Kroger Retirees May Be Trapped in a Pension Plan That is About to Cut Their Benefits Dramatically and Still Faces Likely Insolvency

Kroger employees sue over pension plan

April 27, 2016

Cincinnati Business Courier - A group of Kroger employees and retirees is suing an Illinois-based pension fund, claiming their retirement money has been mismanaged.

The lawsuit involves an underfunded pension plan called Central States, Southeast and Southwest Areas Pension Fund that holds about 5,000 current and retired Kroger Co. (NYSE: KR) employees’ retirement funds, according to the complaint filed in U.S. District Court in Illinois. The outside plan has lost assets over the years as fewer members contribute and thanks to investment losses. Kroger employees want out of the plan.

The 11 employees and retirees who filed the lawsuit call the pension plan “massively underfunded” and say it’s projected to be insolvent by 2026, according to the lawsuit. The plan has $17.8 billion in assets and $35 billion in promised investments.

The plaintiffs in the case live in Indiana, Michigan and Kansas. They worked at Kroger for decades. Many are retired but have gotten jobs to make up for lost pension benefits or are expecting to get jobs during their retirement.

One example of the pension plan’s reduction program would cut participants’ benefits by 31 percent to 71 percent.

The plan’s board filed an application with the U.S. Treasury Department in September to get approval to reduce benefits. The plan’s participants “face an imminent threat of draconian reductions in the future, followed eventually by the plan’s complete collapse,” the Kroger employees said in the lawsuit.

The plaintiffs are all current or former Kroger employees who are represented by the International Brotherhood of Teamsters. The Teamsters negotiated a plan to move Kroger participants to a new plan. It joined Kroger in asking Central State to shift the Kroger employees' and retirees' pensions out of the plan. The Kroger employees’ money makes up about 2.5 percent of the pension plan.

The pension plan’s trustees rejected the proposal within five days, the lawsuit said. The plaintiffs said that indicated they didn’t give it serious consideration. They want an independent outsider to consider their request – which they call “urgent” – to pull out of the plan. The proposal indicates that after June 15, Kroger and the Teamsters won’t be obligated to go ahead with the proposal.

“The Kroger participants will be trapped in a plan that is about to cut their benefits dramatically and still faces likely insolvency” if their pension benefits are not transferred elsewhere before then, they said in a news release.

“Kroger and the Teamsters are continuing to work together to address this situation,” Kroger spokesman Keith Dailey told me. “Kroger and the Teamsters have met and corresponded with Central States many times over the last 12 months. They have indicated a willingness to modify the transfer proposal if Central States does not think it is sufficient to protect the remaining non-Kroger participants. Thus far, Central States has not discussed any possible modifications with Kroger or the IBT.

“The best course for everyone would be for Central States to agree to the requested transfer. Kroger and the (Teamsters) continue to hope Central States Pension Fund trustees will consider it seriously. It fully protects pension benefits of our Kroger associates and it leaves the Central States Pension Fund no worse off.”

Some of Kroger’s employees got involved in the pension plan through a deal with the Teamsters that goes back to the 1970s, Dailey told me. Most Kroger retirees have pensions with dozens of other plans, many of which are sponsored by the Cincinnati-based supermarket giant.

The plan has been in decline over the years. In 1980 it had more than 11,000 employers. Now it has about 1,500. Much of that decline followed deregulation of the trucking industry, the lawsuit said. It also suffered $7.6 billion in investment losses in 2008 from the financial crisis.