Kroger, Teamsters Reach New Pension Deal

The Kroger Co. and International Brotherhood of Teamsters have ratified a new labor agreement that provides for the retailer's withdrawal from the ailing multi-employer pension fund and the establishment of a replacement.

Kroger and IBT said they have been working together for several years on a plan to protect the pensions of Kroger associates at three distribution centers and two dairy manufacturing facilities operated by Kroger who are participants in the Central States Pension Fund.  The Central States Pension Fund projects it will go insolvent in 2025. The new fund, called the International Brotherhood of Teamsters Consolidated Pension Fund,  is designed to provide Kroger associates with a secure pension, and covers associates represented by the IBT at these facilities.

Mike Schlotman, EVP and CFO of Kroger, discussed the retailer's take on pension plans in the quarterly earnings call earlier this month. 

"About a decade ago we identified a great amount of exposure on pension plans and recognized then we would need to begin addressing that exposure like we would any big endeavor, one step at a time," he said, adding that Kroger's efforts began in 2011 when it negotiated and created the UFCW consolidated pension plan. 

Schlotman affirmed the key points for that initiative were capping prior service costs, negotiating a new benefit accrual, consolidating four plans into one and providing more efficient management of the assets. The retailer has made more than $2.3 billion in payments and funding commitments since 2012, which Schlotman says was done with two objectives in mind. 

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"We have adopted this approach in a low interest rate environment to provide greater stability for the pension benefits earned by thousands of Kroger associates and retirees, and to manage these liability proactively or frankly, to avoid kicking the can down the road."

Included in this new agreement are current Kroger associates/IBT members working at facilities in Hutchinson and Goddard, Kan.; Houston; Memphis; Indianapolis; and Livonia, Mich.  The total number of active associates covered is about 1,800. In February, Roundy's associates working at a distribution center in Oconomowoc, Wisc. ratified the same agreement.  

Kroger's withdrawal from Central States Pension Fund is effective Dec. 10, and does not require the approval of Central States. Kroger will make payments to Central States to fulfill its withdrawal liability obligation.

"This is a good agreement for our current associates and our company. It provides our current associates security for their future retirement and the company financial certainty regarding this important investment in our associates," Schlotman said in a statement. 

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Kroger said the new agreement the ratified agreement, would protect benefits under the previous plan while associates would also begin earning a new pension benefit through a formula negotiated by Kroger and the IBT. 

"Given the uncertain future of Central States and the potential adverse impact on our members, the National Committee felt the move to the IBT Consolidated Plan will ensure they have a stable and reliable retirement benefit in the future," Steve Vairma, International Brotherhood of Teamsters VP, said in a statement.