August 3, 2007: by Thomas L. Gallagher, for Traffic World: UPS reached an agreement in principle with the Central States Pension Fund establishing conditions for a potential UPS withdrawal from the multi-employer pension plan.
The controversial decision to remove 42,000 workers covered under the plan would set the stage for establishing a jointly administered Teamster pension plan for UPS employees. Such an agreement must first gain acceptance by the Teamsters National United Parcel Service Negotiating Committee and ratification by the members.
The Teamsters committee said they will not accept a proposal for UPS to withdraw from Central States unless they are satisfied that it would be in the best interest of all Teamsters who are participants in that Fund, not just the UPS employees.
Specific terms of the agreement have not yet been disclosed.
"While we await official notification of the terms of the settlement, we continue to evaluate the effect on the future of Central States," said James P. Hoffa, chairman of the committee and president of the union.
A dissident group within the International Brotherhood of Teamsters is calling for organized resistance to any withdrawal from the Central States Fund. Teamsters for a Democratic Union said a pension pullout by the union's largest employer would undermine the retirement security of all Teamster members.
The group compared Central States with two jointly administered programs in New York and New Jersey, where UPS has successfully pushed for pension cuts. "Both the New York and New Jersey funds have underperformed compared to the Central States Fund," said TDU in a statement.
Loss of contributions to Central States would also gravely weaken it and endanger the benefits of 100,000 non-UPS Teamster members still covered, said TDU.
July 18, 2007: Some defenders of management’s pension proposal claim that a $4 billion withdrawal liability payment from UPS would fix Central States and safeguard members’ benefits. Unfortunately, that’s just not true.
Find out why at www.MakeUPSDeliver.org
July 12, 2007: In June ABF CEO Bob Davidson circulated a letter to all Teamster employees saying that members should dump their Teamster pensions for a company 401(k).
The letter is supposed to be a sales job for the company’s effort to break out of our Teamster pension plans. Instead, it reveals that it would be a disaster for our union to let employers like ABF and UPS to take this course.
An 18-year Teamster wrote Davidson about the company’s proposal. And the CEO’s advice is telling. Don’t worry about losing your pension, Davidson says. Under ABF’s proposal, you would still get your 18-year pension from the Teamster fund—plus start building a 401(k) on top of that pension. It’s “not like Social Security,” Davidson writes, but your very own account.
What Davidson failed to mention is that with 18 years in a pension fund you don’t qualify for anything but a vested pension, which in most Teamster plans amounts to very little.
ABF’s pitch boils down to this: put your future in the hands of the company’s 401(k) and pray that the stock market goes way up. It might work. Then again, the lottery might work, too. You just have to pick that lucky number.
UPS Pullout Could Cause Fund’s Collapse
At least ABF management is up front about their goal: saving the company money on retirement costs. And Davidson is honest enough also to admit what would happen to Teamster pension funds if UPS and ABF pull out.
“A UPS withdrawal, or other adverse factors, would make them even less stable or cause their complete collapse,” Davidson wrote.
Our union needs to say one short word to these corporate schemes: No. The American people have said No to privatizing social security, and we need to tell UPS and ABF the same now, in a strong and unified voice.
The corporate answer is to destroy our Teamster funds to save management money on retirement costs. The union answer is to protect our retirement security by sticking together, strengthening our union funds, and winning benefit improvements.
UPS-Only Plans Cut Benefits
UPS management is pushing their own pension scheme which starts with busting 42,000 UPS Teamsters out of the Central States Fund. Management wants to establish a new UPS-only fund, with half corporate directors and half Teamster officials on the board.
UPS Teamsters don’t have to guess how a UPS-only plan would work. Two large funds exactly like this already exist. They cover all the full-time UPS Teamsters in New Jersey and the New York City areas. Both funds are housed right inside UPS headquarters in Atlanta.
UPS has a track record at these funds—and it should raise alarm for Teamsters concerned about our retirement security.
Management recently demanded big pension cuts in both. They got their way in New York, and slashed pension accrual rates by 30 percent. In New Jersey the union blocked the cuts, so management has pushed the issue before an arbitrator.
