DENVER — As supermarket workers here finish voting on the “last, best and final” offer from the chains in their long-running union contract negotiations, one of the key issues will be the funding of the pension plan that covers retirees.
“A bargaining cycle ago, health care was the main issue we were dealing with,” said Jill Cashen, a spokeswoman for United Food and Commercial Workers International, based in Washington. “Now, it is certainly funding our pensions.
“The financial situation of many of our pension funds — not all of them, but many of them — mirror the greater economic picture of Wall Street. They have taken a hit on their investments, and they do have funding problems.”
Last year, 92% of corporate pension plans were underfunded, after the stock market freefall of last fall, according to a report by Wilshire Associates, an investment consulting firm. Although the stock market has gained some of the ground it had lost, some pension funds have been hit hard because of particular investments, reports said.
In reporting its first-quarter earnings last week, ShopRite operator Village Super Market, for example (see story above), said it may need to make additional contributions to its pension funds.
“We believe a number of the multi-employer plans to which we contribute are underfunded,” the company said in a filing with the Securities and Exchange Commission last week. “As a result, we expect that contributions to these plans may increase. Additionally, the benefit levels and related items will be issues in the negotiation of our collective bargaining agreements.”
Cashen of the UFCW said some locals and employers have had to develop unique solutions to compensate for underfunded plans.
“The intended solution is always to protect retirement security for our members without causing any more stress than necessary,” she said. “In some cases, we have found some creative solutions that scale back benefits for some people in certain situations, but maintain the solvency of the plans.”
In Colorado, for example, King Soopers, a unit of Cincinnati-based Kroger Co., has proposed adding nearly $40 million to the pension fund, but increases the minimum retirement age from 50 to 55.
Although she declined to discuss specific details of the offers in Colorado because workers there were still voting, Cashen did say the fund was in a difficult position.
“That pension fund has some financial challenges, and members are taking that into consideration in their voting,” she said.
One of the problems unions and employers are facing is in the Pension Protection Act of 2006, Cashen explained.
“Once a fund has the PPA ‘red stamp’ on it, the law requires that benefits are reduced,” she explained. “We don't always believe that's the best course of action to maintain the fund.”
