Big Issues in Small Packages

WASHINGTON — United Parcel Service of America Inc. is offering its workers a retirement paradise--if they would only accept a new pension plan that would boost the average monthly benefit for some Teamsters by hundreds, in some cases thousands, of dollars.

But to the striking Teamsters union, the offer is a poisoned apple that could ultimately destroy the current pension program.

With talks to resume today, the complex argument over pensions has emerged as a core issue in the labor dispute. UPS, the biggest contributor to the multi-employer plans covering Teamster members, complains that it is subsidizing workers from other companies.

UPS wants to go it alone, creating a retirement program exclusively for its workers.

“The Teamsters should not stand between their membership and a rock-solid retirement,” said Lea Soupata, UPS vice president.

But a pullout by UPS from the multi-employer pension plans could threaten the long-range solvency of some plans, whose remaining employers might not be able to support them without UPS’ cash. It also defeats the idea behind a multi-employer plan, which makes it easier to change jobs and spreads risks and benefits.

“What the company wants is a multibillion-dollar grab,” keeping funds that would otherwise go into retirement pools, said Teamsters President Ron Carey. And the Teamsters plan in the Western United States beats the UPS plan in several key respects, the union says.

The outcome of the strike could reverberate throughout the American workplace, where multi-employer plans cover 8 million workers in trucking, construction, textiles and other businesses.

UPS said it has received letters from 200 Teamsters supporting the company’s request that the union allow its members to vote on the last UPS offer.

The Teamsters, meanwhile, announced a schedule of rallies and meetings in various cities to demonstrate community support for the strikers.

For the Teamsters, the multi-employer pension program, achieved after hard bargaining, is “sacred,” said Raymond Hilgert, professor of industrial relations at Olin Business School at Washington University in St. Louis.

Under these union agreements, all the companies in an industry contribute for each of their workers to a common pension fund. Workers may move from one job to another, but their service within the industry mounts, and they draw a pension from the common fund. The funds are run by a joint board of trustees whose members are equally divided between the union and employers.

UPS wants to drop out of the 41 separate funds involving Teamsters and use the $1 billion a year it now contributes to them to create a program only for UPS workers. The plan would increase pension benefits for many UPS workers an average of 50%, the company says.

The numbers UPS cites as examples are compelling: Workers in the central Pennsylvania plan, who can get $750 a month now after 30 years of service, would receive $3,000 a month under the proposal. The central states pension plan, which offers $2,500 a month after 30 years, would see its benefit climb to $3,000. And part-time workers, who can get $826 a month after 30 years, would enjoy a raise to $1,500 monthly.

“UPS can pull out and probably buy more benefits for their employees with a single plan,” said Ron Gebhardtsbauer, senior fellow at the American Academy of Actuaries.

Because UPS workers are younger than the average Teamsters, it would be cheaper to buy the insurance annuities that guarantee them pension coverage, he said. UPS would also save money because many workers, such as the large number of part-time employees, may leave the company before the five years needed to guarantee a pension. By contrast, the current system requires the company to pay into the fund for each worker, regardless of how long the worker stays on the job.

UPS would gain another opportunity for a windfall: If the plan’s investments are highly profitable because of a booming stock market, the company could make a much smaller contribution that year to keep the fund healthy. Now most of such a benefit filters to workers.

The clear winners under the UPS plan would be employees who spend a full career with the company, 20 years or more, according to Gebhardtsbauer.

Losers under the UPS proposal could be the mobile workers, who spend several years with different companies, without earning significant retirement credits, Gebhardtsbauer said.

Also, California workers of UPS may do worse under the UPS plan because of how the current system works.

Surplus pension funds produced by a bull market are passed on to the workers now. At the Western Conference of Teamsters trust fund, which covers California and 12 other states, pension credits were boosted 15% in some good years and an early-retirement benefit was added.

Currently there are 265,000 active Teamster members and 163,000 retirees drawing benefits from the Western Conference fund. UPS contributes $2.80 an hour; the average is $1.65 among the 2,000 employers who contribute.

The Western States plan, which already has comparatively good benefits, will beat the UPS proposal “in virtually every case,” said Charles Storke, legal counsel to the fund.

The UPS plan would look better for someone drawing a pension today after 30 years of service. The Western States worker gets $2,600 now, compared with $3,000 under the UPS plan. However, the UPS plan is capped at $3,000, and looks worse for the future, Storke said.