Think it thru....Pension Takeover

[area43]

Re: From the Central States Trustees . . .

2007 -SPECIAL BULLETIN -2007-5
DATE: OCTOBER 4, 2007

TO: ALL PARTICIPATING LOCAL UNIONS, OFFICERS,
BUSINESS AGENTS AND OFFICE CLERICAL STAFF

RE: QUESTIONS AND RUMORS

There have been wide spread questions and rumors about the effect of a UPS
withdrawal from Central States Pension Fund as well as the impact of the new pension
law which becomes effective January 1, 2008. Specifically, one rumor speculates that
participants who fail to retire by January 1, 2008 will have their pension benefit
automatically reduced or subject to offset by any Social Security benefit they receive.
An additional rumor has the Fund being taken over by the PBGC after January 1, 2008.

I can assure you that these rumors are completely false and there are no plans to
reduce benefits for any active or retired participant. You can be further assured
that the Pension Fund is in no danger of being taken over by the PBGC or any
other governmental agency.

As you know, the Trustees of the Pension Fund adopted a plan to improve
funding in 2003, well ahead of the Pension Protection Act ("PPA") that becomes
effective next year. The Fund's plan included steps to secure an amortization extension
from the IRS, reductions in future pension liabilities by plan amendments effective
January 1, 2004 and increases in future pension contributions from our employers. This
plan does not contemplate any further benefit modifications and it is working. In fact,
the Pension Fund is ahead of the funding requirements established by the IRS in
connection with the amortization extension. And, if the recently announced agreement
with UPS is ratified by UPS employees, the near-term funding status of the Pension
Fund will further improve due to the receipt of $6.1 billion in a lump sum withdrawal
liability payment and the transfer of certain early retirement liabilities from the Central
States Plan to the UPS Plan. Our actuaries' estimate that after the transfer of liabilities
and the UPS payment, the Pension Fund's funding ratio as of January 1, 2008 should
exceed 70% and may reach 75% if we meet our actuarial assumptions.

The new pension legislation does not require any automatic reduction in benefits.
Although the new law permits limited reductions in certain circumstances, they are
certainly not mandated. What is required is that the Trustees must establish a plan to
improve funding and provide two alternatives to the bargaining parties to achieve that
end. The first alternative must resolve underfunding through increased contributions
without any further benefit modifications. This is the plan the Trustees have
implemented by requiring contribution rate increases of 7% and 8% per annum for 2006
and 2007, respectively. This plan has been incorporated into the collective bargaining
agreements by the vast majority of employers and local unions whose agreements have
been renewed since its adoption. This plan avoids the need for any further cuts in
current benefits for participants under those collective bargaining agreements. The
second alternative must resolve the underfunding by a combination of benefit
modifications and contribution increases. Which alternative applies depends upon the
outcome of collective bargaining. To date the vast majority of collective bargaining
agreement renewals have included the increased contribution rates. We fully expect
that the vast majority of local unions and employers will continue to support the Fund's
funding improvement plan without any reduction of benefits. As such, we also fully
expect that the net pension accrual for the vast majority of our active participants will
also continue to increase as contribution rates increase in the future.

In short, the rumors are false. The new pension legislation does not require any
automatic reduction in benefits. There are no plans to reduce benefits for any active or
retired participant and the Pension Fund will not be taken over by any governmental
agency.

Later this year, the Fund will hold its annual update meeting for Local Unions to
keep you informed on the issues of the PPA, the tentative UPS' withdrawal from the
Pension Fund, and the Fund's financial status. The date and time for this meeting will
be announced at a later date.

