Kroger, Stop & Shop and the UFCW banded together to create the UFCW and Employer’s Variable Annuity Pension Plan for benefits for future service.
Associates across 14 divisions of The Kroger Co. have ratified an agreement with 20 local unions of the United Food and Commercial Workers (UFCW) to pull out of the UFCW International Union-Industry Pension Fund. A tentative agreement on this issue was struck this past July 21.
“We are pleased to reach an agreement that improves the security and stability of future benefits for our associates and modernizes our retirement benefits offering,” noted Kroger CFO Gary Millerchip. “In an environment where pensions are faced with funding challenges, our strong financial position permits us to invest in our associates.”
The agreement has been OK’d by Kroger, the National Fund Board of Trustees, the UFCW local unions and associates. The Stop & Shop Supermarket Co. LLC, an Ahold Delhaize banner, and Albertsons Cos. Inc. have each entered into separate agreements with the UFCW local unions to withdraw from the National Fund. Kroger, Stop & Shop and the UFCW have banded together to create the UFCW and Employer’s Variable Annuity Pension Plan for benefits for future service.
Kroger will pay the National Fund withdrawal liability of $962 million, on a pre-tax basis, to meet obligations for past service for associates and retirees. The grocer will also make a $27 million contribution to a transition reserve in the new variable annuity pension plan. On an after-tax basis, the withdrawal liability and contribution to the transition reserve come to about $760 million. This withdrawal liability will be satisfied by three years of installment payments to the National Fund.
“Kroger’s investment of nearly $1 billion to help secure and stabilize pensions for our associates is the most recent of several meaningful commitments we've made over the last decade to address the funding challenges facing associate pension plans,” said Tim Massa, SVP and chief people officer at Kroger. “This pension investment is in addition to the more than $1 billion we have invested since March to both reward our associates and to safeguard them and our customers through the implementation of dozens of COVID-19 safety measures. Additionally, as part of Restock Krogerannounced in 2017, over the period of 2018 to 2020, Kroger will have invested an incremental $800 million in associate wage increases.”
The agreement also establishes a pension benefit formula for Kroger’s contributions to the new plan through June 2028, at which time it will be subject to negotiation with the union. This move effectively fixes the terms of Kroger’s collectively bargained pension obligation with the 20 UFCW locals for the next eight years, thereby addressing the grocer’s projected future pension costs and minimizing future exposure to market risk in relation to the current plan.
As a result of the agreement, Kroger will incur a charge to net earnings during the fourth quarter of 2020 of about 98 cents per diluted share on a GAAP basis. According to the company, this doesn’t affect adjusted earnings per diluted share results for 2020, which are provided on a basis excluding such adjustment items as this contribution.
Noting that "[t]his agreement increases the contribution of grocery chains to [the] employees' pension plan and will help to ensure that these hard-earned benefits will be there for our members when they retire," Marc Perrone, president of Washington, D.C.-based UFCW International, said: "As COVID-19 cases skyrocket across the country, essential workers continue to serve their communities. Thousands of essential workers are still being exposed and infected every week as the hazards of this pandemic continue. Now more than ever, companies must invest in these hardworking men and women to ensure they have the hazard pay, essential benefits, and strong financial security that they have earned as this pandemic rages on."
In other union news, UFCW International, which represents 1.3 million food and retail workers— wants the CDC and its Advisory Committee on Immunization Practices to ensure that essential workers in grocery, meatpacking and food processing are among the first people to be vaccinated against COVID-19.
“As the largest union for America’s essential workers in grocery, meatpacking and food processing, UFCW is calling on the CDC to prioritize these brave men and women for early access to the COVID-19 vaccine immediately after health care workers,” said Perrone. “Protecting our country’s food workers is essential to keeping our communities safe and stopping future outbreaks in these high-exposure workplaces. CDC Director Redfield must recognize the vital role these essential workers serve by ensuring that they are among the first to receive access to the COVID-19 vaccine.”
According to the union, there have been at least 109 grocery worker deaths from COVID-19 and more than 17,400 grocery workers infected or exposed to the virus.