Bimbo: Pension challenges not unique to baking

by Josh Sosland
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MEXICO CITY – In offering background on a one-time accounting charge of 1,037 million pesos ($80 million), Grupo Bimbo S.A.B. de C.V. said the baking industry is not alone in grappling with struggling multiemployer pension plans. The company said it was committed to participating in “the problem-solving process” with respect to m.e.p.p. liabilities.

Bimbo’s statement, offered in the company’s quarterly earnings statement, follows:

Multiemployer pension plans (m.e.p.p.s) are collective retirement plans created by the Labor Management Relations Act of 1947, known as the Taft-Hartley Act. MEPPs are designed for workers in industries where it is common to move from one employer to another constantly.

According to the Pension Benefit Guaranty Corporation in the U.S. there are currently more than 1,500 active m.e.p.p.s, covering approximately 10.1 million participants.

All types of pension plans today face structural problems leading to funding status concerns, and particularly m.e.p.p.s. The financial health of m.e.p.p.s has been stressed by poor investment returns, low interest rates, a reduction in the contributor base and, in some cases, retirees that greatly outnumber active participants.

Bimbo Bakeries USA currently participates in 34 multiemployer plans covering approximately 15,100 associates. To safeguard pensions already earned by its employees and to substantially mitigate risks to the company’s future pension liabilities, B.B.U. recently took a proactive stance to address funding concerns for two of the m.e.p.p.s in which it participates, The New England Teamsters Pension Fund and the Bakers Local 433 Fund.

While there is a negative one-time accounting impact of Ps 1,037 million ($79.7 million), withdrawing from the plans enhances the company’s long-term financial health, and generates a positive financial effect with a present value of Ps. 876 million ($67.4 million) before tax.

These actions undertaken and embraced by B.B.U., offer a unique opportunity to fund our associates’ retirement benefits and substantially mitigate future risks associated with the financial health of the plans.
Both of these actions provide certainty for the interests of all stakeholders, including unions, associates, the company and shareholders.

B.B.U. is committed to being part of the problem-solving process and resolved to take the responsible steps with respect to its m.e.p.p. liabilities and its associates’ retirement benefits. Going forward, B.B.U. will be vigilant and opportunistic in this regard and will seek to capture certainty and reduce volatility and exposure within the m.e.p.p.s landscape.

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READER COMMENTS (1)

By Shan Nathan 10/26/2012 4:12:45 PM
Pensions