What happened in the 2008 contract??

[JonFrum]

Wouldnt the central states have gone completely bankrupt in the meltdown of the last 2 years if it werent for UPS pumping billions into the fund?

No.

UPS owed Central States its Withdrawal Liability Payment all along, the bill just didn't come due until UPS actually withdrew. It was the actual withdrawal of UPS that hurt, as UPS was by far the largest contributor to the fund.

Originally, the earliest UPS could have withdrawn was after the then-existing Contract expired on July 31, 2008. But UPS wanted to withdraw prior to Dec. 31, 2007 so they could pay less Withdrawal Liability to Central States. Hoffa moved heaven and earth to make UPS happy by canceling the final seven-plus months of the Contract, and thus allowed UPS to withdraw early. UPS thus had to pay (only) $6.1 billion, which they did on Dec 26, 2007.

Incidently, the $6.1 billion didn't buy any UPSers any new pension credits or restore any previously cut early retirement options. Imagine the benefit enhancements UPS could have bought their employees in the Central States Fund if they had made the $6.1 billion contribution as part of their regular monthly contributions on behalf of each member based on hours worked, instead of as a Withdrawal Payment.

 

[brownIEman]

No.

UPS owed Central States its Withdrawal Liability Payment all along, the bill just didn't come due until UPS actually withdrew. It was the actual withdrawal of UPS that hurt, as UPS was by far the largest contributor to the fund.

Originally, the earliest UPS could have withdrawn was after the then-existing Contract expired on July 31, 2008. But UPS wanted to withdraw prior to Dec. 31, 2007 so they could pay less Withdrawal Liability to Central States. Hoffa moved heaven and earth to make UPS happy by canceling the final seven-plus months of the Contract, and thus allowed UPS to withdraw early. UPS thus had to pay (only) $6.1 billion, which they did on Dec 26, 2007.

Incidently, the $6.1 billion didn't buy any UPSers any new pension credits or restore any previously cut early retirement options. Imagine the benefit enhancements UPS could have bought their employees in the Central States Fund if they had made the $6.1 billion contribution as part of their regular monthly contributions on behalf of each member based on hours worked, instead of as a Withdrawal Payment.

your explanation does not answer the question of whether or not the fund would have gone bankrupt without UPS' withdrawal payment.

Also, your last paragraph is rather curious. What good would it have done UPS to pay in 6.1 billion as added contributions which would have been diluted among UPSers and members of the pension from other employers, and yet not gotten UPS out of the multi-employer plan in which UPS was one of the few remaining viable employers having an ever increasing burden placed upon it to pay for the retirements of people who never contributed a minute of work for UPS?

 

[JonFrum]

your explanation does not answer the question of whether or not the fund would have gone bankrupt without UPS' withdrawal payment.

I thought my "No" answered the question, but to elaborate, multi-employer pension funds like Central States don't go bankrupt. If the day ever comes when they can't pay all the monthly benefits to their retirees (called insolvency,) then they get a loan, (not a grant, a loan, that must be repaid) from the Pension Benefits Guarantee Corporation (PBGC) to help them through their rough time. The fund then continues to cut benefits and raises contribution levels until the financial ballance sheet improves.

Single-employer funds, by contrast, are dependent on just one employer for their financial health, so if that sole employer goes bankrupt, the fund is screwed. The fund must be taken over by the PBGC and benefits are paid on a reduced basis. Single-employer funds fail about one hundred times more often than multi-employer funds. The few multi-employer funds that have failed were concentrated in a single industry where the industry failed, like Steel. Central States, despite it many woes, is diversified among many employers in many different industries.

Central States had $19.3 billion in assets as of Sept. 30, 2009 from which to pay monthly retirement checks. Even if you subtract $6.1 billion from that, they are still not close to insolvent.

Also, your last paragraph is rather curious. What good would it have done UPS to pay in 6.1 billion as added contributions which would have been diluted among UPSers and members of the pension from other employers, and yet not gotten UPS out of the multi-employer plan in which UPS was one of the few remaining viable employers having an ever increasing burden placed upon it to pay for the retirements of people who never contributed a minute of work for UPS?

It's a multi-employer plan. That's its built-in insurance. Employees from other companies have contributions made by those other companies on their behalf all their working life. Employees from UPS have contributions made from UPS on their behalf all their working life. Admittedly there is some subsidizing going on, but that's the price you pay for being among the survivors.

By the way, most UPSers are male, and married when they retire. Men usually die five or six years earlier than women do. If male UPSers elect the surviving spouse option so their pension goes to their widow when they die, do you object that the spouses "never contributed a minute of work for UPS?"

Central States is a huge pension plan. It surely has more than a "few remaining viable employers." Anybody know how many hundreds?

