3.5 hours a day and DRIVERS can wrap up...
  19. brownmonster

    brownmonster Man of Great Wisdom

    Next preloaders will ONLY get 3.5 hours a day and DRIVERS can wrap up...How is that different than it is now?
  20. LKLND3380

    LKLND3380 Active Member

    Well in the preload we start with 1650% and get it wrapped in about 4.5 hours maybe 5 hours... So sending us home at 3.5 would leave the drivers to wrap up 600% plus airs to wrap...:wink2: