The focus on part-time jobs at United Parcel Service of America has obscured a second issue that may actually be a bigger obstacle to a settlement in the 11-day strike.
It is the $1.06 billion a year that UPS pays to 22 pension funds run by the Teamsters.
The money supports UPS retirees but also goes to truckers who work for other companies and even to Teamsters who don’t work in trucking jobs.
The company has proposed pulling out of these multiemployer plans and providinga $700 million withdrawal payment to cover some of its future obligations.
By doing so, UPS says it could double the average retirement benefit for workers, which is now between $750 and $2,500 a month, depending on the plan. Teamster leaders are adamantly opposed to the withdrawal, saying the company is trying to bring the millions of dollars earned by the pension funds under its exclusive control.
“What the company wants to do is get their hands on that pension investment return and put it in their pockets,” said Teamsters President Ron Carey. As unions wane, fewer workers have a say in how much companies contribute to retirement plans or how those plans are administered. Increasingly, workers shoulder those decisions themselves in 401(k) plans or Individual Retirement Accounts.
Teamster control of pension funds means the company has to bargain about those issues. But it also means the union gets as much benefit from the fund as employees do.
As the two sides met on Thursday, UPS Chairman James Kelly struck a more conciliatory note on pensions.
“We think the pension issue is very important for both our people and the future of our company, but as I said there is no one or two single issues that will determine whether we’re able to reach agreement,” he said.
In earlier negotiations, the company had clung to the pension issue as a key feature of its contract proposal.
“Today our workers subsidize the pensions of other companies,” wrote UPS vice president Arnold Wellman in an Aug. 11 letter to Congress. “We think UPS dollars should go to UPS workers.”In the plan he outlined, the company would:
— Pay full-time workers $100 a month per year of service, or $2,500 to a 25 year employee, up from $1,500 in many plans.
— Pay part-time workers a pension benefit of $50 a month per year of service.
— Raise the lowest benefit for a 30-year retiree from $750 a month to $3,000 a month.
Benefits now are determined by the trustees of the Teamster funds. Teamsters in South Florida are covered by the Central States Pension Fund, among the largest of 170 Teamster funds that manage about $60 billion.
UPS wants out because it has been more successful than most other trucking companies and is adding workers while other contributors to the fund are reducing their workforces. Retirees of trucking companies that went bankrupt after the industry was deregulated are still drawing benefits. Small companies that survived have many retirees and fewer active workers paying into the Teamsters fund.
If current trends continue, UPS would face a withdrawal payment of as much as $2 billion when the next contract is negotiated in 2002, the Wall Street Journal reported on Wednesday.
Some UPS workers in South Florida back the company plan because they say it would enrich their retirement. But Amadeo “Trinchi” Trinchitella, a retired Teamster who is also a prominent Democratic political activist, said he is opposed.
“It sounds very good that the pensions should go just to UPS workers, but that’s not the bottom line,” Trinchitella said. “They’re working collectively to help each other,” he said of the union membership. “That’s the purpose of putting all that money together when you’re going up against a $1 billion company.”
Many active workers say they don’t trust UPS, saying the company could cut benefits in future negotiations, even though most agree the new benefits are an improvement.
And union leaders contend UPS will skim off excess investment earnings for its own benefit, rather than letting them remain in the fund or paying special benefits as the trustees of the Teamster plans sometimes do.
But the Teamsters have their own troubled record when it comes to safeguarding pension money. In the 1960s and ’70s, the Central States Pension Fund was legendary for its corruption. Its assets were invested at the direction of organized crime in Las Vegas hotel projects. In the past 10 years, the Labor Department has conducted more than 150 inquiries into Teamster pension irregularities, recovering $13.2 million, according to a CNN report.
As for the company, UPS spokesman Steve Perry said companies are barred from taking money from an ongoing pension plan, but better-than-average investment results could allow UPS to contribute less.
Companies also may terminate so-called overfunded pension plans, where investments have done well enough that the plan has more assets than it needs to pay promised benefits.
Many companies in the past have terminated plans, but Congress recently has made it much more difficult, said Dallis L. Salisbury, president of the Employee Benefits Research Institute in Washington. “Essentially for an employer to do that, almost all of the money is taxed away by the government,” he said.
Salisbury said that the Teamsters have to keep UPS in the multiemployer plans because the young UPS workforce pays more in than UPS retirees take out.
He said the two biggest Teamster funds, the Western Conference and Central States funds, had 480,000 active participants supporting 347,000 retirees.
“Withdrawal of UPS, by our best guess, will represent the loss of 50 percent of the participants in the plans they pull out of,” Salisbury said. “That has very significant implications” for the ability to pay future liablities, he said.
