UPS Moves To Break Up Central States Fund

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.

Pension Improvement?

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.

Realistic Solutions

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.

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