UPS to leave New England fund, strikes new funding deal
By Barry B. Burr | August 27, 2012 3:32 pm
United Parcel Service Inc., Atlanta, expects to pay $1.2 billion in withdrawal liability to the $2.6 billion New England Teamsters & Trucking Industry Pension Fund, according to a UPS statement.
UPS and pension fund officials also agreed to create a new structure for future benefit accruals for the multiemployer pension fund in which all employers will be liable for only their own employees' pension benefits. Under the current multiemployer structure, contributions made by UPS “support pensions of people who never worked at UPS,” said Norman Black, UPS spokesman.
UPS' withdrawal, effective Sept. 16, is pending approval of local unions representing the 10,200 UPS employees who participate in the Burlington, Mass.-based pension fund.
Under the agreement, UPS plans to pay the withdrawal liability in annual $43 million installments over 50 years, Mr. Black said. In the current quarter, ending Sept. 30, UPS plans to take a charge of $896 million for the present value of its total withdrawal liability from the original pension plan structure.
Also, in the new structure, UPS' “liability is only what is in our contract” with its employees who belong to the New England Teamsters fund, Mr. Black said.
The UPS statement said the new “structure is designed to allow employers to assume responsibility only for their own employees' (future accrual of benefits) without regard to any previous fund liabilities.”
“UPS' goal when considering any change to participation in a multiemployer pension plan is to safeguard the pensions earned by our employees in a cost-effective manner,” John McDevitt, UPS senior vice president of human resources and labor relations, said in the statement. “This transfer will remove uncertainty associated with this plan for our people while being fair to the company and our investors.”
“Clearly, it's cost-effective,” Mr. Black said of the new structure.
UPS has a representative on the six-member board of trustees, who was recused from the project to develop the new structure, Mr. Black said in an e-mail.
Mr. Black had no estimate of the expected size of the new pool of assets.
The New England Teamsters pension fund, which has $6.2 billion in liabilities, has been in critical status, or the red zone, as defined by the Pensions Protection Act of 2006 as less than 65% funded, according to the fund's 2011 5500 form, filed with the Labor Department's Employee Benefit Security Administration.
“In addition, UPS and NETTI have agreed to a contribution rate for future accruals designed to ensure UPS employees do not see a reduction in their pension benefits, and the company will not be required to increase cash contributions for 10 years,” the statement said.
Charles Langone, pension fund manager, couldn't be reached for comment.