 

[grgrcr88]

While all this may be true, the fact is the benefits were being drastically reduced in the central states plan and were going to have to be cut even deeper if not for the 6.1 billion dollar cash infusion by UPS. Since that time the fund has recovered somewhat as the market recovered. But without the buyout the fund was very much headed for insolvency and being taken over by the PBGC. If that happened the chances of ever getting benefite restored to the prior level would be 0. At least their is a chance now!!

 

[JonFrum]

While all this may be true, the fact is the benefits were being drastically reduced in the central states plan and were going to have to be cut even deeper if not for the 6.1 billion dollar cash infusion by UPS. Since that time the fund has recovered somewhat as the market recovered. But without the buyout the fund was very much headed for insolvency and being taken over by the PBGC. If that happened the chances of ever getting benefite restored to the prior level would be 0. At least their is a chance now!!

Again, there is $19.3 billiion in assets standing between Central States and Insolvency. (Or $13.2 billion if you don't count the $6.1 billion.)

Again, the PBGC does not take over multi-employer pension funds (unless they actually collapse, and that almost never happens.) Instead, the PBGC lends the temporarily Insolvent fund enough money to make its monthly payments to retirees until the crisis has passed.

There is no chance Central States will restore cut benefits for UPSers as UPSers left the fund on Dec. 26, 2007.

There is no debate about UPS being willing and able to part with $6.1 billion, and additional billions as well. They did it!!! They paid $6.1 billion to Central States in a way that not one penny of restored or additional benefits would be accrued by UPSers. They paid additional billions to their newly created pension fund to provide for early retirement benefits and modest future benefit accruals. Had UPS paid this money to Central States in the form of regular monthly contributions, they could have bought UPSers a boatload of restored and enhanced benefits within Central States. They chose not to.

 

[grgrcr88]

Once the PBGC becomes involved with a pension fund, it is only a matter of time before your benefits are next to nothing. The solution was better than not doing anything.

 

[PobreCarlos]

Jon;

Last I heard, solvency was dependent upon the ratio of assets to liabilities...and simply having "$19.3 billiion in assets" idoesn't mean that there's ANYTHING "standing between Central States and Insolvency" if the funds liabilities exceed that amount.

As for the PBGC "loaning" the funds temporarily, it occurs to me that first the PBGC would, itself, have to have the funds available to make such a loan....something which is far from a given.

As for the crisis passing....well, regardless of the number of employers left in the fund, I don't believe there are any large enough, either singularly or in combination, to make up the funds deficit (bearing in mind, as well, that many of the smaller firms aren't required to bear the "sharing" burden). And, as far as one can tell, that situation is probably only going to get worse; i.e. - seen a lot of firms that the Teamsters organized into CSPF lately? Most companies that COULD otherwise be organized see the resulting liability as a death sentence, and simply wouldn't enter into it under any circumstances. And the more firms they see driven into bankruptcy by virtue of their CSPF liabilty (what's the story about that small town lumberyard in the upper Midwest again?), the more that situation is going to be reinforced.

Fact is the Teamsters "screwed the pooch" in terms of Central States. "Yes", UPS kept 'em hanging in their for quite a period of time, but they're left to their own devices now. Oh, I'm sure they're will be all sorts of weeping and gnashing of teeth....and constant Teamster whining for more government welfare. But, absent such welfare, I can't see the prospects for the fund being good.

 

[JonFrum]

You can define Insolvency any way you want in every day conversion, but the PBGC defines it in relation to multi-employer pension funds specifically as the point where the fund does not have the available funds to pay monthly benefits. Meaning after the fund has raised contribution rates, after it has repeatedly cut future benefits, after it has cut current benefits, after it has paid out its entire assets, after it has cut benefits down to the PBGC guaranteed level, then the PBGC will loan the fund the necessary funds to pay current retirees from the multi-employer insurance fund (not to be confused with the other PBGC insurance fund that covers single-employer funds.) Notice the fund's entire assets stand between it and Insolvency. As does a lot a benefit cutting. That's why I said to the other poster that multi-employer funds generally do not go bankrupt. They keep on chugging, although at a lower and lower level.

Remember too, that a pension funds liabilities are not all due currently. They come due slowly over future years as people retire one by one. $19.3 billion will last a while.

The PBGC insurance fund that insures your single-employer pension is in big trouble. The multi-employer fund, that loans money, not so bad. But I've made the point before that the PBGC is itself in trouble. As is almost every financial thing in the Country and the World.

". . . many of the smaller firms aren't required to bear the "sharing" burden. . . ." You just made that up, didn't you?

