Status Update: Central States Pension Fund

February 26, 2010: The good news: Central States assets increased $2 billion last year.

The bad news: The fund is still in deep trouble.

The assets of the Central States Pension Fund increased by some $2 billion in 2009, ending the year at $19.6 billion. That’s the good news.

The bad news is the fund continues to be in deep trouble, and will have to make 12 percent on its investments just to tread water and end this year with that same asset level.

Riding the stock market upturn last year, the fund made 27.5 percent on its investments.

But employer contributions to the fund were down by $211 million, due mainly to YRC’s pull-out.

Click here to download the Central States Financial and Analytical Report.

Still Hurting from UPS Pension Grab

If UPS were still a participating employer, they would have contributed some $660 million to the fund in 2009. That would have doubled the employer contributions received by Central States for the year. But Hoffa let UPS withdraw from the fund in the last bargaining round.

If UPS Freight was in the Central States Fund, that would have meant an additional $100 million in contributions last year. But the Hoffa administration inked a substandard contract that keeps UPS Freight out of all Teamster pension funds.

YRC, of course, has frozen pension contributions—costing the fund another $180 million last year. With these key employers not making contributions, the fund had to tap $2.1 billion of its assets to pay $2.7 billion in benefits.

Central States ended 2009 with 60,000 active participants, down from 84,000 a year earlier. This reduction was primarily due to the withdrawal of YRC from the fund in June 2009. Secondarily it was due to layoffs in other industries. The UPS pullout reduced the actives by 44,000 back in January 2008. The number of retirees has been steady at 212,000 for the past two years.

The fund remains in the “Red Zone” or critical status due to its unfunded liabilities.

Trustees, Benefits and Investments

The trustees of the fund—half Teamster officials and half employer reps—say they are not planning any further benefit cuts. The drastic cuts imposed in 2004, which eliminated 25- and 30-and-Out benefits going forward (while preserving credits already earned toward early retirement) remain in effect.

The other element of the fund’s rehabilitation plans is a requirement that contracts increase employer contributions by eight percent each year.

YRC’s trustee on the fund, Thomas Ventura, was asked to resign after YRC terminated its participation. He resigned in September, and the employer trustees appointed Art Bunte, the former head of Trucking Management, Inc, and employer negotiator with the Teamsters, to fill the position. The union and employer trustees also decided to give the next employer trustee position (in 2011) to the Association of Food and Dairy Retailers, Wholesalers and Manufacturers, and the 2012 appointment will go to ABF, which is presently the largest contributor to the fund.

YRC’s concession agreement requires them to resume participation in all Teamster pension plans next January, but there is considerable doubt about the credibility of that commitment.

Central States has 69 percent of its assets in the stock market, most of it managed by Goldman Sachs and Northern Trust Global Advisors; these firms were paid fees of $52 million in 2009.

Click here to download the Central States Financial and Analytical Report.