The New Jersey fund is only 52 percent funded, by the way. That’s less than Central States. The return on investment in the New York fund was just 3 percent over the past five years and just over 6 percent for the last ten years. That’s much worse than Central States.
These are UPS-Teamster plans just like the company wants to set up for 42,000 Teamsters in the Central States. And they are cutting benefits. This puts the lie to the company’s claim that you would be better off in a UPS-only plan.
Promises are cheap. The results speak for themselves.
The Positive Alternative
Hoffa’s “Best Contract Ever” and the post 9-11 stock market dip delivered pension cuts. But the recent bull stock market has boosted our pension plans and positioned us to win realistic benefit improvements. That should be the priority for this bargaining round at UPS and in freight.
Affordable retiree healthcare. We have an additional 70 cents per hour in benefits due on August 1 in our national contracts. Early bargaining at UPS can let us get a lot more, enough to pay for retiree health care at affordable cost.
A written timetable for improvements in all pension plans. We need a guarantee, in writing, so all Teamsters will know that our pensions will be restored and improved as increased contributions build up in the funds. In 1997, UPS Teamsters got a binding document from Central States before we voted on the contract. We should settle for no less.
Include UPS part-timers in all Teamster pension funds. Part-timers are already covered by Teamster plans in the West, New England and Upstate New York. This will improve pensions for both part-timers and full-timers and be a big boost to the Central States and other funds, bringing in thousands of new participants.
These are realistic goals. There is no reason to give UPS an early deal without them.
June 28, 2007: At a press conference today, Senator Tom Harkin (D-Iowa) introduced the Restoring Pension Promises to Workers Act of 2007, which contains a number of provisions “to help ensure Americans’ pensions will be there for them when they retire.” For one, the bill would create an Office of Participant Advocacy, which would be a resource for people who are affected by shortcomings in the laws. The bill also includes a provision that would require companies that provide extravagant executive pay packages to maintain a defined benefit pension plan for their workers. There are also protections for employees whose divisions are sold, certain retired union members affected by pension cutbacks, and spouses of federal employees. Read Senator Harkin’s press release. Karen Friedman, PRC Policy Director, spoke at the press conference in support of the bill. Read her statement.
June 26, 2007: Logistics Management says there is good news for shippers in our union's current round of bargaining with UPS, and in the upcoming NMFA negotiations. "There is scant chance of a national strike as happened 10 years ago when Teamsters walked out against UPS and when they struck the LTL sector in 1994."
The article notes that Ken Hall is "seriously considering" UPS management's proposal to split up the Central States Pension. "That’s a far cry from the union’s stance in 1997 when UPS offered basically the same deal, and it resulted in a 15-day national work stoppage. But that was when Ron Carey was running the 1.3 million-member Teamsters now run by James P. Hoffa. The union has never had a national strike in transportation under the younger Hoffa."
June 18, 2007: By John Gallagher, for Traffic World - Pension benefits are in play as never before in the current round of negotiations between UPS and the International Brotherhood of Teamsters, and the future of LTL giants YRC Worldwide and Arkansas Best - as well as UPS's own freight division - may hang in the balance.
When the $48 billion parcel giant inked its last deal for 230,000 union drivers in 2002, it had hoped to be able to celebrate its 100th anniversary this year without the diversion of contract negotiations.
But now both sides are hoping to lock in a new contract as early as the end of the summer, according to industry sources, and avoid anything close to the 14-day strike in 1997 that threw a massive wrench into the trucking market as shippers scrambled to find capacity and rival carriers were deluged with diverted freight.
UPS is adamant that the parcel contract, which expires July 31, 2008, is being negotiated at the same time but separate from a new contract being created for UPS Freight covering 125 employees in Indianapolis, a terminal where workers voted to organize. However, some believe one UPS unit is being used as leverage against the other.
"There's going to be some sort of a trade-off involved with UPS Freight, absolutely," said Jason Seidl, an analyst with Credit Suisse. "Exactly what form that may take, who knows. But I think it's a chip that UPS management can use to help negotiate part of the (parcel) contract, whether it's related to working conditions, salary, or the pension fund."
