Major progress in our goal to secure our Pension!
/Major Progress Made Toward Securing our Pension’s Future and Improving Benefits
We have big news -- a major step in implementing the bargained deal has been approved. One year ago, our union bargaining team secured a tentative agreement for a path forward to secure our pensions for years to come and the membership approved that at our contract vote meetings. We have been working hard ever since to move through all the steps to implement this and have just finished one of the last hurdles.
This is very exciting news for all of us who want to have a solid and secure pension and to be able to have the opportunity in the future to improve benefits. The last steps are the approval by the Pension Benefit Guaranty Corporation (the PBGC is the federal agency that oversees these transactions) and the creation of the new Variable Annuity Plan (VAP), discussed in detail at contract vote meetings last year and overwhelmingly approved by the membership at those votes. The application to the government was filed at the beginning of November and the creation of the new VAP is in process. Stay tuned and read below for more details on the new pension plan.
More information
Some of you may be near retirement after decades of work while others may have started at the grocery store in just the last few years. Whatever your situation, your pension is one of the most important ways to have income when you retire. Your employer begins making payments into your pension when you are hired, and you become vested in that pension plan typically after just 5 years of work in the store.
Tip: The amount someone gets at retirement depends on many things. If you have a question about your specific pension benefits, when you are vested, or other topics, please call our grocery store workers’ retirement plan administrator, Zenith, at 206-282-4500, press option 2, then press option 3.
For decades, grocery store workers have stood strong and gotten the employer to pay contributions to the Sound Retirement Trust to fund our pensions. However, in the past 20 years, there have been economic crises from the Dot Com Stock Market Crash in 2000 to the real estate bubble crash of 2008 and COVID-19. There have also been changes in the grocery store industry over the last generation that created challenges and pressures on our pension plan.
The good news is that, despite all these economic challenges and the changes in our industry, in 2019, we were able to negotiate with Kroger and Safeway/Albertsons to agree to make substantial investments into our pension benefits. These agreements secured hundreds of millions of dollars of support from the employers to both stabilize the Sound Retirement Trust and create a new style of plan that limits the impacts of ups and downs in the stock market on your pension benefits. As part of the support to the Sound Retirement Trust, Kroger has agreed to have a portion of our plan join a multiemployer plan with membership from multiple other UFCW locals. This action will reduce the Sound Retirement Trust funding needs and secure our pensions.
There were several factors that put us in a positive position to be able to achieve this agreement. Two of the most important were: 1) improving wages of all workers as a result of the higher state minimum wages and our higher pay rates in our contracts; and, 2) having a large surplus of tens of millions of dollars in funds in our health care plan through our focus on free preventive care and wellness. This allowed us to increase the employer funding of our pension benefits without impacting our health care plan benefits.
This path to secure our pension plan required many steps for the employers and the unions (we co-manage the pension plan) to complete and over the last year we have continued to push forward along that path. And in early November 2020, we took two big steps toward realizing these goals to support and stabilize our plan’s future: 1) our proposal to transfer a part of the benefits earned under our Sound Retirement Trust Pension to the Consolidated Pension Fund was approved on 11/11/2020 by the Consolidated Fund. The Consolidated Fund is where our members in the Kroger Meat pension were transferred in 2010; and, 2) our application to complete this pension deal was filed with the PBGC.
There now begins a 120-day period for the PBGC to review our application and decide about approving our application to move the Kroger liabilities and assets from the Sound Retirement Trust funds over to the Consolidated Fund. This will improve the funding status of both plans. The goal of the transfer is to pool our retirement funds with fourteen other UFCW locals across the United States, making our pension benefits more secure. This will put our plan in Green Zone status, enabling us to have the opportunity to negotiate improvements to benefits that have not been allowed for years under the law because our plan needed to improve its funding.
Moving forward, there will be two pension plans in place. The current Sound Retirement Trust will remain in place and continue to be funded. The new plan for future benefits will be a Variable Annuity Plan (VAP), the plan recommended by our grocery store worker bargaining team, discussed in detail at Grocery Store Bargaining Kick Off in 2018 and in detail at the contract vote meetings last year, and overwhelmingly approved by the membership at those votes. A VAP is designed to adjust up and down each year based on investment returns.
What is critically different now is that returns greater than 5.5%, up to 8.5%, can be used to increase benefits for the first time since 2010. If the VAP achieves lesser returns than 5.5%, benefits could be adjusted downward. Any returns above 8.5% will help boost a stabilization reserve that will be part of the VAP and will be funded with $15 million to start in order to help prevent reductions in benefits in the event of returns below 2%. With these safeguards and adjustments, the VAP should stay fully funded in all market conditions and the benefits increase over time as wages increase.
Another Bit of Advice: Planning ahead is about more than just the money.
Retiree Barbara Rhodes – former UFCW 21 grocery store worker from QFC and bargaining team member "It's wonderful to have retirement but I'd say to all grocery store workers, have a plan. I wish I'd known twenty years ago what I know now. I don't just mean financially. I mean what you plan to do with yourself. Develop interests and those things when you're still young. And use your full health benefits before you retire too. I met with the Sound Health mental health counselor and they were very helpful. And protect your body, take your breaks and you'll be happier when you retire and are not as worn out as I was.”
A couple years ago we made several goals for our pension, and we have made great strides to achieve those goals based on our union’s collective work, standing together for a secure retirement, and making practical and important decisions. Here is a sample of what we have accomplished so far:
Accelerate funding and secure those benefits that have already been earned.
Approve a Variable Annuity Plan (VAP) design with the following elements:
Defined benefit plan offering a life-time benefit.
Benefits adjusts annually up or down based on investment performance.
The VAP’s investments will be more conservatively invested so extreme movements up or down are minimized.
Funding is always in balance and avoids underfunding risk.
Workers have opportunity to earn benefit increases as wages go up over time.
Creates a stabilization reserve of assets to be used to reduce risk to pensions during any future downturn.
Negotiate a long-term pension funding agreement.
Position ourselves so that as we go into the next round of negotiations in 2022 we have largely addressed the underlying issue with the pension so we can better focus on negotiating improvements to wages and other working conditions.
Want to learn more about your pension – especially if you are less than 5 years away from retirement? Please come to our next round of pension trainings with the Sound Pension Trust. We plan to hold a member retirement education training after the decision of the PBGC comes through and will update members on the details of the date and time of the training after that PBGC decision has been made.
