Tops Markets has settled a major pension dispute that could have cost the company more than $180 million, making its path out of bankruptcy clearer.
The settlement, reached earlier this month following two days of meetings with a mediator, could end a fight that has dragged on for more than four years. The dispute has cast a cloud over Tops' finances, as well as the retirement funds of more than 600 workers at a grocery warehouse in Lancaster that the supermarket company acquired in December 2013.
While the details are still being finalized and the deal must be approved by a U.S. Bankruptcy Court judge, the settlement would resolve one of the biggest financial hurdles that Tops faces as it tries to restructure its business and emerge from bankruptcy.
For Tops, the deal frees it from an expense that could have cost it more than $100 million. The agreement means Tops no longer would be liable to pay as much as $183 million over 20 years to meet funding obligations to the Teamsters pension fund.
Instead, Tops, C&S and the Teamsters pension fund will contribute a total of $15 million that will help replace – at least in part – the pension benefits that the warehouse workers would have accumulated since the end of 2013. Those payments likely would be made into a type of retirement account.
"We are pleased to have reached an agreement in principle with the Teamsters, which will allow us to provide important benefits to Teamsters’ members," said Kathleen Romanowski, a Tops spokeswoman. "It represents an important milestone in our financial restructuring efforts."
For workers at the former C&S warehouse in Lancaster, who have not been accruing any additional pension benefits since Tops acquired the warehouse more than four years ago, the deal will provide them with a one-time payment from that $15 million funding pool, averaging about $25,000 per eligible employee, in a new retirement-type account that will be established for them.
It is likely, however, that payment will not fully reimburse the Tops warehouse workers for the additional pension benefits that they would have accumulated since the end of 2013. The Teamsters union is working on economic models to determine the best way to use those funds to offset the impact on workers, said Brian C. Dickman, the president of Teamsters Local 264, in a letter to workers.
For the Teamsters pension fund, which is underfunded, the settlement will shore up its finances by providing it with a cash infusion through the payment of the withdrawal liability that had been in dispute.
That obligation, valued at nearly $95 million in today's dollars, will be paid by the warehouse's former owner, C&S Wholesale Grocers, which supplies Tops with about two-thirds of its merchandise. Because Tops already has paid $29 million toward that liability since the end of 2016, C&S will pay about $65 million to cover the rest of the money owed to the pension fund.
The pension deal was struck between Tops and Teamsters Local 264, which represents workers at the Lancaster warehouse, as well as the Teamster pension fund and C&S. The agreement is expected to be considered by the Bankruptcy Court during a hearing on June 21.
The settlement, however, does not resolve a separate financial hurdle involving an underfunded pension fund for workers represented by the United Food and Commercial Workers Union Local One. That fund, which covers the vast majority of Tops' unionized workers, is underfunded by more than $380 million. Tops has told UFCW officials it wants to reduce its payments to that pension fund by two-thirds as part of its bankruptcy restructuring.