The early start to negotiations this year has reduced the risk of a work stoppage, but hasn't kept rival carriers and their customers from drawing up contingency plans. UPS moves 15.6 million packages through its system each day, with 13.8 million flowing over the roads, on the rails and through the air of its domestic shipping network.
"(During the strike) in 1997, we got a huge surge of freight - but then again a lot of carriers did," said Con-way spokesman Gary Frantz. "Back then, people were unsure whether UPS could handle the strike. We''re more confident this time around."
While both sides took credit for a "win" in 2002, the labor landscape may have changed enough over the last five years to put UPS management more firmly in the driver''s seat in 2007.
"If you look at other unionized companies like the airlines and the auto industry, they've either downsized, gone through layoffs or renegotiated their contracts over the last five years," said Satish Jindel, a principal with SJ Consulting Group.
"Wages in the airline industry are easily 20 percent lower. While it''s desirable for unions to have decent wages for decent work, they have to recognize that a lot of people are working for less. So for them to push the cost structure of UPS higher, it could undermine the goal of protecting or growing their jobs."
Jindel also noted that besides rival FedEx - the largest express carrier shippers could turn to in 2002 in the event of a snag in negotiations - there was Airborne Express. "Now there''s DHL, and Airborne didn't have the global network that DHL has, or the access to capital that DHL has," he said. "As a result, if there''s a delay in contract execution, and shippers start to move business away, the company will be at risk of seeing that business go away permanently."
The basic matters of wages and work rules are taking a back seat so far to the longer term issues surrounding pension funds in the current round of negotiations, which kicked off in Detroit last September.
Agreeing to place multiemployer pension funds on the negotiating table is evidence, say some industry observers, that Teamsters President James P. Hoffa acknowledges his union may not be playing with as strong a hand as in previous years.
The largest of the Teamster multiemployer pensions, the Central States Southeast and Southwest Areas Pension Fund (commonly called Central States), was only 49 percent funded at the end of 2005, with roughly $21 billion in assets as of the first quarter 2007.
Because an estimated 60 cents of every dollar that UPS contributes to the pension fund cover the retirement benefits of non-UPS employees, the company has proposed - according to the Teamsters - paying a lump sum withdrawal liability owed to the Central States pension fund, an amount subject to negotiation between UPS and the pension plan.
Retirement benefits would thereafter be administered by a new joint Teamsters-company pension plan with an equal number of Teamster-appointed and UPS-appointed trustees.
"I can assure you that the negotiating committee will not consider any plan that jeopardizes the benefits of members in Central States or members of any other Teamster fund," said Ken Hall, director of the Teamsters Parcel and Small Package Division and co-chairman of the UPS national negotiating committee.
"The company's proposal is not a negotiating tactic. 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."
But not all Teamsters agree that management is holding the best cards. Teamsters for a Democratic Union, a grassroots group based in Detroit, believes the Teamsters are still reaping the fruits of a "very successful strike" in 1997. "That still gives us added bargaining power as a union," said TDU national organizer Ken Paff. "We're saying to the union leadership, use some of that power to drive the company demands off the table and put the union demands on the table."
According to TDU, some of those demands should include adding 15,000 new full-time jobs, wage increases and better health care benefits.
"The union could tell the company that if they want early ratification, they have to withdraw the pension proposal, or we'll see you next year," Paff said. "If they were to do that, the TDU as well as the rest of the UPS Teamsters would rally behind them."
Some speculate that one way UPS Freight could be used as a bargaining chip in the current negotiations would be to agree to a card check at all 300 service centers in UPS Freight''s network - in exchange for agreeing to get out from under the multiemployer pension fund. It has been estimated that it would still cost UPS anywhere from $4 billion to $10 billion to payoff its pension obligations under the fund.
"UPS is pretty smart, and if they look at the numbers and it made sense, they'd jump at it," said Art Hatfield of investment firm Morgan Keegan. "It might not be a good deal for the Teamsters, but it would be great for UPS. They've got a lot of cash, and even if it was an $8 billion or $10 billion hit and they had to raise debt to pay it, they''d be swapping out an uncertain liability for a certain one. That would be a positive change to the balance sheet."
