Kroger workers, retirees sue failing pension fund, trustees

• Plaintiffs, current and former employees at Kroger, filed a complaint against Central States Pension Fund for breach of fiduciary duty
• Plaintiffs say the pension fund violated provisions of ERISA, by failing to consider a plan to remove Kroger from the pension fund
• The Central States Pension Fund is on the brink of insolvency, stating that at this rate, the plan will run out of money in 2026
• About 5,000 former and active Kroger employees participate in the plan, making up 2.5 percent of the plan's total contribution revenue.

A group of participants in the Central States Pension Fund is suing the fund, its administrators and trustees for breach of fiduciary duty.

The move follows a nationwide movement of retirees who have taken to protesting the troubled fund, which is set to run out of money in 2026.

The plaintiffs are current and retired warehouse workers at Kroger Co., hailing from Michigan, Illinois and Kansas, whose retirement funds are invested in the Rosemont, Illinois-based Central States Pension Fund.

In the complaint, filed April 25 in the U.S. District Court for the Northern District of Illinois, the plaintiffs allege that Kroger negotiated a complex plan with the International Brotherhood of Teamsters in March 2015, to remove Kroger's participation in the Central States Pension Fund plan, to a "stable, defined-benefit pension plan for the Kroger participants."

The plaintiffs allege that the plan and its trustees breached its ERISA fiduciary duty by failing to consider the plan that would remove Kroger Co. fromthe pension plan, whichcould inturn, save retirees' pensions from massive impending cuts.

ERISA, which stands for Employee Retirement Income Security Act of 1974, is a federal law that sets standards for most voluntarily established pension plans in private industry to provide protection for individuals in these plans.

"The plan's trustees have flatly refused to consider the proposal to preserve the benefits of the Kroger Participants without harming other participants," the filing states. "The Plan's Executive Director, Thomas Nyhan, has written that 'the [Plan] has a firm policy against facilitating employer withdrawals in any way,' without any apparent consideration of whether those withdrawals could bestructurestoward, or even benefit, the Plan."

The 38-page complaint allege that Central States Pension Fund administrators and trustees "refusal to consider the Proposal or even attempt to negotiate favorablemodificiationsto the proposal harms the plan's participants and violates ERISA."

The lawsuit seeks an order that would require an independent fiduciary to review the proposal and determine whether it is in the best interest of plan participants.

"Plaintiff's request is urgent," the filing states. "If the plan does not take further action on the proposal by the deadline (currently expected to be June 15, 2016), then Kroger and the IBT will have no obligation to go through with the proposal and the Korger participants will be trapped into a plan that is about to cut their benefits dramatically and still faces likely insolvency."

Amanda Amert, a lawyer for Jenner & Block, a Chicago law firm that is representing the plaintiffs in the case, declined comment.

Defendants named in the suit include executive director Nyhan and trustees Greg R. May, Gary Caldwell, Charles Whobrey, Marvin Kropp, George Westley, Arthur H.Bunte, Jr., and Ronald Destefano.

A failing fund  desperate to keep employers 

The Central States Pension Fund was created in 1955 to provide pension benefits of the International Brotherhood of Teamsters in the trucking industry and eventually was expanded to include numerous other employers in other industries.

The pension fund, one of the national's largestmultiemployer Taft-Hartley defined benefit funds, is on the brink of insolvency. Thefund calledfor the cuts when Congress passed the Multi-employer Pension Reform Act of 2014, signed into law by President Barack Obama last year.

The law gives the Central States Pension administrators the ability to cut union retirees' benefits by at least 30 percent. Some retirees could see their retirement benefits cut up to 90 percent.

Both locally and nationally, retirees have been protesting the cuts, set to take effect July 1. That is, unless the Treasury Department's special master Kenneth Feinberg, declines to approve of the cuts next week.

Pension regulators, namely Nyhan, say the cuts are necessary. Central Statesis now paying out $3.46 in benefits for every $1 it takesin — paying $2 billion a year more than it receives.

The fund is currently $17.5 billion short of its debts, regulators say. Nyhan said the only way to avoid the fund's collapse in the next few years is reducing payouts to make the money last longer.

"The claims in this complaint, orchestrated by Kroger and the International Brotherhood of Teamsters, are without merit. As fiduciaries, Central States’ Trustees have a duty to safeguard the retirement benefits of all of our 407,000 participants–not a select few from a particular employer," Nyhan told the Enquirer in an email.

"Central States is prepared to defend against this complaint and we are confident that Central States will prevail by demonstrating that the Trustees’ actions are consistent with their fiduciary duties."

According to public comments by plan trustees, roughly 5,000 former and active Kroger employees participate in the plan. Contributions made on behalf of active employees make up 2.5 percent of the plan's total contribution revenue.

Complications in the implications of the suit

While some pension plan participants have called for a suit against the Central States Pension Plan for breach of fiduciary duty, specifically pertaining to violations of ERISA, many are vehemently opposed to employers with active workers being removed from the fund.

One of the biggest of the main criticisms of the fund and International Brotherhood of Teamsters, is that the fund has allowed some of the largest employers out of the fund, creating adirerfinancial situation.

James P Hoffa, current president of the union, negotiated the withdrawal of United Parcel Service, the pension's biggest employer, from the pension fund in 2007. Although the company had to pay more than $6.1 billion to shore up the plan, it also resulted in 238,000 fewer young, active member payers into the pension fund.

"He let go of a whole group of young workers who would've put into that fund," Ken Paff, head of the Detroit-based Teamsters for a Democratic Union, told The Enquirer this month. "A lot of people won't forgive him for that."

Among other things, the plaintiffs in the case against Central States are asking the court for an accounting of how the trustees made the decision to reject the Kroger proposal and any "other relief as the Court deems just and proper."