Pension Grab Affects All Teamsters
October 17, 2007: By late November, we will know if UPS has succeeded in breaking out of the Teamster Central States Pension Plan.
Big Brown’s pension grab affects hundreds of thousands of Teamsters at UPS and in at other Teamster employers, in the Central States and beyond.
If UPS succeeds, 44,000 UPSers will be pulled out of the Central States and the historic union plan will be down to just 100,000 remaining active Teamsters, and over 200,000 retirees.
UPS’s actions are part of a broad corporate attack on union pension plans. In the Teamsters, UPS is leading this charge, but they are not alone.
The big freight carrier ABF has announced it wants to break out of all Teamster plans. PepsiCo (Pepsi and FritoLay) has been doing it for years.
Increasingly, local unions face corporations that want to get out of Teamster benefit funds
Companies want to set up their own, cheaper plans. Or even worse, they want to just have a 401(k), and no real pension plan at all. The goal is to reduce costs, save money on benefit contributions, and undermine our union’s power.
UPS is willing to pay the $6.1 billion withdrawal liability to Central States that is required by law because they know they will save that many times over if they can bust our pension plan and lower their pension costs.
Vote in November
The split-off of 44,000 UPS Teamsters from Central States will be put to a contract vote in early November—but affected UPS Teamsters are not the only ones getting a ballot.
The Hoffa administration is allowing all 230,000 UPS Teamsters to vote on this deal, including those in other pension plans and part timers, most of whom are in a company plan.
Many more Teamsters directly affected by this vote will not get ballot—namely the 100,000 Teamsters in the Central States fund who work for other employers and will see their pension fund lose over $600 million a year in pension contributions if UPS succeeds in pulling out.
Why Hoffa Gave In
For years, Teamster leaders and members have said No to UPS’s attempts to get control over our pensions. This time Hoffa and chief negotiator Ken Hall gave in—and agreed to many more historic concessions as well. Why?
The answer is that UPS has made a deal. If the tentative UPS contract with this pension split is approved, they will give “card check” organizing rights to our union at UPS Freight. This means that our local unions can sign up a majority of UPS Freight workers at one terminal, and get the right to bargain.
We definitely need to organize UPS Freight. But many Teamsters believe we can achieve this goal without these monumental givebacks.
UPS’s stockholders want an early agreement. This gives our union leverage. Why not use it by telling UPS they get no early settlement unless they give us the right to organize at UPS Freight—while keeping the corporation’s hands off members’ pensions?
The Facts About the Pension Protection Act
October 17, 2007: Rumors are flying about the Pension Protection Act, the pension legislation that starts to take effect on Jan. 1.
Does the UPS contract have to be settled by Jan. 1 to head off benefit cuts and win pension improvements? Is a new round of pension cuts on the way? The answer is NO.
TDU consulted with actuaries, attorneys and fund managers to cut through the rumors and provide members with the facts.
January 1: A Kickoff, Not a Deadline
Some provisions of the Pension Protection Act go into effect on Jan. 1. This date is the kickoff of a long-term timeline for strengthening funds over 10 to 15 years.
It is not a deadline by which the UPS contract needs to be ratified for UPS Teamsters to avoid pension cuts or win pension improvements. It also is not a date on which Teamster pension funds will change their benefits.
What Happens on January 1?
On Jan. 1, 2008, the funding portions of the Pension Protection Act go into effect.
As a result, Teamster pension funds will have to certify their funding levels (Green Zone, Yellow Zone or Red Zone) and inform participants and the government of their status. This process does not occur immediately on Jan. 1, but can take up to 90 days.
On April 1, 2008, fund actuaries have to certify the status of the plan. If a plan is under-funded, then it must notify participants, the union, the company, and the government by May 1, 2008—120 days after Jan. 1.
Yellow Zone and Red Zone
If a pension plan is under-funded, it will be certified by the fund actuary as in the “Yellow Zone” or the “Red Zone.”
The Yellow Zone means the fund is less than 80 percent funded.
The Red Zone means that the fund is seriously under-funded and also has a short-term credit balance deficiency (a technical calculation that indicates a more short-term problem than the funding level). Being under 65 percent funded will not automatically place a pension plan in the Red Zone.
Few, if any, Teamster plans will fall in the Red Zone. But some major Teamster funds, including the Central States Fund and the New England Fund, are expected to be in the Yellow Zone.
December 31, 2008: Deadline for Plans
If a plan is in the Yellow Zone or Red Zone, the plan’s actuary will then come up with at least two options to get the funding level up toward 80 percent over the next ten or 15 years.
These options include increasing employer contributions, and/or decreasing future pension accruals.
For any plan under 80 percent funded, the trustees will adopt a Funding Improvement Plan, based on the options prepared by their actuaries, to present to the union and the company. If the trustees deadlock (company vs. union trustees), the matter goes to expedited arbitration.