Sincerely,

BOARD OF TRUSTEES, CENTRAL STATES,
SOUTHEAST AND SOUTHWEST AREAS
PENSION FUND, BY:

Thomas C. Nyhan
Executive Director

[ Original 2-page 968kb PDF file available at
http://www.centralstates.org ]

Hi Jonnie, where have you been? Still pushin the ol Mep. LMAO, Incredible. If it was such a great way of doing pensions why did the Teamsters give it up. The buy out that is of appox. 35,000 to 40,000 UPS active workers. I am truely surprised that a man of your intelligence would believe Thomas Nyhan. Jon, listen. Get your crystal ball out. I'll even put money on it. CS will be in the PBGC hands within 5 years or less. UPSers the MEP works on lots and lots and lots of active working members to keep it afloat via their empoyers contributions. The 6.1 billion is just a band aid. Again, 200,000 retires now are on the CS payroll. Pre-buy out there was appox. a 150,000 active workers. Now with Moses(UPS) leading its people out of Egypt's(CS) captivity there will now be only about a 110,000 active workers contributing. Come on Jon, 75% funded. How long do you really think that is going to hold up? CS titanic. Davey Jones locker. Jon is the above post just a sales pitch to try and get new members? Ha How are they going to attract new members? It appears the Teamsters when it comes to the MEP has just shot themselves in the face with the buy out. Jon, that info you posted was nothin but a bunch of Hog wash.

 

[JonFrum]

Phoney January 1st Deadline. No Rush To Judgement.

The Facts About the Pension Protection Act
January 1 Is Not a Deadline for Contract Ratification

Rumors are flying that the UPS contract must be ratified by January 1 because of pension legislation that takes effect on that date. MakeUPSDeliver consulted with actuaries, attorneys and fund managers to cut through the rumors and provide members with the facts. Here is a summary of the real deal on the Pension Protection Act and what it means for our contract and pensions.

January 1: A Kickoff, Not a Deadline

Some provisions of the Pension Protection Act go into effect on January 1. This date is the kickoff of a long-term timeline for strengthening funds over 10 to 15 years. It is not a deadline by which the UPS contract needs to be ratified for UPS Teamsters to avoid pension cuts or win pension improvements.

The Pension Protection Act does include a series of deadlines that must be met by Teamster pension funds. On January 1, 2008, the funding portions of the Pension Protection Act go into effect. As a result, Teamster pension funds will have to certify their funding levels (Green Zone, Yellow Zone or Red Zone) and inform participants and the government of their status. This process does not occur immediately on January 1, but can take up to 90 days.

On April 1, 2008, fund actuaries have to certify the status of the plan. If a plan is under-funded, then it must notify participants, the union, the company, and the government by May 1, 2008—120 days after January 1.

Yellow Zone and Red Zone

If a pension plan is under-funded, it will be certified by the fund actuary as in the Yellow Zone or the Red Zone. The Yellow Zone means the fund is less than 80 percent funded. The Red Zone means that the fund is seriously under-funded and also has a short-term credit balance deficiency (a technical calculation that indicates a more short-term problem than the funding level). Being under 65 percent funded will not automatically place a pension plan in the Red Zone. The Central States Plan will not be in the Red Zone. In fact, few Teamster plans with UPSers will be in the Red Zone, if any.

Funds Have Until December 31, 2008 to Set Plans to Improve Funding

If a plan is in the Yellow Zone or Red Zone, the plan’s actuary will then come up with at least two options to get the funding level up toward 80 percent over the next ten or 15 years. These options include increasing employer contributions, and/or decreasing future pension accruals. In no case will your accrued benefits be cut. What you have already earned is safe.

For any plan under 80 percent funded, the trustees will adopt a Funding Improvement Plan, based on the options prepared by their actuaries, to present to the union and the company. If the trustees deadlock (company vs. union trustees), the matter goes to expedited arbitration.

By December 1, 2008 (over a year from now) a pension plan must announce their improvement plan, unless there is an impasse. That plan must go into effect by December 2009, two years from now.

How Will a New UPS Contract Affect This Process?

