The United Parcel Service (NYSE: UPS) and the Teamster's Union have reached agreement on the proposal Douglas McIntyre wrote about here last week. A new five-year contract, to be voted upon by the Teamsters' UPS employees, would transfer the 43,000 UPS employees currently enrolled in the Central States Pension Fund, which covers almost 400,000 union members from a number of companies, into their own pension fund, funded by UPS and administered cooperatively by UPS and the union. The contract would require UPS to make a one-time pre-tax payment of $6.1 billion to the CSPF to make up for its loss of members.

UPS is the largest employer of Teamsters, with around 240,000 covered by this contract proposal. The union claims that the new pact will not only better secure pension rights, but also bring increased wages and safeguard medical coverage for current and retired UPS workers. According the to The Wall Street Journal [subscription], the new contract would increase wages and benefits by $9 per hour over five years.

Critics of the proposal worry that, for the union, culling the UPS workers from the already-underfunded CSPF could weaken the pension security of non-UPS union workers. While UPS claims that the agreement will help it remain competitive, any cost-capping features in the contract that will allow them to compete with mostly non-union FedEx have yet to be specified.

Both sides claim to be pleased that accord was reached upon almost a year before the previous contract was due to expire. For the union, it will allow the members to vote on, and hopefully pass, the contract in time to beat new pension regulations that take affect January 1. For UPS, the pact secures an uninterrupted labor force for many years to come.