Freightmaster1
TB Legend
- Credits
- 607
“If we operate in a largely non-unionized industry, we need to be able to pay in a mainly non-unionized fashion,” says Pierson. “If we’re above the market by 15% we’re not going to be competitive. We are now paying what the market will bear, and we all need to divorce ourselves from the mindset that that 15% is going to come back.”
One financial issue that’s not going to be mitigated anytime soon involves YRC’s pension liabilities. While the company is contributing to the multi-employer fund (called the Central States Teamsters fund) only 25% of what it did before 2009, YRC’s obligations to its retired workers and future retirees are underfunded by a staggering $10 billion. “We don’t have $10 billion, and we never will,” Pierson says.
To say that the shortfall is not all YRC’s fault would be an understatement. As of last October, the Central States fund, which covers workers from many companies, including other truckers, car-hauling firms, and grocers, was paying benefits to five retired or separated workers for each active worker, according to a report by the Center for Retirement Research at Boston College. In 1980, the ratio was almost the opposite: four active workers to every retiree or separated worker. In large part the reversal happened because so many unionized trucking companies went out of business over the past 30 years.
YRC is counting on new legislation to come to the rescue. The Multiemployer Pension Reform Act of 2014, enacted in December, allows the most distressed multiemployer plans to suspend payments that exceed 110% of the maximum benefit guaranteed by the Pension Benefit Guaranty Corp., if needed to prevent insolvency.
More importantly for YRC, the law also provides an employer participating in a multiemployer plan with the opportunity to withdraw from the plan with reduced liability. Specifically, 10 years after a benefit suspension, an employer seeking to withdraw can treat the suspended benefits as permanent cuts for purposes of calculating unfunded vested benefits.
“The legislation isn’t going to change what we pay into the plan, but what it hopefully will do over time is decrease our liabilities to the retirees,” says Pierson. “That’s difficult for our management team. We desperately want a good package for our current and future retired employees. But two-thirds of every dollar we’ve contributed to the fund goes to people who were never our employees, and the ratio of active workers to retirees is not sustainable. This will only be solved, in my opinion, by the legislation,” although that solution will be at least a decade out.
http://ww2.cfo.com/credit/2015/02/anatomy-turnaround-yrc-worldwide/
One financial issue that’s not going to be mitigated anytime soon involves YRC’s pension liabilities. While the company is contributing to the multi-employer fund (called the Central States Teamsters fund) only 25% of what it did before 2009, YRC’s obligations to its retired workers and future retirees are underfunded by a staggering $10 billion. “We don’t have $10 billion, and we never will,” Pierson says.
To say that the shortfall is not all YRC’s fault would be an understatement. As of last October, the Central States fund, which covers workers from many companies, including other truckers, car-hauling firms, and grocers, was paying benefits to five retired or separated workers for each active worker, according to a report by the Center for Retirement Research at Boston College. In 1980, the ratio was almost the opposite: four active workers to every retiree or separated worker. In large part the reversal happened because so many unionized trucking companies went out of business over the past 30 years.
YRC is counting on new legislation to come to the rescue. The Multiemployer Pension Reform Act of 2014, enacted in December, allows the most distressed multiemployer plans to suspend payments that exceed 110% of the maximum benefit guaranteed by the Pension Benefit Guaranty Corp., if needed to prevent insolvency.
More importantly for YRC, the law also provides an employer participating in a multiemployer plan with the opportunity to withdraw from the plan with reduced liability. Specifically, 10 years after a benefit suspension, an employer seeking to withdraw can treat the suspended benefits as permanent cuts for purposes of calculating unfunded vested benefits.
“The legislation isn’t going to change what we pay into the plan, but what it hopefully will do over time is decrease our liabilities to the retirees,” says Pierson. “That’s difficult for our management team. We desperately want a good package for our current and future retired employees. But two-thirds of every dollar we’ve contributed to the fund goes to people who were never our employees, and the ratio of active workers to retirees is not sustainable. This will only be solved, in my opinion, by the legislation,” although that solution will be at least a decade out.
http://ww2.cfo.com/credit/2015/02/anatomy-turnaround-yrc-worldwide/
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