UPS Uses Political Clout to Press for Cuts in Pension Benefits

For 15 years, United Parcel Service Inc. has spent more money on U.S. elections than any other company. Now UPS, which has gotten its way on everything from federal highway programs to expanded routes to China, is seeking a new return on its investment.

The world's largest package-delivery service wants Congress to allow employers to cut pension benefits already promised to some workers in plans funded by multiple companies. Atlanta-based UPS says the plans can no longer afford to pay full benefits because so many companies that used to pay into the pool have gone out of business. As the number of contributors shrinks, remaining companies are obligated to fund the retirement plans.

``The way the system is structured now, it's the last man standing,'' says Representative Dave Camp, a Michigan Republican who serves on a House-Senate conference committee that's crafting pension legislation. ``You end up having greater responsibilities thrust upon employers who are remaining.'' UPS is ``probably going to be the last man standing.''

Multiemployer plans cover 9.8 million U.S. workers, or about 22 percent of those in defined-benefit plans. They were $177 billion in the red in 2003, the last year for which figures are available, according to the Pension Benefit Guaranty Corp., a quasi-governmental agency that insures pensions. The more common single-employer plans were underfunded by $450 billion in 2005, the Labor Department says.

House Signs On

The House of Representatives passed broad pension legislation in December that would require companies to pay more into multiemployer funds. It included a UPS-backed provision that would allow the plans' trustees -- which include company and union representatives -- to cut benefits by an unspecified amount for workers retiring early if the plans are less than 60 percent funded. The Senate has not approved such a provision.

``This is all part and parcel of companies backing off their pension requirements,'' says Senator Tom Harkin, an Iowa Democrat. ``They want to let pensions crash.''

UPS and companies such as Overland Park, Kansas-based YRC Worldwide Inc., the biggest U.S. trucking company, say they are targeting early-retirement benefits -- even those already being paid out -- to ensure that people who stop working at 65 can get full benefits.

For UPS, overhauling pensions is a top priority. The company has 120,000 truck drivers in 21 different multiemployer pension plans, which allow workers in highly mobile industries, such as trucking and construction, to bounce from job to job and still receive a pension when they retire. The largest one, the Central States plan, is less than 60 percent funded.

Failing Companies

At the same time, there are fewer companies contributing. One indication: The number of trucking companies signed on to a national contract with the Teamsters Union dropped from 900 in 1980, when the industry was first deregulated, to 15 today. Sixty cents of every dollar UPS pays to the pension funds covers the retirement costs of employees who worked for other companies.

``The structure of the plans is not consistent with how companies operate today,'' says UPS spokesman David Bolger, who has been lobbying lawmakers on the issue. ``It's not a healthy scenario down the road.''

Coal Miners

An example of how multiemployer plans can run into trouble was in the coal industry during the 1970s, as mines from Pennsylvania to West Virginia were shut down and companies shifted operations to Western states. Congress, under pressure from mining companies facing more than $6 billion in unfunded liabilities, amended the law in 1980 to force companies electing to leave the system to pay an exit fee. The move helped save the pensions, even though plans that were once funded by more than 1,500 mining companies are now backed by fewer than 300.

Contributors to UPS's multiemployer plans are dwindling because of bankruptcies, so those exit fees aren't being paid.

The package-delivery company's political action committee has been the most generous corporate giver to federal candidates for every election since 1992, donating a total of $14 million through Dec. 31, 2005, Federal Election Commission records show.

For that, it has gotten a willing ear from Congress. In 1999, when the company sought Transportation Department approval to begin deliveries to Beijing and Shanghai, 368 of the 535 members of the House and Senate wrote in support. The department approved the request in 2001.

Lobbying Power

UPS, whose workforce of 407,000 makes it the U.S.'s fourth- largest corporate employer, spent $1.3 million during the first half of 2005 successfully lobbying for the Central American Free Trade Agreement and legislation that provided more highway funds.

House Majority Leader John Boehner, an Ohio Republican and the sponsor of the pension provision in the House, has been the fifth-biggest recipient of UPS campaign donations among U.S. lawmakers since 1990, getting $76,700, according to the Center for Responsive Politics, a Washington-based research group that tracks campaign donations.

``Every member of Congress knows UPS is in their district,'' Bolger says. ``We consider it our obligation to participate in the political process. We go to the fundraisers.''

UPS is part of a coalition supporting the House pension provision composed of trade groups, unions and companies such as Cleveland-based Eaton Corp., the world's second-biggest maker of hydraulic equipment, and Carteret, New Jersey-based Pathmark Stores Inc., owner of more than 140 supermarkets.

Lining up against them are Senators Kent Conrad, a North Dakota Democrat, and Harkin, as well as the Teamsters union, which manages the Central States plan. Charles Grassley, an Iowa Republican who is chairman of the Finance Committee, refused to include the provision in the Senate legislation.

Not Fair

Critics of the provision say it's not fair for workers to lose pensions that they've earned. They say there are other ways to address the shortfall in pension funds, such as seeking tax relief or cutting future benefits.

The two major political parties have been split by the debate, as have labor unions. The United Food and Commercial Workers Union and Unite Here back the pension cuts, opposing the Teamsters.

Representative Rob Andrews, a New Jersey Democrat, supports the provision. ``The solution we have created is delicately balanced, and I want to make sure we hold the coalition together so that multiemployer plans can survive,'' Andrews says.

Some Senate Democrats disagree. ``I don't think it's fair to be cutting people's benefits,'' Conrad says.

`Share the Pain'

American Trucking Associations, of Alexandria, Virginia, says the proposal before Congress would require companies to pay more into the fund and guarantee full pensions to workers who don't retire early.

``It's a share-the-pain concept,'' says Tim Lynch, chief lobbyist for the trucking group, whose members include Chattanooga, Tennessee-based U.S. Xpress Enterprises Inc.

That pain would be shared even by those who retired in the last year, including Tommy Burke, who drove a UPS truck for 38 years. ``I'd have to get another job if they cut my pension like they want to,'' says Burke, 61, who lives with his 84-year-old infirm mother in Fayetteville, North Carolina, on $2,798 a month. ``This provision would really hurt a lot of working people.''

Burke is ``disappointed in UPS,'' he says. ``I gave them nearly 40 years; $2,798 a month is not too much to ask.''