Three different grocers have entered into separate tentative agreements with local unions of the United Food and Commercial Workers (UFCW) to withdraw from the UFCW International Union-Industry Pension Fund, a multi-employer pension plan referred to as the National Fund. Kroger, Albertsons and Ahold Delhaize-owned Stop & Shop have all approved their respective agreements along with the National Fund board of trustees, so now it's up to members to ratify.
"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," said Gary Millerchip, Kroger's chief financial officer. "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. Our strong free cash flow and confidence in our model is allowing us to pursue this opportunity, while still accomplishing our other capital priorities such as returning cash to shareholders via our dividend and share repurchase program."
Kroger, Albertsons and Stop & Shop plan to establish variable annuity pension plans, with the goal of improving security for retirement benefits for future service.
In order to fulfill obligations for past service for associates and retirees in the National Fund, Kroger expects to pay a withdrawal liability of $962 million, while Albertsons will pay $286 million and Stop & Shop will pay $649 million.
The agreements, if ratified, will impact 18,000 Stop & Shop associates represented by four UFCW locals unions, 33,000 Kroger employees across 20 local unions and an unspecified number of Albertsons employees from nine local UFCW unions.
We are pleased with this agreement,” said Vivek Sankaran, president and CEO of Albertsons. “We believe this protects and provides the right benefits for our employees, while reducing financial risk going forward.”
The three retailers all plan to contribute approximately the same amounts as they did to the National Fund to the new variable annuity pension plans (VAPP). There are plans to establish the VAPP by Oct. 31, 2020 if the agreements are ratified.
"Together, these agreements are expected to materially improve the security of pension benefits for associates and reduce financial risk for the company," Ahold Delhaize said.
The Stop & Shop Supermarket Co. LLC's parent company Ahold Delhaize USA is No. 11 on The PG 100, Progressive Grocer’s 2020 list of the top food retailers in North America. Cincinnati-based Kroger is No. 3 on the list, while Boise, Idaho-based Albertsons is No. 8.