Firms Seek to Replace Pension Funds
ABF, UPS Seek Teamsters OK to Replace Funds
By Daniel P. Bearth, Staff Writer
This story appears in the May 14 print edition of Transport Topics. Click here to subscribe today.
NEW YORK — The top executive at Arkansas Best Corp. said he expects to offer his fleet’s unionized employees a less-costly company-funded pension benefit plan and withdraw from the current Teamsters multi-employer funds as part of a new labor agreement with the union.
Separately, the Teamsters last week confirmed that UPS Inc., the nation’s largest trucking company and largest single employer of Teamsters, has offered the union a similar proposal.
These developments set the stage for potentially significant changes in the way the Teamsters and motor carriers handle the distribution of health benefits and retirement payments to employees covered under collective-bargaining agreements.
“We can provide the same benefits at significantly less cost than we are now paying,” said Robert Davidson, chief executive officer of Arkansas Best, the parent company of less-than-truckload carrier ABF Freight System in Fort Smith, Ark. Davidson spoke at an investment conference sponsored by Bear, Stearns & Co. here May 8.
Davidson didn’t offer details of the company’s proposal nor any insight into how it intended to secure the union’s agreement to the change. ABF is ranked No. 17 in the Transport Topics 100 list of the largest for-hire carriers in the United States and Canada.
Teamsters officials said on May 10 that UPS — No. 1 on the TT 100 — has proposed creating a pension plan that would replace the Central States Pension Fund. The new company-funded plan would be jointly administered by the company and the union.
Although the UPS-Teamsters pact doesn’t expire until July 2008, negotiations started in September. (9-25, p. 6).
Ken Hall, director of the Teamsters Parcel and Small Package Division, said under the UPS proposal, the company would pay a lump sum to withdraw from Central States, the largest of a dozen or so multi-employer pension funds. As part of the deal, Hall said, UPS would increase contributions to other multi-employer pension funds covering UPS workers.
“The company’s proposal is not a negotiating tactic,” Hall said in a statement. “It is a serious proposal that must be seriously evaluated and compared with the other options available for improving and protecting the pension benefits of our members.”
Hall said the Teamsters’ negotiating committee has retained actuaries to determine the effect on Central States if UPS is allowed to withdraw.
UPS pays about $1 billion a year into all multi-employer pension funds, a company spokesman said.
Central States operates a Health and Welfare Fund and Pension Fund and has about 150,000 participants and 210,000 beneficiaries for about 3,000 employers.
For motor carriers, at issue is the amount of unfunded liability associated with the funds because contributions and investment income haven’t provided enough money over the years to cover the cost of benefits to a growing number of retirees, especially because many unionized carriers have gone out of business and no longer are contributing to the funds.
When firms withdraw from the funds — either voluntarily or by going out of business — fund trustees can make a claim to recover the company’s share of the cost of providing benefits to current and future retirees, if any assets are left in the fleets.
In late 2004, some estimates placed Central State’s underfunding at as much as $10 billion.
UPS made an attempt to withdraw from the multi-employer funds in 1997 but dropped it after Teamsters officials objected.
In his remarks, Davidson did not say when negotiations over the new pension plan would begin, but he said talks likely would get started only after UPS concludes its talks with the Teamsters.
He also said his company would amortize the cost of withdrawal over an extended period of time. As a result, he said, the company would have a lower operating ratio and a “more competitive” position in the market.
“It’s a win-win deal,” he said.
“We have an opportunity to negotiate withdrawal from all or some of these funds,” Davidson told attendees at the investment conference. “We’re going to pursue that aggressively.”
Davidson also said that while negotiating with the Teamsters, the company would seek greater flexibility on work rules, but he emphasized that withdrawal was “the most significant issue facing us.”
William Zollars, chairman of YRC Worldwide Inc., said his company has not yet decided how it will proceed on the issue of pensions or whether the company would negotiate with the Teamsters separately or in concert with other carriers.
“Everything is on the table,” he said, “but it’s too soon to make a commitment.”
