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Pension Funds

Peeps maker denied bid to stop new hire pension contributions

A worker performs quality control as marshmallow candy Peeps chicks move down a conveyor belt at a Just Born Quality Confections’ plant in Bethlehem, Pa.

A federal appeals court in Richmond, Va., on Thursday denied a bid by Peeps maker Just Born Quality Confections to be allowed to stop making pension contributions for newly hired workers because of the multiemployer plan's critical status.

The 4th U.S. Circuit Court of Appeals upheld a District Court ruling that the company owed the $4.3 billion Bakery & Confectionery Union and Industry International Pension Fund, Kensington, Md., for $255,264 in delinquent contributions, plus interest, damages and attorneys' fees.

According to court documents, the company stopped making the contributions in 2015 after a collective bargaining agreement with the union's Local 6 ended. After negotiations broke down, the company unilaterally implemented its terms, including its decision to stop contributing for new employees and instead contribute to a 401(k) plan for them, which led to the union's lawsuit.

While the contract was still in effect, the pension fund was certified to be in critical status, requiring plan trustees to adopt a rehabilitation plan with increased contributions, including 5% more each year from Just Born.

The company argued that it was no longer a bargaining party when the previous contract expired, but the lower court ruled that bargaining parties under an expired labor agreement are required to continue with payment schedules.

Just Born CEO Ross Born said in a statement that the company is disappointed in the ruling. "However, despite the ruling, there is, unfortunately, no change in the status of the union pension plan: 'critical and declining.' We have, for over 53 years, always paid our commitment to the union pension plan as per our negotiated contracts with the union. In the coming days, we will have further discussions on next steps."

Calls to the union and the pension fund were not returned at press time.