eamsters Multiemployer Pensions:
Needed Change May Finally Be on the Way
By William H. Fisher,
Raymond James & Associates
June 8, 2007
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Key Excerpts: Pension Developments Discussed
Unlike single employer plans where the integrity of the pension resides with the contributing company, multiemployer plans commingle the employee pension assets/liabilities of numerous companies, implicitly pooling/diversifying the risk of failure of one company among all other contributors. In essence, if one company fails, the other contributors to the plan, through no fault of their own, would be on the hook for the residual liability tail of the failed company.
The funds are managed by trustees, not the employers, and certain provisions appear governed by the Teamsters, again, not the employers.
The data shows that Central States was $20.4 billion or only 49% funded at the end of 2005, as computed by ERISA using single employer pension plan methodology.
The irony is that these funds in aggregate are significantly under-funded despite the fact that the employers are making relatively enormous annual outlays [over $20,000 per full-time employee per year for pension and healthcare for the major union transportation companies]. As a result of the aforementioned items, according to 2005 Form 5500 ERISA data (the latest liability info available), the five largest Teamster multiemployer pensions, anchored by the poster child, Central States Southeast and Southwest Areas Pension Fund (Central States), are collectively under-funded by a whopping ~$31 billion (or only 64 percent funded).
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There are fewer companies contributing to these pension plans. The number of trucking companies signed on to a national contract with the Teamsters union dropped from 900 in 1980 to 15 in 2006.
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Sixty cents of every dollar UPS pays to the pension funds covers the retirement costs of employees who worked for other companies.*
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The Central States Pension Plan was only 49 percent funded at the end of 2005, with roughly $21 billion in assets as of the first quarter of 2007.**
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The ratio of assets to liabilities for the 5 largest Teamster pension plans combined is 62 percent.
Retirees outnumber active participants in the Central States Pension Plan by nearly two to one.***
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“We strongly believe UPS and its employees would be far better off if it were able to exit the Central States Plan,” said Bill Fisher, Managing Director of Raymond James & Associates.
UPS and other freight carriers (YRC Workdwide, Arkansas Best, and a handful of smaller carriers) belong to scores of multiemployer pension plans. Because of the decline in unionized carriers and the more than 600 closings of Teamster-covered carriers in the freight industry since 1980, the remaining carriers are liable for literally billions of dollars in unfunded pension withdrawal liability. ****
