Pension Bill Would Provide Firms More Time to Restore Funds to Underfunded Plans

This story appears in the Nov. 9 print edition of Transport Topics.

Carriers with multi-employer pension obligations would get as much as 30 years to restore full funding of currently underfunded plans, under legislation introduced by two members of Congress.

The bill would stretch out the current seven-year requirement for boosting assets in underfunded plans through more extended employer contributions.

The Preserve Benefits and Jobs Act of 2009, introduced by Reps. Earl Pomeroy (D-N.D.) and Patrick Tiberi (R-Ohio), affects YRC Worldwide Inc., UPS Inc. and Arkansas Best Corp., which employ Teamsters union workers, as do some smaller fleets. Fleet officials and union leaders praised the move, saying it addresses the long-standing issue of pensions paid from multi-employer funds.

“Exceedingly large pension costs will hamper both job growth and capital investment that are needed to grow the economy,” Pomeroy said in a statement. “The cornerstone of this bill is temporary pension funding relief that eases an employer’s obligation to make up for the investment losses.”

The sponsors said the bill also would ease pressure on funds in the worst financial shape, offering options such as mergers or alliances to conserve assets. The bill also would give the Pension Benefit Guaranty Corp., a government agency, the ability to step in and pay benefits when possible.

Tiberi and Pomeroy blamed the stock market’s nose dive last year for funds’ difficulties, which sharply increased employer contributions, by 13% in 2009 alone, to rebuild assets.

“This massive increase could cause many employers to have to lay off workers to meet the government-mandated contribution increase,” the congressmen said.

The measure also would protect employees, its sponsors said, by guaranteeing that pensions would continue to become available.

Randy DeFrehn, executive director of a trade group that includes multi-employer plans, said at an Oct. 29 hearing that trucking has the second-largest number of multi-employer plan participants, exceeded only by construction. In total, he said, 10.1 million Americans are covered by multi-employer plans.

YRC said the bill “seeks to repair and resolve some unintended consequences” of past legislation that forced operating less-than-truckload carriers such as YRC to pay benefits for workers at competitors that failed.

The company, in its most recent quarterly regulatory filing, said it could face withdrawal liability of more than $4 billion in connection with underfunded pensions.

Arkansas Best’s withdrawal liability to those underfunded plans would be about $800 million.

“We obviously want to pay retirement benefits for our own employees, but the hundreds of thousands of employees of bankrupt companies should not be our responsibility,” Arkansas Best said in an e-mailed statement criticizing the “fundamental inequity” that exists now.

“The current situation is like being the last one to leave a restaurant and receiving the bill for a room full of strangers,” the company said in the statement.

Pension costs prompted Arkansas Best to seek an exit from those plans for its ABF Freight System unit during the last round of contract talks with the Teamsters union. In 2007, UPS agreed to pay $6 billion to the Central States pension fund to exit from the fund. UPS still pays into other funds with Teamster members.

Up to 50% of YRC’s pension contributions go to funds that pay benefits to retired workers who never had a job at YRC or its predecessors, the company said. YRC currently isn’t making pension payments to those funds, after a deal with the union to conserve the carrier’s cash.

“These costs represent a huge, hidden tax on large and small businesses,” said Bill Zollars, chairman and CEO of YRC. “We are hopeful that Congress will take swift action to resolve this inequity.”

No hearings on the House bill have been scheduled, and there is no companion bill in the Senate, said Sandra Salstrom, a spokeswoman for Pomeroy. She said his seat on the Ways and Means Committee, which has jurisdiction over tax and pension issues, would help the bill’s prospects.

The measure also would offer a choice of new approaches to firms with defined benefit pensions.

One approach would give them nine years to make payments into the fund to restore them to fully funded levels, with two years of interest-only payments or a 15-year period to reach that level.

The Teamsters said the largest pension funds had less than 80 cents in assets per $1 in obligations to pay benefits at the end of 2008, before the stock market recovery.

“This legislation would simply give our pension plans some breathing room to recover from the catastrophe that the big banks and Wall Street operators created,” said Teamsters General Secretary-Treasurer Thomas Keegel.

“The funding pressure on the remaining employers is unsustainable and, if not dealt with soon, will lead to a new wave of bankruptcies,” the union said in the statement.