Retired Teamsters May Face Pension Cuts Under Rules Included in Spending Law

This story appears in the Dec. 22 & 29 print edition of Transport Topics.

Pensions for some of the hundreds of thousands of retired Teamsters members who worked for UPS Inc., YRC Worldwide and ABF Freight System could be cut under new rules contained in the federal spending law signed by President Obama last week.

The pension rules create a process for cutting benefits at multi-employer pension funds that could become insolvent in as little as 10 years, Kevin Williams, a pension and transport specialist at Washington law firm Ford Harrison, told Transport Topics.

“Plans have done everything they can to try to stabilize themselves,” Williams said, including increasing contributions from employers. “Things are still getting worse. They have to cut benefits.”

Kathy Fieweger, chief marketing officer at ArcBest Corp., parent of ABF Freight, said the company applauds “Congress and the president for crafting and signing into law a solution for the complex multi-employer pension plan issue.”

She described the steps as “painful but necessary to eliminate the serious risk of insolvency that many of these plans have been facing.”

There are between 100 and 150 of the 1,400 multi-employer plans that are considered deeply troubled and subject to eventual benefit cuts, Williams said.

One is the Central States Pension Fund, whose more than 400,000 participants include retired Teamsters from ABF and YRC, as well as other less-than-truckload carriers that have failed.

Thomas Nyhan, executive director of the Central States Fund, is among those supporting the changes through the National Coordinating Committee for Multiemployer Pensions, or NCCMP, a lobbying group.

His fund’s obligations are nearly $3 billion annually, while employer contributions are about $650 million, federal reports show. There are about four retirees for every active worker at companies such as ABF that pay into the fund.

Assets dwindled because failed less-than-truckload companies stopped paying into the plan, but Central States and other funds’ retirees continued to receive benefits.

UPS paid $6.1 billion in 2007 to exit the Central States fund as beneficiaries ballooned and the number of active union LTL workers shrank. The company’s retired union workers now have their own plan. UPS workers affected by the changes are in other plans.

The amount of the cuts at Central States and other funds is not known because the process has not yet begun.

Williams, who was once the executive director at American Trucking Associations’ now-defunct Regular Common Carrier Conference, emphasized that other Teamsters funds are not in similar straits.

Randy DeFrehn, executive director of NCCMP, told TT, “what was passed is very helpful.” DeFrehn also said his group is trying to develop a new plan approach as an alternative.

UPS spokeswoman Kara Ross told TT the company “has in the past, and will in the future, advocate for fair legislation that protects the interests of our employees and retirees. UPS is continuing to evaluate the potential impact of the proposed legislation.”

ArcBest’s Fieweger emphasized a broader benefit.

“By giving the plan trustees the tools to make needed changes, the plans are now on a path to be self-sustaining and maintain benefits at the highest level they can afford without putting more undue pressure on contributing employers or taxpayers at large,” she said.

YRC did not return calls seeking comment.

Williams, the pension specialist, said it likely will be a year or more before reductions begin.

The process begins with an assessment of whether a fund can meet its long-term commitments. If not, trustees must develop a reduction plan that is approved by a majority. Unions appoint half of multi-employer fund trustees, and management names the other half.

Fund participants, including pensioners, then vote on the trustees’ plan. If it is rejected and there is more than $1 billion in unfunded liability, the federal Pension Benefit Guaranty Corp. can step in and order a reduction.

Union leaders and the activist group Teamsters for a Democratic Union criticized part of the legislation that they said gave UPS a $2 billion bailout by removing an obligation to make up the difference when other plans’ benefits are cut.

Teamsters General President James Hoffa said UPS cut “a secret backroom deal,” compounding the harm of upcoming benefit cuts.

“We are surprised the Teamsters are calling this a bailout — nothing can be further from the truth,” Ross told TT. “UPS is standing by its contractual commitment to our union employees under the collective bargaining agreement and has advocated to protect our employees’ benefits during this process.”

Ken Paff, an organizer for TDU, said efforts will continue to counteract the changes, though he acknowledged it was a difficult task.