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.
October 1: They'll Be Done
Our right to vote on the tentative agreement gives us the power to stop Hoffa from settling short again. We can send them back to the bargaining table if the deal falls short.
The National Negotiating Committee has vowed they will cut off negotiations if an agreement is not reached on Monday, saying "October 1 or We're Done."
With no contract campaign or membership mobilization, Hoffa and Hall have bet all of their chips on reaching an early deal with the company.
After a tentative agreement is reached, the International Union will call a meeting of the "Two-Person Committee" consisting of two representatives from each local with UPS Teamsters. Then there will be local union meetings where officials explain it (and many give a sales job) and members can discuss it. The tentative agreement will then be put to a vote of the members in a mail ballot.
Teamsters at UPS will have at least two votes: one vote on the National Agreement and one on the Supplement (a local or regional agreement). In some cases, members will even get a third vote on a local Rider.
In 2002, Hoffa sold us the "Best Contract Ever." This time, UPS Teamsters need to scrutinize the settlement carefully before voting.
Make UPS Deliver Will Get You the Facts
Make UPS Deliver will get the facts out so that Teamsters at UPS can make an informed decision.
- Make UPS Deliver will publish a contract analysis on contract highlights and lowlights.
- The Make UPS Deliver network will also be holding a series of conference calls and rank-and-file meetings to bring members together to go over the agreement.
UPS is making record profits. Their offer will be the richest contract offer ever. We need to look beyond the dollar signs to make sure that the contract protects our pensions and benefits for the long term—and provides new contract protections that will improve life for Teamsters in every job classification.
UPS is hungry for an early deal. Our right to vote gives us the power to send the company and the union back to the table if they negotiate another substandard contract.
Make sure you are informed about the details of any new deal. And help spread the word to other Teamsters at UPS so they too can cast an informed vote.
Click here if you want to be contacted to participate in a conference call to go over the details of the new agreement.
Click here if you can help distribute copies of a Contract Highlights and Lowlights to UPS Teamsters.
Read the Wall Street Journal article "UPS, Teamsters Near Pension Deal."