UPS officials are taking a hard line with the Teamsters partly because they believe most striking workers would jump at the chance to leave the union's multiemployer pension plans.
There is evidence they might be right. But union officials say other important issues are at stake and insist their members want to keep the existing pension funds intact.
In the 1980s, a group of New England UPS employees unsuccessfully attempted to leave the New England Teamsters and Trucking Industry Pension fund.
The workers believed pension contributions entitled them to a much higher benefit. The fund's trustees balked at a proposed plan by some employees to create, with UPS' help, a separate pension fund solely for the New England employees. As a result, the UPS workers sued the trustees, but lost their case, both in a lower court in Boston and, in November 1993, in a court of appeals.
That little-known case "is one of the reasons why we want the contract offer to be put up for a vote" by UPS workers, said Erica Webster, a UPS spokeswoman. "It's one of the things that proves that getting out of the (multiemployer funds) is good for the company (employees) and good for retirees as well." And, ". . . it tells us that if the contract (offer) were put up for a vote (by Teamster employees) it would be ratified."
Charles Rader, director of the office of benefits for the Teamsters in Washington, scoffs at the notion UPS Teamsters would support the company's proposal. In July, after seeing the offer, "95% of those (UPS Teamsters) who are covered under the UPS contract voted to give authority to the union's negotiating committee to call a strike," he said. "People have voted, and they are voting with their feet now."
Mr. Rader dubbed the New England UPS employees' issue "old news." In his view, it doesn't represent current thinking by UPS Teamsters.
But the New England case apparently is giving heart to management of United Parcel Service of America Inc. in its battle over a new contract with the International Brotherhood of Teamsters. A key issue in that showdown has been UPS' desire to quit the Teamster multiemployer pension funds and set up its own fund for Teamster union employees.
Atlanta-based UPS has been demanding a vote by its Teamsters workers on the company's proposed new contract; but the union leadership so far has rejected that idea.
Experts point out that, as standard union practice, workers do not vote on proposed contracts until after their leadership agrees to a proposal.
UPS had raised the idea of withdrawing from Teamsters' multiemployer funds as part of union contract talks in 1993.
This year, UPS management and Teamsters leaders appear to be at odds, at least publicly, about the importance of UPS' desire to quit the Teamsters' multiemployer funds it uses.
According to the Teamsters, UPS participates in 21 Teamster multiemployer funds for its Teamster workers.
The company has called the pension issue the key stumbling block in contract resolution. But Teamsters officials stress that contract disputes cover a range of issues, including more full-time jobs, job security and better working conditions, as well as pensions.
However, pension issues clearly are a critical issue for both sides. UPS is the largest company contributor to most of the Teamster multiemployer funds in which it participates. And it is the biggest single corporate contributor to the Teamsters Central States, Southeast and Southwest Areas Pension Plan, accounting for 18% for total annual contributions, according to Mr. Rader (Pensions & Investments, Aug. 4).
From UPS' perspective, "they think they can provide the same or better benefits at the same or lower cost than what they contribute to the Teamsters' plans. And the reason they think so is that they have on average, young workers, who (often) don't stay long and get vested in the plan. But the money contributed for them stays in that plan," said attorney Henry Rose, a specialist in employee benefits law. "That money that stays in the plan pays the benefits of somebody else. And if that arrangement happens enough, (a company's) overall contributions become much lower than they otherwise would be. That's apparently what's happening with UPS."
UPS officials have said that, by remaining with the multiemployer plans, it subsidizes benefits of retirees from other companies. Thus, the existing plans aren't "producing sufficient retirement benefits for its workers," the company has said in a statement.
UPS spokeswoman Susan Rosenberg said the company's proposed new pension plan would provide an average 50% increase in monthly pension benefits.
As Michael Plourde, investments manager of UPS' $3.2 billion retirement plan for non-union employees, acknowledged it will become increasingly expensive for the company to withdraw from the multiemployer plans. "We can afford to (withdraw) today. But in five years, perhaps we might not be able to do it," he said. The Teamsters' Mr. Rader has put UPS' withdrawal penalty between $880 million and $938 million.
"In some respects we look at this as the last bite of the apple," said Mr. Plourde.
Mr. Raderm argues that the Teamsters union provides the better benefits. "In our plans, better-than-expected investment returns accrue to the plans, not the company. If the company gets higher-than-expected investment returns they will reduce contributions," he said.
He said the union has been planning to increase pension benefits for UPS Teamsters in all of the plans used by them. And just last week, the union announced specific benefit improvements it plans for UPS members of the Teamsters' Central States pension fund. As Mr. Rader described it, the proposed benefits would match those offered by the company - except in one category where the Teamsters'plan would be more favorable.