Under the law, Teamster pension funds must adjust their funding plans based on any new pension money that is negotiated in the UPS contract—whenever the contract is settled. A new contract does not have to be ratified by January 1. When the UPS contract is settled, fund actuaries and trustees will adjust their Funding Improvement Plans based on the new money projected in the contract.

If a notice went out to members on April 1 that a plan is in the Yellow Zone and the money negotiated by the UPS contract puts the fund in the Green Zone, then a new notice would go out and the fund would be freed up to make pension improvements.

The Bottom Line

The goal of the Pension Protection Act is to get multi-employer plans to move their funding levels up to 80 percent over the next ten to fifteen years. It is a long-term process. No plan needs to be adopted until December 1, 2008, over a year from now, and none needs to be put into effect until a year after that. Any contract improvements that are won—at any time—will be taken into account. The UPS contract does not need to be settled by January 1 for us to win pension improvements. The key to improving our pensions is to make sure we make UPS put its very best offer on the table—whenever that is.

[ Slightly fuller article available at
http://www.makeupsdeliver.org/news.php?extend.93 ]

 

[Bill]

Better think thru the Pension Takeover by Uncle Parcel !!!!......I suggest that you ask management how happy they are with their poor (and getting poorer) pension plan ....

An intelligent person would wait to hear all the details before making a decision. I have heard many rumors so far concerning the pension takeover by UPS, but I need to see the final terms of the agreement in writing before I can decide if it is a decent proposal. I suggest all of you people out there do the same.

 

[Bill]

No they can not. If you vote no you stop the whole thing. It is your choice. It is a scary choice. Stay in the Central States Titanic of bad investments and health care issues dragging it down or jump into the Ship of Fools with the untrustworthy liars at UPS. Remember how IBM dumped their pension!!!!!! I do not trust UPS but I do not like Central States either. This is why I wanted matching 401k funds and stock bonuses just like the managers get. At least we can take those with us and get at those when we want minus the taxes and penalties!!!!!!!!!

I like the 401K matching funds, but that is not a choice, so we are stuck choosing between the lesser of two evils.

 

[beentheredonethat]

I like the 401K matching funds, but that is not a choice, so we are stuck choosing between the lesser of two evils.

Up in New England the current pension contribution is $5.26 per hour with a 40 hr max per week and this is for hrs paid, so for a FT vacation pay counts. Assuming a normal year of 40/week for 52 weeks you would get $10,940 contributed. I know back in 93 or so the pension was closer to $2.76. Can you imagine getting that in your 401K instead? Up here also the teamsters get the money for PT people's pension, including the thousands of PT who never vest and dont' get anything for the hours they work. Take a hub that has 1000 total employees working per day between Day, Twi, Mid and Preload with a 4 hr day (up here we contribute for 4 hrs minimum) that's 4000 hrs day or 20000 per week. at 50 weeks a year (to make the math easy) thats 1 million hrs a year at the rate of $5.26 or 5.26 million a year of pension. How many of those PT'ers make it to vesting? Let's assume 1/2 (which is a very high assumption). That's still 2.6 million a year the teamsters get and they don't have to pay out on that money. Where does it go??????

 

[18wheelbrownie]

Up in New England the current pension contribution is $5.26 per hour with a 40 hr max per week and this is for hrs paid, so for a FT vacation pay counts. Assuming a normal year of 40/week for 52 weeks you would get $10,940 contributed. I know back in 93 or so the pension was closer to $2.76. Can you imagine getting that in your 401K instead? Up here also the teamsters get the money for PT people's pension, including the thousands of PT who never vest and dont' get anything for the hours they work. Take a hub that has 1000 total employees working per day between Day, Twi, Mid and Preload with a 4 hr day (up here we contribute for 4 hrs minimum) that's 4000 hrs day or 20000 per week. at 50 weeks a year (to make the math easy) thats 1 million hrs a year at the rate of $5.26 or 5.26 million a year of pension. How many of those PT'ers make it to vesting? Let's assume 1/2 (which is a very high assumption). That's still 2.6 million a year the teamsters get and they don't have to pay out on that money. Where does it go??????

thats what everyone in central states has been asking since 2003???

