Pension Legislation Could Help United Parcel Service

Senator Bob Casey (D-PA) plans to introduce legislation that would change some of the rules controlling multiemployer pension plans, or union-operated retirement pools to which United Parcel Service as well as companies in trucking, retail grocery and a number of other industries participate.

The press conference announcing the bill was attended by representatives of the Teamsters and two large less-than-truckload companies, ABF Freight Systems, and YRC Transportation.  ABF Freight Systems, and YRC Transportation are the last remaining large nationwide less-than-truckload trucking firms that existed when the Motor Carrier Act was passed in the 1980's. 

The legislation would make the following changes in existing law:

• Mergers and Alliances – The language in the bill would enable multi-employer funds to combine resources for purposes of reducing administrative costs. 
• Partition (ERISA Section 4233) – If a plan satisfies certain requirements, the plan will transfer to a separate account all benefit liabilities attributed to orphans (participants of employers who withdrew from the plan without paying withdrawal liability) and assets equal to a maximum of 5-years of projected benefit payments.  The PBGC will handle the initial application, drafting of partition agreement and monitor financial assistance to the plans.  PBGC does not provide notices, calculate benefits or in any other form administer the plan.  The orphans benefit will be fully guaranteed as if the orphan was still receiving benefits from the multi-employer plan.
• Order the Department of Labor and Department of Treasury to prepare a report on whether the qualified partition program has strengthened the financial condition of the original plans and improved the ability of the contributing employers to these plans to remain in business.

Teamster multi-employer pensions are in trouble as competition from non-union firms and rail intermodal services as well as changing market conditions resulted in the bankruptcy and/or liquidation of most of the firms that contributed to the pensions over the past 30 years.   Today, these pensions are paying benefits to more retirees from firms that are no longer in business than they pay to employees of firms that are still in business.  The first two of these three provisions would relieve companies still contributing to these pension plans from the burden of paying for all of the benefits of employees of defunct firms. 


United Parcel Service is one of the largest if not the largest firm still making contributions for active employees to nearly all of the underfunded Teamster plans in which it participates.    United Parcel Service successfully extricated itself from the largest underfunded plan, the Central States Pension plan and set up a single-employer pension plan for the Teamsters that worked in the territory covered by the plan.  To do so, United Parcel Service paid $6.1 billion to cover the withdrawal liability required to exit the underfunded plan.  United Parcel Service would face similar withdrawal liabilities in order to withdraw from the more than a dozen other plans that it contributes to for it employees. 

Consolidating the smallest of these plans would reduce the administrative costs UPS pays to administer its employee retirement benefits.   The segregation and eventual Pension Benefit Guarantee Corporation handover of the liabilities for pensions of employees of defunct companies would reduce the liability that United Parcel Service now holds (but is not on its books) for covering future payments for employees of these companies.  

The companies that attended the press conference and support this proposed legislation differ from United Parcel Service in that they do not have the financial where-with-all to pay the withdrawal liabilities from multiemployer plans.  While United Parcel Service would benefit from the legislation, its absence from the press conference suggests that it has a somewhat different legislative strategy in regards to multiemployer pensions than other less financially strong participants.   The lack of consensus among multi-employer stakeholders will slow if not derail any change in current law relating to multi-emeployer pensions

Teamsters Bowing to Reality in the LTL market

In a bulletin to its members on Friday, the Teamsters Union announced that it is starting the process of reopening the contract with ABF Freight System.  ABF is the only nationwide carrier still operating under the National Master Freight Agreement, an agreement that for well over 40 years was negotiated between the Teamsters and less-than-truckload carriers as a group.  In the bulletin, the union stated:

While we have heard ABF’s requests to fully understand its position, we have not entered or begun discussions. However, based on our current understanding of the industry, the company’s financial position, and from concerns raised by many of you, we now believe it is in our best long-term interest to fully engage ABF through formal discussions to determine if and what type of contractual relief may be necessary.


This language reflects the significant challenge that the Teamsters Union has in preparing its members for the changes to come.   The Teamsters have had some experience in this regard, having had to prepare its members for changes in the United Parcel Service contract in regard to the pensions offered UPS employees working in most states east of the great plains not including states on the East Coast from Virginia to Maine, and major changes in wages and benefits needed to keep Yellow Roadway Corporation in business.