UPS is a multi-billion dollar company, but for close to 9,000 of its retirees, it doesn’t seem that way. These former employees could see their monthly pensions cut as early as the spring.
Many are wondering why only some retirees are facing these cuts. The Central States Pension Fund oversees hundreds of thousands of workers from many different companies around the nation. This particular fund is facing cuts in order to remain solvent. Those cuts will be in the form of reduced pension payments. One former driver who retired after more than three decades on the UPS payroll is currently receiving $2,903. He received a letter last month notifying him that his monthly payment could be reduced by half. If the Treasury Department approves the plan, he and many more will see this possibility become a reality.
In a strange twist, many employees, had they delayed retirement by several months, would not have faced any cut at all. The fund that covers these payments to a specific unionized group of drivers opted to leave in 2008 in another effort of saving money while not reducing payments to its retirees. The Central States Pension Fund set up its own pension fund and took current UPS workers with it. Any UPS drivers who had already retired would have been “grandfathered” and would still be covered solely by the existing fund. This exit move cost UPS $6.1 billion.
Then came the deregulation in the trucking industry, which sent many companies into bankruptcy. Those bankrupt companies could no longer pay retiree pensions. An aging workforce further increased costs and has become a trifecta of financial challenges.
“UPS regrets that economic challenges and other conditions have resulted in Central States administrators choosing to propose a difficult restructuring that will potentially adversely impact thousands of retired UPS employees,” the press release reads. It goes on to say that the company has already made substantial payments to fund its former workers’ retirements.
Central States is only the first to cut the pensions. Others are expected to follow for similar reasons, meaning the cuts would affect a growing number of retirees.
If you’re wondering about the federal law that took effect in late 2014, you can be sure that this is the reason the fund is allowed to legally cut benefits.
Further, not everyone in the fund is seeing the same size cut to their pension.
Those over the age of 80, on disability or who are receiving a spousal death benefit will not see their pension checks cut. But retirees whose employers left the fund and did not pay what was due on their behalf will see the most severe cuts, according to a provision in the law.
As mentioned, the Treasury Department will have the final say on whether the cuts are fair, and necessary in order to avoid insolvency.
In the meantime, retirees are worried and feel they’re being forced to shoulder the payment shortcomings. “It’s very sad that anyone has to see their pension cut, but we feel that it’s not right that a profitable company like UPS isn’t doing right by their employees,” said one retiree.
- Concerned about Leaving a Large Inheritance? A Trust May Be the Solution - January 19, 2021
- If You Are a Parent Estate Planning Is Essential - January 14, 2021
- Is It Too Late for Medicaid Planning to Help Me? - January 12, 2021
