UPS Battles for Multl-Employer Funding Breaks

March 20, 2006 ( - As US House and Senate negotiators continue trying to hammer out a compromise pension reform measure, United Parcel Service (UPS) has it sights set on a particular provision affecting multi-employer pension programs.

The world’s largest package-delivery service wants Congress to make it possible for employers to cut pension benefits already promised to some workers in a multi-employer plan, according to a Bloomberg news report. UPS says the plans can no longer afford to pay full benefits because contributing companies that used to pay into the pension pool have gone out of business.

“The way the system is structured now, it’s the last man standing,” US Representative Dave Camp, (R-Michigan), a member of the pension conference committee, told Bloomberg (See  Enzi Gets Nod as Chair of Congressional Pension Reform Conference Committee ). “You end up having greater responsibilities thrust upon employers who are remaining.” UPS is “probably going to be the last man standing.”

Multi-employer plans cover 9.8 million US workers, or about 22% of those in defined benefit plans. They were $177 billion in the red in 2003, the last year for which figures are available, according to the Pension Benefit Guaranty Corporation (PBGC), the agency that insures private-sector defined benefit pensions.

The multi-employer provisions are in the House version passed in December that would require companies to pay more into multi-employer funds. It included a UPS-backed provision that would allow the plans’ trustees to cut benefits by an unspecified amount for workers retiring early if the plans are less than 60% funded. The Senate has not approved such a provision.

Overhauling pensions is a big deal these days at UPS, which has 120,000 truck drivers in 21 different multi-employer pension plans, which allow workers in highly mobile industries, such as trucking and construction, to bounce from job to job and still receive a pension when they retire. The largest one, the Central States plan, is less than 60% funded.

Contributors to UPS’s multi-employer plans are dwindling because of bankruptcies, so those exit fees are not being paid.

Lining up against UPS and its supporters are Senators Kent Conrad, (D-North Dakota) and Tom Harkin (D-Iowa), as well as the Teamsters union, which manages the Central States plan. Charles Grassley, an Iowa Republican who is chairman of the Finance Committee, refused to include the provision in the Senate legislation.