You can read about the exciting world of the PBGC and multi-employer pension funds here . . .
https://web.archive.org/web/20090324095016/http://www.pbgc.gov/practitioners/index.html

 

[whiskey]

I'm waiting for the other shoe to fall. Our current contract reminds of the movie "analyze this". A parody on all Teamster/UPS negotiations.

 

[whiskey]

By the way, Mr. Package, that was quite a first post.
It precipitated some very cerebral responses. Welcome aboard.

 

[PobreCarlos]

Jon;

Seems to me that the word "insolvency" is pretty much limited to having one true meaning...and the taking of a controversial non-standard meaning assumed by an organization that itself is essentially insolvent really isn't going to change that fact. Beyond that, stating what an insolvent entity "will" do in terms of "loaning funds" - funds that it doesn't have to begin with - to another entity that has squandered more than HALF of its total assets in less than a decade - strikes me as rather impetuous.

As for your comment of...

"Remember too, that a pension funds liabilities are not all due currently. They come due slowly over future years as people retire one by one. $19.3 billion will last a while."

...well, all I can say is that, in terms of the CSPF and the way the Teamsters have constituted it, that's not particularly true. The fact is that a high percentage of the participant are NOT retiring "one by one", but virtually all in one fell swoop. A large (VERY large!) percentage of the participants are of that age and in such a situation (later in life, losing their jobs dues to the Teamsters having put their employers out of business, etc.....think of CFWY or YRCW currently) that they are seeking retirement NOW...and the money to pay them all simply isn't there. All the smoke and mirrors and creative re-translations of the word "insolvency" aren't going to change that fact; i.e. - without some form of welfare, CSPF simply isn't going to be able to meet it's obligations.

As for what I "made up", I suggest you actually *LOOK* at the law governing multi-employer pension funds, paying special attention to something enacted by Congress called the "de minimis" rule". Perhaps you might even find it referenced in the link which you, *YOURSELF* posted. [smile]

 

[JonFrum]

PobreCarlos,

You'll just have to adjust to the use of the term Insolvency. It's the Law (ERISA). And the government agency that insures pension plans is the PBGC. Their proceedures for dealing with Insolvency are the official proceedures, and they matter, regardless whether you like it or not.

The PBGC insurance plan that insures multi-employer plans (like Central States) is in deficit, but the PBGC's seperate single-employer plan, (that insures UPS plans) is running a deficit about 25 times as great. I wouldn't call the former insolvent.

Central States' $19.3 billion in assets will in fact last quite a while, as the retirement bill is not all coming due at once. Most participants can't retire now as you claim. Indeed, one of the major complaints against Central States was that early retirement was taken away and they had to wait until age 65 to retire. The quarterly Central States Financial Reports indicate the average number of retirees has been holding steady from one period to the next.

And let's not forget that Central States has money coming in every month in the form of new contributions, which can only add to the length of time it will take to exhaust the $19.3 billion.

I don't understand your reference to the "de minimis rule." You were claiming most of the small employers in the fund aren't sharing the burden. But the "de minimis rule" applies only to a few small employers who leave the fund.

 

[PobreCarlos]

Jon;

Your comment that I'll "just have to adjust" reminds me of the Indiana legislature coming within a vote or two in the 19th century of passing a law that made the mathematical constant "pi" equal to "3"; i.e. - just because something is made "law" doesn't change the facts. Congress can legislate all they want in terms of claiming insolvency isn't insolvency...but that doesn't make an entity any less insolvent. Sorry...just the way things are! (on the other hand, Congress *CAN* hand-out various forms of welfare, which is pretty much what CSPF and the Teamsters behind it are asking for these days. And make no mistake about it; begging and/or demanding welfare is something Teamsters - as an organization - are very, very good at...perhaps the only thing they're good at in recent times)

As for your comments about not retiring now, all I can say is that, as you, yourself, indicated, one of the major complaints about CSPF is that "early retirement was taken away"...which, in case you hadn't noticed, was an OBLIGATION on the part of CSPF, and an indicatiion that the retirements ARE being attempted and that, in not being able to meet it's OBLIGATIONS, CSPF is ALREADY insolvent. I.e. - an entity claiming it's not insolvent yet stops paying it's (to participants, very real!) debts is NOT a very valid description of the process.

As for the length of time if would take to "exhaust the 19.3 billion", one can't help but note - again - that the 19.3 billion is ALREADY less than the funds liabilities; i.e. - they have no working "capital" at all. And as for the actual time it would take to exhaust such an amount, based on recent history, it could be as little as a few quarters....and with YRCW rushing to bankruptcy (and essentially no longer contributing and/or backstopping fund liability), that period of time could be rapidly accelerated.

Lastly, in reference to your speaking of the "de minimus" rule, in which you claimed....

