UPS Seeks to Change Union Pension Fund

This story appears in the August 13 print edition of Transport Topics.

UPS Inc., the nation’s largest single employer of Teamsters, said it is proceeding in talks with a union-related pension plan that could result in the parcel giant’s withdrawing from the multi-employer funds that cover current and retired union members.

The union reported to its members via the Internet that UPS had reached an agreement in principle with the Central States Health & Welfare and Pension Funds on the conditions for withdrawal. While the company would not confirm the union’s assessment, a UPS spokesman did say the corporation has been gathering information on the plans, so its negotiators can return quickly to the bargaining table. UPS and the Teamsters suspended their talks on a new labor pact last month.

“UPS doesn’t have an agreement with Central States, but we continue to have discussions with them and have made very good progress. The fund is a separate entity from the Teamsters and is the only repository of information where we can go to obtain information” on pensions and health-care benefits, UPS spokesman Norman Black said in an inter-view.

Thomas Nyhan, the Rosemont, Ill., funds’ executive director, characterized talks with the company by saying, “We’ve had discussions with UPS for the conditions under which a withdrawal could take place if the company could persuade the Teamsters.”

The talks with UPS are continuing, Nyhan added by phone Aug. 8, and he stressed the necessity of gaining Teamsters’ approval before such an action could actually take place.
Union spokesman Galen Munroe said the Teamsters stood by its Aug. 2 Internet letter from President James Hoffa to the membership, but for now, the union has no further public comment.

Black said UPS contributes to 22 such funds that provide health and welfare and pension benefits to current and former Teamsters workers. The funds, which are usually organized geographically, are fed by multiple employers.

Central States, for example, served 450,000 current and retired workers, as of the end of 2005, but only 40,000 of them were affiliated with UPS, Nyhan said. The fund has more than $20 billion in assets and does serve other Teamsters in trucking, including less-than-truckload employees covered by the National Master Freight Agreement. However, it also affects grocery, warehouse and construction workers and municipal government employees.

While Black confirmed the UPS-Central States talks, he declined to comment on whether similar talks are going on with the 21 other funds to which the company contributes.

UPS’ desire to leave the multi-employer plans dates back at least to 1997, when the com-pany’s move to do so was a contributory factor leading to the 15-day strike that August. The contract that ended the strike kept UPS as a contributor to the funds.

Hoffa has not endorsed withdrawal, but he has expressed both open-mindedness and skep-ticism. His letter said the union would “not accept a proposal for UPS to withdraw from Central States unless we are satisfied that it would be in the best interest of all Teamsters who are participants in the fund, not just the UPS employees.”

Ken Paff, leader of Teamsters for a Democratic Union, has taken a harsher stand, telling union members on the same day as Hoffa’s letter that “a pension pullout by UPS . . . would undermine the retirement security of all Teamster members — and it should be rejected.”

He also said a pullout by UPS “would gravely weaken the Central States Pension Fund.”

Stock analyst Thomas Wadewitz wrote to clients of J.P. Morgan Securities on Aug. 6 that a withdrawal from the multi-employer plans could cost UPS from $4 billion to $6 billion.

Even so, he said, “it would eliminate the great uncertainty and undefined future liability, which could get even worse over time.”

To place that amount in perspective, UPS has averaged $1.02 billion a quarter in net in-come for the nine quarters ended June 30.

Black called Wadewitz’ estimate “pure speculation,” upon which the company would not comment.

The idea of leaving the multi-employer funds gained a public foothold when executives with UPS and Arkansas Best Corp., the unionized LTL carrier that operates as ABF Freight System, broached the idea to investors in May at a New York conference organized by Bear, Stearns & Co. (5-14, p. 1)

UPS began negotiations with the Teamsters for a new contract in September, even though the current six-year pact does not expire until July 31. Both sides have said they are dealing with complicated issues, including pensions and health care, and neither wants to see parcel shipping diverted to UPS’ prime rival, FedEx Corp., which does not use union labor.

Black said that, while talks on the national master document have been suspended since July, negotiations have continued on local supplemental riders. He did not have a firm date for when national master discussions would resume but said he hoped it would be soon.