UPS to restructure pension liabilities for New England-based Teamsters members

UPS said late last week it has reached an agreement with the New England Teamsters and Trucking Industry Pension Fund (NETTI) to restructure pension liabilities for more than 10,000 UPS employees.

UPS officials said that the agreement enables NETTI’s trustees to establish a second pension plan “pool” to make it more attractive for new employers to join the Fund. And they added that this structure is designed to allow employers to assume responsibility only for their own employees without regard to any previous Fund liabilities.  For UPS, this structure allows the company to freeze its liability in the original pool, establish its payment obligations and move UPS employees into the new pool.

As a result of this initiative, UPS said it will record a one-time charge of $896 million in the third quarter, which represents its present value of is $2.1 billion withdrawal liability from the original pool that the company will pay over the next 50 years. This is subject to approval by local unions, with the withdrawal effective on September 16. UPS said it has also reached an agreement with NETTI on a contribution rate for future accruals so that UPS employees will not have a pension benefit reduction while UPS will not be able to raise cash contributions over a ten-year period.

“UPS’s goal when considering any change to participation in a multi-employer pension plan is to safeguard the pensions earned by our employees in a cost-effective manner,” said John McDevitt, UPS’s senior vice president of human resources and labor relations, in a statement.  “This transfer will remove uncertainty associated with this plan for our people while being fair to the company and our investors.”

LM recently reported that the current contract for about 250,000 UPS Teamsters does not expire until 12:01 a.m. on Aug. 1, 2013. But formal talks are set to open on Sept. 27 in Washington, D.C. The exact site has yet to be determined. The plan is to address non-economic issues this year, setting the stage to negotiate economic issues in 2013.

Further complicating this year’s talks at UPS’ package division, its largest, will be the expiration of the contract covering an additional 15,000 Teamsters at UPS Freight, its long-haul heavy freight division. That contract will be negotiated by separate management and labor teams even though both contracts expire at the same time.

A UPS spokesman refused to discuss the company’s goals or disclose any negotiation details in the press. The spokesman only said that its overarching philosophy was to negotiate a deal that rewards its workers for what they do while allowing the company to remain competitive in a very competitive industry. He added that UPS wants a contract that is good for its employees, customers, and shareholders.

Currently, fully experienced UPS full-time workers earn about $31 an hour ($75,000 annually) before overtime and fringes. Counting benefits, each of UPS’ 125,000 or so full-time employees costs the company around $100,000 in wages, health care, and pension.