- Fred Meyer and QFC workers from four local unions ratified a deal with Kroger to transfer approximately $ 400 million in pension liabilities from an underfunded plan to UFCW’s consolidated pension plan, the grocer announced Friday.
- The Sound Retirement Trust fund transfer agreement to the UFCW scheme covers the benefits of more than 10,600 workers from the two Kroger banners and aims to minimize the grocer’s exposure to market risk while reducing the administrative costs, according to Kroger.
- Kroger’s deal with labor groups comes as the federal government takes action to protect pension benefits for workers covered by troubled pension plans.
Kroger’s arrangement with labor groups representing Fred Meyer and QFC workers reflects vast financial problems with multi-employer pension plans that could cause them to fail in years to come.
More than a million American workers participate in more than 130 multi-employer pension plans that are at risk of collapse, according to the House Committee on Education and Work. These types of plans, which provide benefits to unionized workers in a variety of industries, cover approximately 10 million people, CNBC reported.
The latest round of federal pandemic relief includes measures to stabilize financially distressed pension plans and protect workers’ benefits, but the Sound Retirement Trust is not eligible for relief under the law, a Kroger’s CFO Gary Millerchip said in a statement. The Pension Benefit Guaranty Corp. (PBGC), the federal government agency that serves as a safety net for collapsing pension plans, is itself in dire financial straits and predicts it could short of money by the end of 2027.
The agreement between Kroger and the unions, which was ratified by the affected workers, has been approved by the PBGC, the UFCW Consolidated Pension Plan and the Sound Retirement Trust. Kroger said he plans to meet his obligations under the deal, which amount to around $ 310 million after-tax, even through installments over the next six years.
Kroger noted that future benefits for associates would accrue in a new variable annuity pension plan that will be administered by the trust.
Millerchip said the arrangement to transfer the pension funds would benefit its shareholders in addition to securing retirement benefits for its workers. “The proactive steps Kroger has taken over many years to address the significant underfunding challenges facing multi-employer pension plans puts us in a strong position to continue to deliver strong and sustainable total shareholder return. “Millerchip said in a statement.
Kroger’s deal with workers at grocery stores he operates in the Northwest follows an attempt agreement between the grocer and Stop & Shop with the International Union of United Food and Commercial Workers (UFCW) last July under which companies created a variable annuity pension plan that covers 33,000 Kroger workers and 18,000 Stop & Associates. Shop. Grocers withdrew from a multi-employer pension fund as part of the deal, which involves contributions to the UFCW industry pension fund by Kroger and Stop & Shop of $ 962 million and $ 649 million, respectively.
Also last July, Albertsons reached an interim agreement with the UFCW to establish a separate variable annuity pension plan.
In January, Giant Food said it had fully implemented an $ 800 million plan to combine multiple pension plans into one deal.