ATLANTA - UPS' desire to quit the multiemployer pension plans used by its Teamsters union workers and create a company-sponsored pension plan was key to the breakdown in contract talks last week.
Officials of United Parcel Service of America, Atlanta, said withdrawing from the multiemployer plans was the major stumbling block to reaching agreement over a new contract for UPS' roughly 190,000 workers that belong to the International Brotherhood of Teamsters.
At presstime, a strike had been postponed while contract negotiations continued. The old contract expired at midnight July 31.
UPS spokeswoman Susan Rosenberg told Pensions & Investments: "Our chief negotiator said this (pension) issue is the one that they (the union) keep stonewalling on."
According to a union representative, a range of issues is on the table, including salaries, job security, the creation of more full-time jobs and better working conditions, as well as pensions.
UPS wants to create a company-controlled defined benefit plan jointly trusteed by the company and the union.
Charles Rader, director of the office of benefits for the Teamsters in Washington, said UPS accounts for about 15% of the 750,000 participants in Teamster multiemployer plans, whose assets total $60 billion.
The two sides can't even agree on how many pension plans are involved. UPS said it wants to withdraw from 31 multiemployer plans to which it now contributes; the union said the number is 22.
UPS' Ms. Rosenberg said the company would pay any outstanding liabilities owed the multiemployer pension funds. Although she did not say how much that would cost the company, the Teamsters' Mr. Rader said UPS would owe between $880 million and $938 million in withdrawal penalties.
In a statement, UPS noted that by remaining with the multiemployer plans, the company subsidizes benefits of retirees from other companies. Because of bankruptcies and withdrawals, fewer companies are contributing to these Teamster multiemployer plans.
The UPS statement also said the existing plans "are not producing sufficient retirement benefits" for UPS workers.
Ms. Rosenberg said the proposed new pension plan would provide an average 50% increase in monthly benefits.
But Mr. Rader of the Teamsters insists restraining benefits over the long run is a key reason UPS wants out.
"UPS has a horrible record running benefits for their (workers)," he said. For example, "they had a plan for part-time UPS Teamsters' workers that they ran alone. And in 10 years, they never improved the benefits of it," he said.
In contrast, "Teamsters have the best benefits of any workers and wouldn't want to trade them for pie-in-the-sky promises."
UPS spokeswoman Erica Webster denied UPS was trying to hold down benefits by creating a new Teamsters pension plan.
According to Mr. Rader, UPS is the largest company contributor to most of the multiemployer plans in which it participates. And it is the biggest single corporate contributor to the Teamsters' Central States pension fund, accounting for 18% of total annual contributions.
UPS' withdrawal "would undermine all the ones (other companies) that are in it," said attorney William Hanrahan, a principal in the Washington law firm of Groom & Nordberg. Without UPS, the multiemployer plans "would have less of a contribution base," he said.
"The security one finds in multiemployer funds come from the fact that a large group of employers spreads the risk around. If you see an exodus of even one large employer, the ones that remain might think of doing the same thing," Mr. Hanrahan said.
He also noted if UPS creates its own plan, the company might be able to get more control of its benefits packages. "This could mean lower costs of benefits. It also could mean it offers more attractive benefits packages to retain employees, and might even allow them to do both - cut costs and offer better packages - by doing it themselves."