 

[JonFrum]

Up in New England . . .(up here we contribute for 4 hrs minimum) . . .

BeenThereDoneThat,
Can you provide a reference? I'm in the New England Fund myself, but I've never heard there is a four hour minimum daily pension contribution.

 

[Bill]

I have only got one check from the Teamsters, and that was for 55 bucks ten years ago and that didn't quite cut it. I realize that this new Teamster/UPS Pension is not going to be the same UPS Pension that non-union employees have. What we have to think about though, do I want an UPS employee only pension put together by a corporation that knows how to make money or do I want what we have now, a multi-employer plan that is only going to get worse if we stay in it. The Teamsters have steadily been losing members for a long time and have done a poor job of organizing. Along with corrupt IBT leaders, mob influence, and poor investments, I don't have a lot of faith in their way of doing things. I often wonder who do we trust the least, UPS or the IBT? We will just have to wait a little longer and see what the new Pension Plan offers. I hope that UPS will try to let a lot of us retire earlier, a bunch of sixty plus year old Package Drivers out there is not in the company's best interest. I have 8.25 years in the PT UPS Pension and will have 24 years vested in CS next August and will be fifty then. Thats twelve years away from being able to draw a full CS benefit.

If you bothered to read the contract proposals, there are major problems that we need to understand. It states that we will receive two checks (one from UPS and another from CS) totalling $3000 per month for a 30 and out pension. UPS will offset the difference from what CS pays out, but IF THE CS PORTION IS REDUCED AS PERMITTED OR REQUIRED BY LAW, THEN THERE WILL BE NO OFFSET. In other words, if CS becomes underfunded again (it will, but now it will be a few years later), then we are looking at a reduction in our pension and UPS is off the hook. We still don't have any security with the pension. The only winner here is UPS, as they will be saving billions each year and we still don't have a secure pension. Even though the Teamsters negotiated a higher contribution rate toward our pensions, they will, in actuality be putting in much less money than they do now. Logically, if UPS contributes more, why aren't we receiving more. It just doesn't add up.

 

[JonFrum]

. . .Even though the Teamsters negotiated a higher contribution rate toward our pensions, they will, in actuality be putting in much less money than they do now. Logically, if UPS contributes more, why aren't we receiving more. It just doesn't add up.

Engineer79,
I don't follow what you're trying to say, but if you're talking about the new single employer plan for full time Central Staters, let me say this: The Teamsters didn't negotiate a higher pension contribution rate, or any specific contribution rate for that matter. "The Employer will be responsible for funding the UPS/IBT Plan as required by applicable law." Meaning, UPS only has to fund the vested benefits of participants as they accumulate. All those revolving door UPSers that never get vested cost UPS zero in pension contributions. Those that do get vested will often have to wait years to collect, or will have to accept a reduced pension amount if they insist on collecting it early. This delays and reduces costs for UPS. It works like the UPS Pension Plan for part-time Central Staters, which is a very inexpensive plan to fund. Admitedly, a full-timer plan will be more expensive, but still a lot cheaper that having to make contributions on behalf of everyone for each hour worked up to 2080 hours per year. The savings go to UPS, not the fund participants. If you want higher benefits, you will have to re-negotiate them this time, and at every contract negotiation in the future.

 

[Cezanne]

I believe that the new lanuage about the Central States offset means that those funds vested from the time you were in that fund are paid at the normal retirement age of 65. This new joint pension trust will bear the burden for any early retirement and will have to wait till the retiree reaches 65 to recover any of the vested funds from the Central States trust. This would answer one of my questions to how UPS's 6 billion dollar withdraw liability would not be easily consumed by the mass exodus of UPS early retirees. The trustees in fact will have a window of 5 to 15 years of untouched investment money to push the fund to the federal mandated levels.