By Dec. 1, 2008 a pension plan must announce their improvement plan, unless there is an impasse.
That plan must go into effect by December 2009, two years from now.
The Central States Fund has already adopted its plan. They require contracts signed this year to have pension contributions go up at least eight percent a year. And they cut back benefits, by eliminating unreduced 25- and 30-and-out pension accruals.
Under the law, Teamster pension funds must adjust their funding plans based on any new pension money that is negotiated in contract bargaining. A new contract does not have to be ratified by Jan. 1.
When major contracts are settled, fund actuaries and trustees will adjust their Funding Improvement Plans based on the new money projected in the contract.
The Bottom Line
The goal of the Pension Protection Act is to get multi-employer plans to move their funding levels up to 80 percent over the next ten to fifteen years.
It is a long-term process. No plan needs to be adopted until Dec. 1, 2008, over a year from now, and none needs to be put into effect until a year after that.
Any contract improvements that are won—at any time—will be taken into account. The UPS contract does not need to be settled by Jan. 1 for us to prevent cuts or win pension improvements.
Tentative UPS Contract
BNA Daily Labor Report: UPS Tries to Shortchange New Jersey Health and Welfare Fund
October 5, 2007: From the BNA Daily Labor Report: Officers and members of a local Teamsters union must arbitrate with United Parcel Service of America Inc. (UPS) on the issue of whether UPS must contribute on union members' behalf to two UPS-sponsored and administered health and welfare plans at rates set out in bargaining agreements, the U.S. District Court for the District of New Jersey ruled Oct. 2 in an unpublished decision (Palumbo v. United Parcel Service of America Inc., D.N.J., No. 06-CV-5331 (DMC), unpublished 10/2/07).
According to the court, UPS employs approximately 235,000 workers in the United States who are represented by the Teamsters. Most Teamsters-represented UPS employees also are members of a Teamsters local. UPS has a collective bargaining agreement with the national Teamsters union as well as local supplemental bargaining agreements which apply to employees in particular geographic areas and/or local unions.
Unlike most full-time Teamsters-represented employees at UPS who receive health and welfare benefits under jointly-trusteed plans, full-time employees of UPS who are represented by Teamsters Local 177 are provided health and welfare benefits from two plans that are funded, administered, and controlled solely by UPS. These two UPS-sponsored plans are funded through a voluntary employees' beneficiary association, according to the court.
Victor Palumbo, as the President and Secretary Treasury of Teamsters Local 177, along with seven Local 177 members filed a lawsuit against UPS in November 2006 contending that UPS had breached its fiduciary duties under the Employee Retirement Income Security Act by failing to make contributions to the UPS plans at rates specified in UPS's master labor agreement with the national Teamsters union. According to the court, the plaintiffs based their claim on a provision in the master agreement that dealt with UPS's obligation to make contributions to jointly-trusteed benefit plans.
Judge Dennis M. Cavanaugh granted UPS's motion to stay the plaintiffs' lawsuit for their failure to first initiate arbitration, as required under the master labor agreement. According to the court, although the plaintiffs framed their arguments as ERISA claims, their claims could not be resolved under ERISA but instead required resolution under Section 301 of the Labor Management Relations Act.
"Although the Complaint does not expressly reference the LMRA, Plaintiffs' claims--whether for breach of fiduciary duty or violation of ERISA's prohibited transaction provisions--turn on a threshold contractual determination, namely whether UPS owes contributions at a specified rate under the CBA. The LMRA requires that this threshold determination be resolved pursuant to the grievance and arbitration procedures contained in the CBA," the court said.
The plaintiffs were represented by Robert A. Fagella of Zazzali, Fagella, Nowak, Kleinbaum & Friedman, Newark, N.J. Jody S. Riger of Proskauer Rose, Newark, N.J., represented UPS.
The full text of the opinion is at https://d3n8a8pro7vhmx.cloudfront.net/teamstersforademocraticunion/pages/6158/attachments/original/1434125644/06cv5331.pdf?1434125644.
UPS Deal Won't Create 10,000 New Full-Time Jobs
Click here to visit MakeUPSDeliver.org for the latest contract info.
Bloomberg: Teamsters Ink Deal with UPS
October 1, 2007: United Parcel Service Inc.'s five-year tentative contract agreement with the Teamsters will allow it to pay $6.1 billion to gain greater control of some pensions and will provide pay and benefit increases for workers.
Wall Street Journal: UPS, Teamsters Near Pension Deal
September 29, 2007: United Parcel Service Inc. and the Teamsters union are closing in on a labor agreement that would restructure and possibly lower the company's pension obligations.
The two sides are trying this weekend to finish hammering out a deal in which the Atlanta package-delivery giant would pull out of the Central States Pension Fund, the largest multiemployer program in the trucking industry.