"You were claiming most of the small employers in he fund aren't sharing the burden. But the "de minimis rule" applies only to a few small employers who leave the fund"

...I said *NO SUCH THING!* What I said - and WHICH YOU YOURSELF QUOTED!!!! - was....

"". . . MANY (not "most"!) of the smaller firms aren't required to bear the "sharing" burden"

I have kind of a thing about individual's being dishonest about what I say. If you can't stick to the truth in a discussion, then I suggest you keep your trap shut; the LAST thing the Teamsters and/or the CSPF fund needs right now is yet another nickel-and-dime-liar "defender". Got it?

 

[Cezanne]

OK, for the average joe, me included who does not know anything about ERISA, PGBC and pension liabilities to the degree you guys are quoting. Will somebody out there research how much money is going annually into the Central States trust, also the investment rate and how much is going out also annually? It might help clarify both your arguments.

Here is the bottom line that most us (baby boomers) will not happy with. It is that the prospect of any early retirement benefits is slowly being eliminated or extended by these plan trustees. Watch out social security is next.

Another event that might help PobreCarlos argument is when UPS Freight unionized with the last contract they were not negotiated into the Central States plan, instead they were placed under the company controlled UPS Pension Plan. Sure indicates to me at least a lack of confidence with the solvency issue of Central States.

 

[JonFrum]

. . .Will somebody out there research how much money is going annually into the Central States trust, also the investment rate and how much is going out also annually?. . .

It's all there in the quarterly financial reports I mentioned.

Central States has been under close Court supervision since 1978!!! Everything it does of any significance is overseen and approved by the Court.

Much greater detail is available in the annual Form-5500 financial filings available from the fund or free from:

http://freeerisa.benefitspro.com/

 

[PobreCarlos]

Unforttunately, it's not the fund - in and of itself - that's the problem. Rather, the problem lies with the failure of the Teamsters to look out for the welfare of their employers and/or their failure to organize new employers.

I'm sure there are others here who recall the often-quoted "Lynch testimony" as to how many Teamster-organized CSPF contributing firms in the LTL industry have gone out of business....during a period in which the industry itself prospered. To wit, once there were close to 3/4s of a million or more Teamsters in LTL (a significant portion of them representing CSPF contributions), with barely a tenth (if that, particularly considering the state YRCW is in) of that left today. Yet all those ONCE-employed Teamsters expect a pension.

Meanwhile, the Teamsters haven't wasted any effort worthy the name over the last 35 years to organize the competition of their pension funds main competitors (yes, FDX). Now, with the frightful liability (even with the limited liability available under the 5 year "trial period", so to speak), a firm would have to be crazy to allow itself to be organized by the Teamsters, if such organization involved them with Central States....crazy to the point that it would make more sense to just go out of business from the get-go as opposed to going through the expensive rigamarole of bankruptcy.

In short, it's one hell of a problem. Personally, I don't think the Teamsters can prosper unless they (1) get rid of the dead weight of the insolvent pension trusts, which would likely mean laying down some hard - VERY hard! - facts to a lot of past members counting on pensions, and (2) transforming themselves into an entity that actually PROMOTES their employers interests...including making themselves at least as competitive as their non-organized coherts.

From that perspective, the only other way they could make it is simply to become welfare queens; i.e. - be highly subsidized and, as an ENTITY (note I am *NOT* including individual hard-working UPSer's here!) be an overall drain on society generally. Reading Hoffa's tirades of late (anti-free trade, no Mexican truckers, national health plan, Teamsters not paying taxes on the benefits they recieve, etc.), I'm convinced that's the direction the Teamsters are going in now.

Time will tell.

 

[Scooter1]

Mostly everyone I worked with voted "no" on this "best contract ever"

 

[24601]

The contract must look nice to people in Washington State. I noticed today that the minimum wage there is $8.55. I am sure the new part timers in Washington are happy that the negotiated pay for new part timers is .05 cents below the state minimum wage!

 

[FAVREFAN]

The contract must look nice to people in Washington State. I noticed today that the minimum wage there is $8.55. I am sure the new part timers in Washington are happy that the negotiated pay for new part timers is .05 cents below the state minimum wage!

Lol! So true. Starting pay will be below state minimum wage in other states as well by years end. What a bad face that will put on the company when the public starts to hear that UPS wants to pay less than the law allows. No free food or discounts either that other companies offer their part-timers. What a joke.

 

[705red]

The contract cannot override state and or federal laws. People will be paid at the minimum wage. I agree with you that it is sad and its been 13 years since the part timers starting wage went up. It was 15 years before that. It took a great union leader Ron Carey to pull this off, and one day we will have a new leader again that will stand up for the members. Next election is 2011.