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Kroger, UFCW reinforce pension benefits for Fred Meyer, QFC workers

Agreement reached to transfer $400 million in liabilities from an underfunded pension plan

Russell Redman

May 24, 2021

3 Min Read
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The Kroger Co. said the move will stabilize pension benefits for over 10,600 Fred Meyer and QFC associates, limit market risk and reduce administrative costs.Fred Meyer/Kroger

Four United Food and Commercial Workers (UFCW) union locals representing Fred Meyer and QFC employees have ratified an agreement to shift about $400 million in pension liabilities from an underfunded pension plan to the UFCW Consolidated Pension Plan.

The Kroger Co., parent of Fred Meyer and QFC, said Friday that the funds transfer from the Sound Retirement Trust plan will stabilize pension benefits for more than 10,600 of the chains’ associates, limit market risk and reduce administrative costs. The transfer has been approved by the UFCW Consolidated Pension Plan and the Pension Benefit Guaranty Corp., the federal agency that regulates private-sector pension plans.

“I am delighted we have reached an agreement to address the underfunding of the Sound Retirement Trust, which is ineligible for relief under the Emergency Pension Plan Relief Act of 2021,” Gary Millerchip, chief financial officer at Cincinnati-based Kroger, said in a statement. “This agreement is a great outcome for our associates, as it better protects previously earned benefits and will stabilize future benefits.”

Kroger noted that it will cost the company about $310 million (after-tax) to transfer the $400 million in net accrued pension liabilities (pretax), which cover associate and retiree payments for past service. Plans call for Kroger to transfer the funds from the Sound Retirement Trust to the UFCW Consolidated Pension Plan in installment payments over the next six years, resulting in an estimated charge of 40 cents per diluted share to first-quarter 2021 net earnings on a GAAP basis.

Related:Giant Food gains union approval for pension plan transition

For the affected Fred Meyer and QFC employees, benefits for future service will accrue in a newly created variable-annuity pension plan (VAPP) administered by the Sound Retirement Trust, Kroger said.

“As with previously announced pension restructuring agreements, this agreement allows us to minimize future exposure to market risk, produces a return on investment above our internal hurdle rate by mitigating future costs, and provides a more secure future for our associates' pension benefits,” according to Millerchip. “The proactive steps Kroger has taken over many years to address the significant underfunding challenges faced by multi-employer pension plans puts us in a position of strength to continue to deliver strong and sustainable total shareholder return.”  

At the end of November, 20 UFCW locals covering 33,000 Kroger Co. associates across 14 divisions ratified an agreement to withdraw from the UFCW International Union-Industry Pension Fund and transition to a new VAPP. UFCW unions representing employees from Albertsons Cos. and Ahold Delhaize USA’s Stop & Shop chain also agreed to the transition, unveiled in July. Kroger and Stop & Shop worked with UFCW to create the UFCW and Employer’s Variable Annuity Pension Plan (VAPP) to provide future pension benefits.

Related:UFCW unions ratify Kroger, Albertsons, Stop & Shop pension fund withdrawal

In connection with the transition, Kroger is slated to pay about $760 million after tax in installments to the national pension fund over the next three years. The company noted at the time that the agreement sets a pension benefit formula for its contributions to the new plan through June 2028, fixing the terms of its collectively bargained pension obligation with the 20 UFCW locals for the next eight years.

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About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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