Meanwhile, YRC and Arkansas Best, which will be renegotiating the National Master Freight Agreement with the Teamsters later this year, are keeping close tabs on UPS and whether it is successful in negotiating its way out of the pension fund.
"We'll be bargaining with the same group, and UPS is participating in all the same pension funds we are, so it will certainly be of interest to us," said Mike Smid, president and CEO of YRC National Transportation.
According to Securities and Exchange Commission documents, YRC contributed $542 million to the pension plans last year, up from $472.7 million in 2005 and $378 million in 2004. The company estimated its full withdrawal liability to be $3 billion to $4 billion, payable over 20 years.
"Yellow Transportation, Roadway and the applicable subsidiaries of Regional Transportation have no current intention of taking any action that would subject us to withdrawal obligations," the company said in an SEC document filed earlier this year.
However, at a conference hosted by Bear Stearns May 8, YRC Chairman, President and CEO Bill Zollars said he considers the multiemployer pension plan "an investment like any other investment," and negotiating a deal to exit the plan "all depends on how much we put in and what we get back for it."
At the same conference, Arkansas Best President and CEO Robert Davidson was more explicit.
"We can provide the same benefits that we're providing now directly to our employees at significantly less cost than we're now paying. That money would allow us to amortize the withdrawal liability that we would pay to the funds, and would lower our operating ratio to allow us to be even more competitive in the marketplace."
ABF estimates it would cost the company $600 million to $650 million to withdraw from the plan, payable over a 10- to 15-year period.
"We have the capital structure to allow us to do it, so the plan is to pursue that aggressively, and hope Yellow and Roadway are on board with us for it," Davidson said.
Whether or not UPS Freight is used as a bargaining chip in the negotiations, Wall Street believes UPS Freight will eventually be organized.
"We continue to believe that the model contract worked out with Indianapolis will not include restrictive work rules like the National Master Freight Agreement, allowing them to operate as they always did as a nonunion carrier," said Stifel Nicolaus analyst John Larkin.
"Wages and benefits should go up, as the carrier is unionized, but UPS, as the largest employer of Teamsters in the world, will more than offset any labor cost disadvantage with added density and improved efficiency."
June 8, 2007: UPS management has put a dangerous proposal on the table: to pull UPS Teamsters out of the Central States Pension Fund, the plan that covers 42,000 full-timers in 25 states.
Under the law, UPS would have to pay $4 billion in withdrawal liability to the Central States to break out of the fund—a penalty management is happy to pay because they can make it up over time by reducing future benefit costs.
Our union has always opposed pension grabs by UPS in the past because the company’s goal is to weaken our union and our benefits. In 1997 we defeated the company on the issue and won major benefit improvements.
But this time, the Hoffa administration may go along the company’s plan, calling it “a serious proposal that must be seriously evaluated.” The entire contents of the last Teamster UPSDate was dedicated to talking about management’s proposal—without a single word on what the union’s proposal is.
UPS’s pension grab would hurt our union in the long run—in exchange for not much benefit in the short run.
Under the company’s initial proposal, the UPS-only fund would pay a 25-and-out benefit of $2,500, a 30-and-out benefit of $3,000, and a 35-and-out benefit of $3,500. Benefits would be capped at a maximum of $3,500 a month no matter how many years you work.
At $100 per year of service, the proposed UPS pension would actually pay less than Central States, which pays $123 per year of service. And that number will go up at least eight percent a year, so Central States will pay about $175 per year by the end of the next contract. The main improvement is that the UPS-only plan would restore early retirement by eliminating the six percent per year penalty for retiring before 62.
Of course, UPS can sweeten the pot and improve their initial offer. We fully expect that to happen.
But UPS Teamsters shouldn’t have to be pulled out of Central States to get the benefits they deserve. It’s our union’s job to win full 25 and 30-and-out benefits at any age and affordable retiree healthcare in a Central States plan.
The reason is simple: breaking apart the Central States Fund will weaken our union and put members’ benefits at risk.
