Turning Around the Crisis in Our Health Fund

Straight talk about where we stand, how we got here, and what we can do to protect our benefits for the future.

The new Local 804 leadership team inherited a Health Fund in crisis.  Financial reports revealed that for years the Fund has been running multi-million dollar deficits. Fund actuaries projected we would be in the red by June of next year.

UPS was demanding severe benefit cuts, including increasing all co-pays and massively hiking the cost of retiree healthcare to more than $1,100 a month for family coverage.

The company’s plan also included establishing a minimum age for retiree healthcare of 55 years old.

The critical decisions about the future of our benefits were about to be taken out of our hands and put into the hands of an outside arbitrator who could have implemented all of these cuts and more.

We were not going to let that happen. Instead we rolled up our sleeves and got to work.

Taking on UPS

The new union trustees did our due diligence. We met with attorneys, actuaries and experts. We told UPS their proposals were unacceptable. And we sat down to hammer out a tough agreement that protects the membership. As a result:

  • We protected affordable healthcare for Local 804 members and our families.  
  • We prevented the massive hikes to retiree healthcare and guaranteed that members with 25 years of service will  continue to be eligible for retiree healthcare at any age.
  • We strengthened the Fund’s finances by getting UPS to put 65¢ of the $1 per hour increase in benefit contributions due this year under the contract into the Health Fund. The other 35¢ will go into the Pension Fund.

The agreement with the company trustees also includes some bitter pills to swallow: including higher co-pays,  higher out-of-pocket expenses on out-of-network claims, and an increase in the cost of retiree healthcare.

A Healthy Fund is Run Into the Red

The responsibility for these cuts lie squarely on the shoulders of the company and former union trustees who inherited a strong, healthy fund and ran it into the ground.

As recently as 2003, our Fund had $34.3 million in reserves, enough to pay one year’s worth of benefits. Unfortunately as the cost of healthcare rose, not enough funds were negotiated in the 2002 and 2008 contracts to pay for our benefits.

Even worse, the company and our former union trustees secretly agreed to reduce the money going into the Health Fund in 2005 and diverted millions from our Health Fund to our Pension Fund.  Local 804 members were never told a word about this.

The Battle Ahead

We know these benefit changes will not be popular with the membership. But we’re not willing to play politics with your healthcare. We didn’t create this crisis in the Local 804 Health Fund. But we are determined to fix it.

The interim agreement will stabilize our Health Fund and stop the bleeding—while protecting your benefits. But the battle for the future of our benefits will continue.
As part of the agreement, we are required to sit down with the company trustees this fall to negotiate a plan to restore the Fund to firm financial footing and to build up six months in reserves by Dec. 31, 2015.

Building up these reserves will not be easy. If healthcare costs continue to rise, then the company’s contributions are expected to once again fall short of the monthly cost of our health benefits by 2013.

Our contract expires in 2013. We all need to be ready to make UPS deliver the contribution increases we’ll need to protect our medical benefits and retiree healthcare.