RICHMOND, Va. -- Officials at Overnite Transportation Co. are battling a labor union proposal that would move 1,800 union employees from the Overnite pension plan into a multiemployer plan.
This is the second corporation in as many months to resist an effort by union members to move employees from the corporate pension plan into a union plan.
Seattle-based Boeing Co. was in a situation similar to that of Overnite in August. The International Association of Machinists and Aerospace Workers wanted thousands of Boeing workers moved from the Boeing plan into the I.A.M. National Pension Fund, which would have meant annual contributions of $154 million for Boeing. Boeing hadn't made a contribution since 1997 on its overfunded $15 billion pension fund.
But the union accepted a contract Sept. 1 that did not include a move into the I.A.M. plan, according to Boeing spokesman Peter Conte. Instead, workers received a 25% increase in retirement benefits.
For Overnite, a move to the multiemployer plan "wouldn't benefit our employees," said Pat Hanley, chief financial officer of the trucking company.
Overnite is in negotiations with the International Brotherhood of Teamsters, Washington, about working conditions, wages and benefits.
The union wants Overnite to freeze current contributions for Teamsters and make future contributions to the $19 billion Teamsters Central States, Southeast & Southwest Areas Pension Fund in Rosemont, Ill.
The $500 million Overnite defined benefit plan is fully funded, Mr. Hanley said. It covers 13,000 employees, including the union members. The company also has a $150 million defined contribution plan.
Overnite contributed $10 million to the defined benefit plan last year.
In 1997, it made benefit changes that included lowering the optional retirement age to 55 from 65, Mr. Hanley said.
Overnite currently pays benefits based on $44 per week per employee for each year they have worked. The union wants to see that figure increased to between $69 and $85 a week. That means Overnite would have to contribute between $6.5 million to $8 million annually for the 1,800 union members.
"Our fund is invested and in a healthy condition. We had excellent returns of 19% to 20% for the last few years," Mr. Hanley said.
Officials at Central States declined to discuss the current condition of the union plan.
But it was a tough summer for two of Central States' employer members. NationsWay Transport Service declared bankruptcy in May, shutting down its Commerce City, Colo.-based operation and putting 3,500 employees out of work. NationsWay listed a $2 million debt to Central States in its Chapter 11 filings, according to published reports.
Additionally, Preston Trucking Co. of Preston, Md., closed at the end of July, laying off 6,000 workers; Preston also reportedly owes contributions to the Central States fund.
Employers that remain in the plan fear their contributions will be increased to make up for the losses, said industry experts. That concern was one of the reasons Atlanta-based United Parcel Service of America Inc. tried in 1997 to get Central States to create a separate fund for UPS employees. UPS was not successful.
Bull market gains
U.S. labor unions have complained in recent years that corporate pension funds don't share with employees the financial gains made during the bull market. Rather than pass along excess returns in the form of increased employee benefits, corporations have used the gains to avoid making pension contributions, according to labor officials.
"And it's true to the extent that there is a lot of money in these company plans, but that doesn't mean the employer will raise benefits," said Ian Lanoff, a partner at The Groom Law Group, a Washington law firm that specializes in employee benefits.
If the Overnite plan is moved to Central States, "the Central States plan will pay more" in benefits than the Overnite employees now receive, said Dave Cameron, spokesman for the Teamsters. He was unable to be specific about how the benefits would differ.