Senate Bill Seeks to Relieve Underfunded Pension Plans

This story appears in the March 29 print edition of Transport Topics.

Pension legislation garnered renewed attention in Washington last week as a senator offered a bill to aid struggling multi-employer plans, and companies, including Con-way Inc., pressed for more time to beef up their plan funding.

The Senate bill, introduced by Sen. Robert Casey (D-Pa.) on March 22, would allow multi-employer pension funds to pay benefits for employees whose employers have failed out of a fund separate from the one used to pay pensions for retirees of companies still in business.

Casey outlined his bill at the Carlisle, Pa., terminal of YRC Worldwide Inc. The unionized less-than-truckload carrier has estimated that as much as half of its pension payments are made to so-called “orphans” who worked for failed companies but still receive benefits.

“Multi-employer plans face unique challenges that are overburdening pension plans and the bottom lines of companies,” Casey stated. “My legislation would help correct these problems to protect the pensions of workers and unburden companies stuck paying a crippling expense.”

Separately, Con-way Vice President Randy Mullett urged Congress to act quickly on a bill giving companies more time to replenish plans depleted by financial market losses.

YRC and ABF Freight System have been in the forefront of efforts to overhaul laws that govern their payments to union retirees who participate in multi-employer plans.

Costs for payments to retirees of failed companies “represent a huge, hidden tax on large and small businesses that are unfairly shouldering this burden,” said Mike Smid, chief operations officer of YRC.

YRC isn’t making any pension contributions this year under a cost-saving agreement with the Teamsters union.

One of the funds that provide benefits for YRC Teamsters is the Central States Fund, whose assets have shrunk by about 25% since the end of 2007. A Washington pension attorney last month estimated Central States would have to have a return of 12% for the next 15 years to reach full funding.

“We support this legislation as it helps protect the pension benefits of ABF employees, and addresses the unfair burden placed on companies, like ABF, that are providing contributions for pension benefits of people that never worked for them,” Arkansas Best Corp. spokesman Danny Loe told Transport Topics.

Casey’s measure would allow multi-employer plans to pay “orphaned” retirees from a separate account that would not require contributions by companies whose workers still are in the plan. The fund for “orphan” retirees’ benefits would be carved out of the existing multi-employer fund balance and dedicated to paying benefits to the “orphans”.

Casey’s bill is similar to H.R. 3936, a bill introduced in the House of Representatives last year that would spread out the time required for company pension plans and multi-employer plans to reach fully funded status. The current requirement is seven years, and the bill would allow up to 15 years for company funds and 30 years for multi-employer plans.

The Senate already has approved a bill that would enable a longer time period, while the House hasn’t acted yet on a companion measure.

Mullett said in a March 24 conference call that the stock market decline caused Con-way’s pension plan to fall 40% from its fully funded status between September 2008 and February 2009. The plan was 77% funded at the end of 2009.

That decline prompted Con-way to cut capital spending and reduce pay and benefits to conserve cash for increased pension payments, he said.

Without the extension, Con-way’s pension expense would double this year, he said.

“Our fear is that unless Congress acts on this, presses the pause button and allows the markets to come back a little bit . . . that we will be forced to take even more drastic steps,” Mullett said. “This is one of the most stimulative things that Congress could do without spending any government money.”

At the Carlisle event, Teamsters Local 776 shop steward Dave Wolf said, “We’re not asking for trillions of dollars like the banks get. We’re just asking for temporary relief for pensions that lost money in the stock market crash.”

Con-way and hundreds of other companies are supporting pension law changes advocated by the American Benefits Council, a trade group made up primarily of business associations.

Lynn Dudley, senior vice president of the American Benefits Council, said pensions are an urgent issue now because companies whose pension plans are less than 60% funded on April 1 would have to freeze them, effectively reducing benefits for employees.

In addition, she said that companies face required payments to make up a portion of their shortfall on April 15.