Fleets must weigh expense, risk against unrelenting need for drivers
Is a pension the key to retention for footloose drivers? Or is it just the source of more apprehension for company executives trying to design compensation programs that are attractive to workers and acceptable to regulators? Several factors make these questions more urgent than ever, while keeping the answers elusive.
Two new reports document the rapid expansion in trucks and drivers. The Bureau of Labor Statistics projected that the number of light- and heavy-truck drivers will increase by nearly half a million in the next decade, from 3 million in 1998 to almost 3.5 million in 2008. Even this estimate may be understated. The Census Bureau recently released the final results of the 1997 Vehicle Inventory and Use Survey. It shows that the number of combination trucks shot up by 27% between 1992 and 1997, from 1.4 million to 1.8 million, while single trucks increased by 5%, from 3.7 million to 3.9 million.
Not-for-hire operators accounted for four-fifths of the trucks, a gain of 7% from 1992. The for-hire universe was divided between nearly 700,000 trucks operated by motor carriers and 200,000 by owner-operators; the latter were almost evenly split between "independent" and "leased to a company." The number of trucks in the for-hire category grew nearly 22%, or three times as fast as the not-for-hire fleet. And TL outnumbered LTL by about 2 to 1.
These numbers show that growth has been occurring in all types of fleets - contrary to a popular impression that not-for-hire and LTL fleets are in decline. One implication is that there are no "easy pickin's" in terms of categories that are downsizing or dropping out of competition for drivers. Another implication is that for-hire companies must consider the compensation that private carriers can offer, not just the for-hire fleet down the street.
Trucking companies have been leery of offering traditional, defined-benefit pension plans, partly because companies in multi-employer plans have been struggling for nearly 20 years to get relief from withdrawal liability penalties that make it "too expensive to go out of business." On the other hand, President Clinton has advocated a number of retirement savings incentives, including tax credits for small employers that start plans. Therefore, some type of pension improvement seems to be on the short list for tax changes in 2000.
But are pensions an effective inducement for drivers? If they're looking for signing bonuses, plusher cabs, and other goodies, a pension plan that only rewards 20 or 30 years of loyalty may not get a second look.
However, the most valuable drivers may be those with some seasoning who are ready to stay with one company for the long haul. Unlike hot ".com" companies, most fleets don't have stock that is attractive enough to be part of a compensation package. So tax-deferred pension income may be a better way to attract and hold those drivers.
Some drivers may fear that a company won't be able to make good on its pension promises. But the Labor Dept. has just issued proposed rules designed to make small pension plans more secure. Larger plans already pay premiums to the Pension Benefit Guaranty Corp., which makes every participant in a bankrupt firm's defined benefit plan whole.
The bottom line: Pension coverage is expensive for companies. Not only are there complex design decisions and rules to follow, but Congress, regulatory agencies, and sometimes courts have a nasty way of changing the rules or their interpretation. Pension plans may also not appeal to drivers whose credo is"Show me the money - today." But more mature drivers may want the tax advantages of pension coverage. And they may be just what your company needs.