Long Term Problems
UPS’s proposal would establish a UPS Pension Plan, with management officials and Hoffa administration Teamster officials as trustees. A Teamster vested in the Central States Plan would in the future draw two separate checks, which would add together to make up a pension.
Central States would not give up funds that have been contributed over the years. They would stay there and provide a partial pension, while the UPS Plan would pay the rest of the pension. Healthcare and retiree healthcare would continue to be provided by Central States.
By breaking up and weakening the Central States Fund, management’s proposal would put UPS members’ future pensions at risk. UPS currently contributes $500 million per year to Central States. That income, which grows each year, would be gone forever.
If the big freight companies follow UPS’s example and pull out, the Central States Fund would be even worse off. The CEO of ABF now says busting out of the Teamster pension plans is his top bargaining goal.
UPS Teamsters would still depend on the fund for a large part of our pension. It would not be smart to weaken the fund by supporting a pullout when we will still need the fund to support our retirement.
Real Problem; Wrong Answer
UPS’s proposal for a UPS-Teamster plan covering the Central States has been tried elsewhere. Let’s look at the results.
Local 804 in New York is a UPS-Teamster plan just like the one being proposed for the Central States. Over the last ten years, that fund’s investments have performed worse than Central States. At the beginning of this year, UPS’s trustees forced through a 30 percent pension cut.
Now UPS is trying to push through a pension cut in New Jersey Local 177—another UPS-Teamster fund. That decision is before an arbitrator.
Both of these plans are based in Atlanta, at UPS headquarters, with all employer trustees being UPS management. They show that a UPS-Teamster pension plan would not be a magic bullet.
Early bargaining gives us leverage. We need to use it to win benefit improvements for UPS Teamsters in the Central States Fund and all Teamster pension plans, including:
Affordable retiree healthcare. Cuts in retiree healthcare are the number one obstacle to members retiring at 25-and-out 30-and-out—and the easiest benefit cut to restore. We need to substantially increase contributions to Teamster Health and Welfare funds so that our health benefits are protected and affordable retiree healthcare is immediately restored.
A timetable for improvements in all pension plans in writing at the time of ratification so that Teamsters in all funds will know that our pension benefits will be restored and increased as increased contributions build up in our funds. In 1997, UPS Teamsters got a document from Central States—before we voted on the contract—telling us in writing what our benefits would be if the contract was ratified.
Include UPS part-timers in all Teamster pension funds. Part-timers are already covered by Teamster plans in the West, New England and Upstate New York. As a result, part-timers in these areas receive superior pension benefits and the contributions for part-timers who do not vest are used to strengthen Teamster pensions, not to line the company’s pockets.
These are achievable goals. There’s no reason to give UPS an early deal unless it delivers the benefit improvements that Teamster members need today—and the stronger benefit funds that Teamster members will need tomorrow.
June 8, 2007: UPS management has been trying to win control over our pensions for years. After Teamsters defeated UPS’s pension grab in 1997 and won major improvements in our benefits, it looked like management’s dreams were finished.
Then the 2002 “Best Contract Ever” and the pension cuts of 2003 breathed new life into management’s old ambitions to get control over our pensions.
UPS Teamsters are angry over the cuts and they’re looking for answers. Management is trying to play off our anger to revive their efforts to take over our pensions. The company wants to convince Central States Teamsters that they will look out for our pensions.
When it comes to big promises, actions speak louder than words. The fact is management hasn’t been looking out for our retirement; they’ve been leading the attack on our benefits. Just look at the UPS record:
- UPS management’s representative to the Central States Pension Fund voted to cut our pensions and opposed a motion by our union trustees to increase employer contributions.
- UPS management’s representative to the Western Conference of Teamsters Pension Fund voted for benefit cuts, even though that fund is 100 percent funded.
- There are two UPS-Teamster plans like the one being proposed for the Central States and management has pushed for pension cuts at both. UPS’s trustees forced through a 30 percent pension cut in New York Local 804, and they are trying to cut benefits in New Jersey Local 177, where the issue is deadlocked to an arbitrator.
- UPS management refused to pay millions of dollars owed to two pension funds, in Virginia and New York. In Virginia, management stopped making required pension contributions when members were on vacation.