Thomas Nyhan, general counsel for Central States Pension Fund, could not be reached. Norman Black, media relations manager for UPS, declined to comment.
This story appears in the May 14 print edition of Transport Topics. Click here to subscribe today.
NEW YORK — The top executive at Arkansas Best Corp. said he expects to offer his fleet’s unionized employees a less-costly company-funded pension benefit plan and withdraw from the current Teamsters multi-employer funds as part of a new labor agreement with the union.
Separately, the Teamsters last week confirmed that UPS Inc., the nation’s largest trucking company and largest single employer of Teamsters, has offered the union a similar proposal.
These developments set the stage for potentially significant changes in the way the Teamsters and motor carriers handle the distribution of health benefits and retirement payments to employees covered under collective-bargaining agreements.
“We can provide the same benefits at significantly less cost than we are now paying,” said Robert Davidson, chief executive officer of Arkansas Best, the parent company of less-than-truckload carrier ABF Freight System in Fort Smith, Ark. Davidson spoke at an investment conference sponsored by Bear, Stearns & Co. here May 8.
Davidson didn’t offer details of the company’s proposal nor any insight into how it intended to secure the union’s agreement to the change. ABF is ranked No. 17 in the Transport Topics 100 list of the largest for-hire carriers in the United States and Canada.
Teamsters officials said on May 10 that UPS — No. 1 on the TT 100 — has proposed creating a pension plan that would replace the Central States Pension Fund. The new company-funded plan would be jointly administered by the company and the union.
Although the UPS-Teamsters pact doesn’t expire until July 2008, negotiations started in September. (9-25, p. 6).
Ken Hall, director of the Teamsters Parcel and Small Package Division, said under the UPS proposal, the company would pay a lump sum to withdraw from Central States, the largest of a dozen or so multi-employer pension funds. As part of the deal, Hall said, UPS would increase contributions to other multi-employer pension funds covering UPS workers.
“The company’s proposal is not a negotiating tactic,” Hall said in a statement. “It is a serious proposal that must be seriously evaluated and compared with the other options available for improving and protecting the pension benefits of our members.”
Hall said the Teamsters’ negotiating committee has retained actuaries to determine the effect on Central States if UPS is allowed to withdraw.
UPS pays about $1 billion a year into all multi-employer pension funds, a company spokesman said.
Central States operates a Health and Welfare Fund and Pension Fund and has about 150,000 participants and 210,000 beneficiaries for about 3,000 employers.
For motor carriers, at issue is the amount of unfunded liability associated with the funds because contributions and investment income haven’t provided enough money over the years to cover the cost of benefits to a growing number of retirees, especially because many unionized carriers have gone out of business and no longer are contributing to the funds.
When firms withdraw from the funds — either voluntarily or by going out of business — fund trustees can make a claim to recover the company’s share of the cost of providing benefits to current and future retirees, if any assets are left in the fleets.
In late 2004, some estimates placed Central State’s underfunding at as much as $10 billion.
UPS made an attempt to withdraw from the multi-employer funds in 1997 but dropped it after Teamsters officials objected.
In his remarks, Davidson did not say when negotiations over the new pension plan would begin, but he said talks likely would get started only after UPS concludes its talks with the Teamsters.
He also said his company would amortize the cost of withdrawal over an extended period of time. As a result, he said, the company would have a lower operating ratio and a “more competitive” position in the market.
“It’s a win-win deal,” he said.
“We have an opportunity to negotiate withdrawal from all or some of these funds,” Davidson told attendees at the investment conference. “We’re going to pursue that aggressively.”
Davidson also said that while negotiating with the Teamsters, the company would seek greater flexibility on work rules, but he emphasized that withdrawal was “the most significant issue facing us.”
William Zollars, chairman of YRC Worldwide Inc., said his company has not yet decided how it will proceed on the issue of pensions or whether the company would negotiate with the Teamsters separately or in concert with other carriers.
“Everything is on the table,” he said, “but it’s too soon to make a commitment.”
Thomas Nyhan, general counsel for Central States Pension Fund, could not be reached. Norman Black, media relations manager for UPS, declined to comment.
