Gathering Clouds

Gathering Clouds

Copyright 2002, Traffic World, Inc.

There's a big shakeup under way at the Teamsters Central States Health and Welfare and Pension Fund. The fund's long-time director is out and three trustees - all Teamsters - have resigned.

The story broke too late last week for us to have a full story about it in this issue, but you can read Associate Editor John D. Schulz's report on the developments on our website,

The Central States fund's general counsel, Thomas Nyhan, took over the executive director's position recently from Ronald J. Kubalanza. Trustees Phil Young, Ray Cash and Jerry Younger resigned upon Kubalanza's departure. No one would talk to us last week about the changes, but the shakeup points the spotlight anew on the huge financial problems at the Central States Pension Fund.

Almost a year ago, John Schulz reported on the unfunded liability problem under the headline "Big Black Cloud Looming." Since then the problem has gotten worse and that torrential downpour is a lot closer. In his preview of the Teamsters freight contract negotiations starting on page 15, John reports that the Central States Pension Fund's unfunded pension benefit liability has risen to $4.9 billion.

The problem is that the number of working Teamsters truck drivers contributing to the pension fund keeps decreasing, thanks to the shutting down of union motor carriers like Consolidated Freightways. The Central States fund has 187,229 active workers contributing to the fund and 197,011 retirees drawing a pension. Compounding the fund's shortfall is the fact that its investments in the bearish stock market lost 4.5 percent of their value this year.

The worst is yet to come, said trucking attorney Herve H. Aitken. He predicts a "tidal wave" of unfunded liability over the next two to three years.

There are two ways to fix the imbalance: increase the contributions paid to the pension fund or decrease the amount of benefits paid out to retired Teamsters. Increasing the contributions would require the Teamsters to extract money from profit-challenged union trucking companies, push union carriers to add more jobs or organize some of the nonunion carriers, as the Teamsters are trying to do with Overnite, FedEx and others.

In the contract it negotiated this year with United Parcel Service, the Teamsters got no significant increase in UPS contributions to the Central States plan. There had been no significant pension payout increase in the last five years and the new UPS contract continues this freeze for another six years.

The freeze is getting a chilly reception from some rank-and-file Teamsters. Teamsters for a Democratic Union, the dissident group that challenged James P. Hoffa's campaign for reelection, has organized a Central States Pension Improvement Committee to agitate for an increase in pension benefits whether or not contributions to the plan increase. The TDU blames top Teamsters and UPS for the extended freeze on benefit increases.

"Top Teamster officials made a handshake deal with UPS to suppress benefits in Central States to achieve 'full funding,'" the TDU alleged on its website. "When a pension fund is fully funded, then the company can withdraw from the fund without paying any withdrawal penalties," the TDU said. The TDU is organizing a petition drive and holding rallies to push for pension increases.

It is no secret that UPS would like to get out of the multiemployer Central States pension plan and have its pension contributions dedicated to a plan for UPS employees only. If the TDU's description of events is correct, Hoffa and UPS may be doing the only responsible thing they can to try to bring the pension fund into balance again.