- UPS has been the number one supporter of legislation that would make it easier to cut our benefits.
UPS’s record shows that the company can’t be trusted with our benefits. But many UPS Teamsters will say Hoffa can’t be trusted either. After all, Hoffa promised that the “Best Contract Ever” would protect our benefits.
True enough. But we’re not going to get even with Hoffa by jumping for a bad proposal from management. Remember, management’s plan to break up the Central States Fund will only go to a vote if Hoffa is backing it.
Hoffa and UPS sold us a bill of goods in 2002. The answer isn’t to fall for a bigger bill of goods now. UPS is under pressure from stockholders and shippers to reach an early agreement. This gives us leverage. Let’s use it.
UPS Teamsters should not ratify any early agreement unless we have it in writing that the contract will restore affordable retiree health coverage and gives us a written timetable for restoring our pensions.
We can win these improvements without letting UPS break apart the Central States fund and weaken our retirement security over the long run.
June 8, 2007: As negotiators for UPS and our union square off over the pension issue, members in the Eastern Region’s two largest UPS locals want to know whether early bargaining will deliver a real pension increase—or a freeze that keeps benefits at pre-pension cut levels.
New York Local 804 and New Jersey Local 177 were the first Teamster locals in the nation to win 25-and-out and 30- and-out pensions. UPS management controls all of the employer trustee positions at both of these funds—and has used its authority to push for pension cuts.
UPS trustees pushed through a 30 percent cut in the pension multiplier at Local 804 effective Jan. 1 this year—over the opposition of Local 804’s trustees to the fund. In Local 177, Teamster trustees have blocked UPS’s demands for pension cuts so far, but the issue is in arbitration.
Local 804 members circulated petitions calling on the union to let members know what needs to be won in bargaining in order to reverse the cuts and increase benefits. The International requested this information from all of the benefit funds that cover UPS Teamsters, including Local 804 and Local 177. But this information has never been shared with the members.
“It seems like the plan is to restore what we lost and sell it to us like we gained something,” said Jorge Diaz, a package car driver from Local 804. “But to me, that’s not gaining anything. That’s a pension freeze.”
“We’re not being told anything, In 1997, we knew what the company was proposing and what the union was fighting for. We won higher pensions. We shouldn’t settle for a freeze this time.”
“That fund is not 100 percent funded. When that fund gets to 100 percent based on their rules, they’ll do the right thing.”
Tom Keegel, IBT Candidates Forum, Aug. 25, 2007
“The Plan’s vested benefit liabilities are 100 percent funded.”
Memorandum to Local Union Officers from Western Conference of Teamsters Pension Trust
More than nine months ago, the Hoffa administration promised Teamsters that the Western Conference of Teamsters Pension Trust would end the pension cuts when the fund was 100 percent funded. But the cuts continue even though the plan is 100 percent funded.
The Hoffa administration’s promise “to do the right thing” was always an empty one. Before General Secretary Treasurer Tom Keegel even made it, the WCT Pension Trust had already issued a memo to local union officers in the West that, “The Plan’s vested benefit liabilities are 100 percent funded.”
The fund issued another letter on Nov. 13, this one from employer chair Bernard T. Eilerts—reaffirming that the fund was 100 percent fully funded.
Three days later, the fund announced a change in the multiplier. But instead of restoring members’ benefits as promised, the fund raised the multiplier only slightly. The new rate was only 1.65 percent, nearly 40 percent lower than the historic minimum rate of 2.65 percent.
IBT Vice President and union trustee Randy Cammack announced at a recent Local 63 meeting that the multiplier will be increased. That’s long overdue. As a result of the cuts, the annual pension of UPS, freight and many warehousing Teamsters in the West has been reduced by more than $6,000 a year.
The UPS contract will set a new record for pension contributions into the fund. That money must be used to restore the benefits that Western Teamsters have lost and restore the multiplier.
UPS has been the number one player behind the scenes pushing Teamster pension plans to lower benefits. Before they vote on any early deal, UPS Teamsters deserve to know how much of their pension benefits will be restored and what the pension multiplier will be going forward.