The Kroger Co., Albertsons Cos. and Ahold Delhaize USA’s Stop & Shop have reached tentative agreements with United Food and Commercial Workers (UFCW) union locals to withdraw from the UFCW International Union-Industry Pension Fund.
Plans call for the UFCW locals to transition to variable annuity-based pension plans from their current national plan, the supermarket retailers said late Tuesday. The board of trustees of the UFCW’s national pension fund have approved the agreements, while union ratification is pending.
Cincinnati-based Kroger said its agreements with 20 UFCW locals cover 40 separate contracts and would allow 33,000 Kroger Co. associates — including most meat and deli clerks and some retail clerks — across 14 divisions to participate in the new variable annuity pension plan (VAPP). Stop & Shop’s pacts with five UFCW locals cover 18,000 employees. Albertsons said it reached agreements with nine UFCW locals but didn’t report the number of employees affected.
Kroger, Albertsons and Ahold Delhaize USA, the parent of Quincy, Mass.-based Stop & Shop, said the shift to VAPPs will bolster the security of pension benefits for the UFCW members while reining in financial risk for the companies concerning pension costs.
“In an environment where pensions are faced with funding challenges, we are pleased to have reached a tentative agreement that will protect benefits for our associates,” Kroger Chief Financial Officer Gary Millerchip said in a statement. “Our strong financial position is allowing us to make this investment in our associates and support our commitment to deliver sustainable and attractive total shareholder returns by addressing future pension cost increases and minimizing Kroger’s future exposure to market risk associated with the current pension plan.”
Upon union approval of the agreements, Kroger said its expects to pay a withdrawal liability of $962 million (pretax) to meet obligations for past service for associates and retirees in the national pension plan, as well as make a $27 million contribution to a transition reserve in the new VAPP. On an after-tax basis, the withdrawal liability and contribution to the transition reserve total approximately $760 million.
Ahold Delhaize pegs its liability for Stop & Shop’s withdrawal from the UFCW national pension fund at $649 million (pretax). The company said it will make an $18 million contribution to the new VAPP. On an after-tax basis, the payments will total about $500 million. The pacts with Stop & Shop cover UFCW Locals 1445, 1449, 328, 371 and 464A.
Albertsons, based in Boise, Idaho, said it will pay approximately $286 million ($213 million after-tax) in withdrawal liability to the UFCW national plan and pre-fund a transition reserve in the new VAPP with a payment of $8 million to $9 million.
If the union locals ratify the agreements, Stop & Shop and Kroger would work with UFCW to form the UFCW and Employer’s Variable Annuity Pension Plan to provide future pension benefits.
All three retailers said they will make the payments to the UFCW national pension fund in several installments over the next three years.
“We are pleased with this agreement,” commented Vivek Sankaran, president and CEO of Albertsons Cos. “We believe this protects and provides the right benefits for our employees, while reducing financial risk going forward.”
UFCW International President Marc Perrone called the agreements with the three grocery retailers “historic.”
“America’s grocery workers are putting themselves in harm’s way every day of the COVID-19 pandemic. Today’s historic tentative agreement that UFCW secured with Kroger, Albertsons, and Stop & Shop is a critical step to ensuring that these brave workers have the financial security they need to provide for their families,” Perrone said in an email statement. “This agreement will help to ensure that, for grocery workers across the country, these hard-earned benefits will be there when they retire. As millions of frontline workers continue to serve their communities during this pandemic, it is more important than ever that all companies invest in these hardworking men and women and ensure they have the financial security they have earned.”
Under the pension plan transition, Kroger and Stop & Shop would work with UFCW to form the UFCW and Employer’s Variable Annuity Pension Plan to provide future pension benefits. Ahold Delhaize said it expects union ratification of the agreements by Oct. 1. According to Albertsons, the company and the UFCW locals aim to establish the new VAPP by Oct. 31.
“This new plan is designed to protect the benefit accrual of participants, with a significantly reduced risk of plan underfunding and improved visibility on annual contributions,” Zaandam, Netherlands-based Ahold Delhaize stated.
In a message to members late Tuesday, UFCW Local 464A President John Niccollai said the agreements with Ahold Delhaize, Albertsons and Kroger would provide a funding infusion of $1.84 billion into the national pension plan. UFCW 464A, based in Little Falls, N.J., maintains its own pension fund for the majority of the membership but participates in the national plan for full-time employees of Stop & Shop in Long Island, N.Y., and Acme (Albertsons) in New York and New Jersey.
“The national pension fund has been negatively affected by the tech bubble, the stock market crash of 2007-2008 and now the COVID pandemic. In order to protect you, the participant, and allow the plan to be well-funded for many years to come, the parties tentatively accepted the $1.84 billion employer contribution,” Niccollai told members. “A new future service plan would be established similar to the current plan requiring that returns from investments may be lower to maintain benefits. A bridge to transition members to the new plan with minimal disruption, maintaining current contributions, has been established. We view what has occurred here as taking a potential disaster and turning it into a positive for all those involved.”
The three retailers said they expect their regular contributions to the planned new VAPP to be about the same as their current contributions to the UFCW national plan. All three companies added that the new agreement would fix the terms of their pension benefit contribution through the end of June 2028.
Source: Supermarket News