September 19, 2008: The Central States Pension Fund lost $3.1 billion during the first six months of this year, which is half as much as the $6.1 billion that the fund received in December from UPS as a pay-out to leave the fund.
The fund lost $2.1 billion on its investments in the first half of 2008, or eight percent of its assets. At the same time, the fund suffered a $287 million loss of income, compared to the first half of last year, because UPS is no longer contributing to the fund.
The investment losses during the first half of 2008 came as stocks dropped dramatically. Central States fared worse than most other pension funds due to its aggressive investment strategy: their Quarterly Report provides a comparison to the average of other large funds.
No More UPS Contributions
When the Hoffa administration gave UPS management a huge concession in the form of the pensions of 44,000 full-time UPSers, they told Teamsters that the deal would work out well for the Central States Fund, because of the $6 billion received from UPS.
Six months later, that claim does not hold up, especially since CSPF has lost $600 million per year in contribution income that UPS would have had to pay in. And that income figure would grow each year, as employer contributions go up as required by the contract.
Relying More on Investments
Prior to the deal to allow UPS to exit the fund, Central States relied on employer contributions for about 50 percent of its income, and investment returns for about 50 percent. Now, Central States must count on investment returns for some 70 percent of its income, with employer contributions contributing about 30 percent. This makes Central States more dependent on investment returns than most other pension funds.
Central States’ assets stood at $23.7 billion as of June 30, so there is still plenty of money to sustain benefits and recover, as long as the union leadership is committed to make it happen.
You can obtain a copy of the Quarterly Report of the Independent Special Counsel, and the Quarterly Financial and Analytical Information at www.tdu.org.
TDU members won an order in federal court that requires the Central States Fund to provide us with this information. Previously, they kept it secret from members.