The Pension Fund is an issue that impacts Local 1500 members both past and present. It used to impact every member until the late-2015 controlled liquidation of the A&P Company which owned Pathmark. That liquidation left more than $77 million dollars in withdrawal liability unpaid and took over 3,500 people off the monthly contribution roles of the Pension Fund. Because it is a multi-employer Fund, the responsibility to pay that $77 million got divided up among the remaining employers, which has caused some financial and refinancing difficulties for a few of them. But the loss of 3,500 contributions a month overnight created an unfathomable problem for the Fund. Stop & Shop bought 12 of the biggest Pathmark stores we had and thankfully kept all those folks in the Pension Fund. Approximately 1,000 former Pathmark members stayed with new Local 1500 employers that wouldn’t join the Pension Fund or a legacy company that wouldn’t buy these stores if they had to keep the members in the Pension Fund.
So, we started the Local 1500 Annuity Fund to make sure that these members had a retirement vehicle that was collectively bargained and jointly managed. This was the first big hurdle for the Pension Fund, but unfortunately it wouldn’t be the last. Between 2016-2019 there were some market fluctuations that caused our Pension Fund to miss its investment assumption more than once. These unperforming investment years created a situation where the Trustees needed to act fast because the Fund had slid into the Red Zone. As difficult as it was to navigate, the Trustees created a rehabilitation plan and worked to find the best solution possible for all the participants.
Then in January of 2020, Fairway, our 3rd largest employer, filed for Bankruptcy, and was auctioned off piece by piece to the highest bidders. This created another massive hurdle for the Pension Fund. Fairway left behind approximately $66 million in withdrawal liability that once again needs to be split up among the remaining employers. This bankruptcy would also cause the elimination of about 2,450 contributions per month to the Fund. Thankfully, we were able to help more than 1600 Fairway members retain their jobs. We worked with every and any other employers out there to get them to buy these stores. Not surprisingly none of those employers would agree to buy stores if they had to participate in the Pension Fund or accept that orphaned withdrawal liability.
What could we do? Our number one goal was, and HAD TO BE, to keep members working after both bankruptcies. No matter what, all the stores would’ve gone dark, or been sold to non-union operators, if we didn’t agree to put those stores into the Annuity Fund. Amazon bought two New Jersey Fairway stores and immediately let everyone go. But we managed to keep them from buying two additional stores in New York by finding other buyers. If we had insisted these buyers stay in the Pension Fund they never would’ve bid, and those members would also be out of work.
Then came the Kings bankruptcy a few months ago. Although the Kings store we represent was acquired by Acme, it will also not remain in the Pension Fund. In this case just about $1.1 million in withdrawal liability is being orphaned and there will be about 40 less monthly contributions to the Fund. That’s over $144 million dollars in orphaned withdrawal liability and approximately 6000 fewer monthly contributions to the Fund in about 5 years’ time. Coupled with the 2 years of substandard market returns, the fast rise in the NYS minimum wage (which has caused all of our employers to cut back on hiring), and the occasional store closings that occur, that is why the Pension Fund is where it is.
What does that all mean? Simply put, it means that the Trustees need to take whatever actions necessary to secure the Fund and all the benefits earned up to and including 12/31/2020. This means that our Employers will have the ability to buy their way out of the Pension Fund in the coming months or years. This means that some Employers will stay in the Fund, but that future accruals would be reduced from the current levels. I did not say that early retirement options would go away. I did not say that any benefits earned prior to 12/31/2020 would be reduced. I did not say that every employer will be doing the same thing. But I did say that some employers may buy their way out of the Fund by paying their withdrawal liability up front.
For an employer that wants to “buy out” of the Fund they would need to contact the Board of Trustees, have their withdrawal liability assessment done by the Plan actuaries, and then come to a payment agreement with the Board of Trustees. That agreement would include a schedule of how and when they pay their withdrawal liability and would ensure that all payments are made at a rate consistent with the rules of the Plan. Should this occur, then the members from that company would need to be moved into another retirement vehicle, like the Local 1500 Annuity Fund, going forward. If a large enough employer or group of employers do this, it would secure the benefits previously earned, significantly increase the current funding percentage and give the Trustees the ability to operate without the limitations of the red zone or the Rehabilitation Plan. A significant increase in funding percentage would give some Employers the ability to stay in the Plan and that future accruals could be restored for the participants in those companies. What level of contribution your employer needs to pay and/or what the yearly accrual will be, beyond 12/31/2020, still needs to be determined by the Board.
Once we have more information, or if an agreement is reached between an Employer and the Pension Board of Trustees, we will notify the affected participants. As much as I wish I had more specifics about your individual situation or what I think your company will do vs. another, unfortunately I don’t. The main information I hope everyone takes away from this article is that the Trustees are going take whatever actions necessary to secure all the benefits already earned and to preserve the Fund for decades to come. Sadly, if we do not take these types of actions, this Fund will continue its current negative trajectory and could end up in the hands of the PBGC. That is something that everyone involved should want to prevent at all costs. PBGC involvement would mean immediate benefit reductions for all participants and based on recent reports the PBGC is projected to be insolvent before 2030. As a reminder the PBGC, or Pension Benefit Guarantee Corporation, is a Federally created corporation that acts as a Pension insurance company. The PBGC only guarantees a limited percentage of a person’s pension benefits and does so on a very specific scale. More information about the PBGC can be found at pbgc.gov.
No matter what, we will be looking to move any Company, that reaches agreement to buy out and withdraw from the Fund, into the UFCW Local 1500 Annuity Fund to ensure a future, collectively bargained retirement vehicle for all members involved. This is not an easy conversation for me to have or for you to hear, but one that must happen. When it comes to multi-employer, defined benefit pension funds, there are many more pitfalls and danger zones than safe havens or positives. When the number of people retired and collecting or separated and vested, outnumber the number of active participants, economic solutions disappear quickly and there is a need for government help. Unfortunately, the political establishment in America hasn’t even yielded a productive conversation albeit a legislative answer on how to begin to fix what has now become a national crisis.
As difficult as it is to try and transition from the Pension Fund to well wishes and Holiday wishes I must. First and foremost, please make sure that you check out the centerfold of this issue. After more than 34 years on the staff and more than 46 years as a member Tony is now 100% Grandpa. I will get more into my goodbye to Tony in the centerfold, but would be remiss if I didn’t say, thank you, I miss you, stay healthy and never, EVER change in this article. I love you Tony. You are my brother, my friend, my confidant, a tireless fighter, and someone who always believed in the truth and doing what was right. My respect for you is immeasurable and I will do my best to lead the Local the way you taught me.
God Bless all of you and your families during this Holiday season. Just like all of you, I look forward to spending some time being reminded of what’s most important in life, family. Please remember to stay safe, take care of each other, and I’ll see you in the stores. Here’s to a much better 2021!
Robert W. Newell, Jr. – President
The Advocate Winter 2020