401(k) vs. Pensions: Teamsters vs. Waste Management, Inc.

Don Walker of the Milwaukee Journal Sentinel reports, "Trash haulers’ union chilly toward 401(k) plan."

The leaders of Teamsters Local 200 said Thursday that they have made no decision yet on whether to take Waste Management Inc.’s “last, best and final offer” to union membership for a vote.

It appears that one of the sore points in the company's proposal is to drop the pension plan in favor of a 401(k) plan:

Speaking out in detail for the first time since the strike of union trash haulers began Aug. 26, union leaders said they learned only late in the negotiating process of Waste Management’s proposal to drop the Central States Pension Fund in favor of a 401(k) plan. Under Central States, the employees have a defined-benefit pension.

As a result, Tom Millonzi, secretary-treasurer, and Tom Benvenuto, the union’s business agent, said the local needs more information from Waste Management in order to make an informed decision. So far, they said, specific information has not been forthcoming.

“We feel we don’t have enough information on their plan,” said Benvenuto. “They refuse to answer anything.”

Waste Management thinks the pension plan is an "unreliable fund":

The two said the switch from Central States to a single-employer 401(k) program would impose an unfair and burdensome financial penalty on retirees and some current employees because it would take money out of workers’ pockets.

“This has ramifications for all employees for the next five years, and to some guys for the rest of their lives,” Benvenuto said.

Lynn Morgan, a Waste Management spokesman, said the Central States issue was raised “some time ago.” She said the company felt the Central States pension was an unreliable fund for employees and that a new plan would “bring greater value to employees.”

I am sure they have an ACTUARY! And then there is the minor question of how current retirees would be handled...

As to the impact on retirees if Central States were abandoned, Morgan said that would be a decision made by Central States, not the company.

The Teamsters meanwhile are posturing for a deal similar to the one struck with United Parcel Service (UPS) recently:

As a counter-proposal, union officials have offered an alternative they said is similar in nature to the pension Teamsters have with UPS.

On Wednesday, Waste Management made public what it had offered to an estimated 240 striking Teamsters trash haulers in talks before a federal mediator: a five-year contract; a first-year wage boost of 10% to 15%; and the pension plan change.

Millonzi and Benvenuto said the company offer didn’t tell the whole story.

“Let’s be honest here,” Millonzi said. “The job isn’t glamorous, as we all know. They pick up people’s trash, work terrible hours and work in bad weather. And they work until their routes are done.”

Millonzi said the haulers work on an incentive basis, and their hourly wage averages about $14 to $19. The Waste Management offer, he said, is designed to put pressure on younger drivers to approve it.

The workers’ contract expired April 30.

Since the strike began, the company has been using replacement drivers brought in from around the country. Waste Management collects trash in Kenosha, Racine, Milwaukee, Ozaukee, Washington and Waukesha counties. Thousands of homes, apartment complexes, restaurants and other commercial operations depend on the drivers to pick up trash.

By way of background, UPS and the International Brotherhood of Teamsters or "Teamsters" reached a deal back in October 2007 whereby UPS got to get out from under pension obligations to the Central States fund mentioned above, and instead got to get the employees covered under a separate DB plan managed by UPS instead of the Central States multiemployer plan manager. This caused the UPS to take a one time charge of nearly $4 billion to fund the plan and caused its credit rating to be put under watch for potential downgrade as a result of the transaction.

Waste Management is obviously posturing to get out from under this type of an arrangement (unlike what UPS finally agreed to do) and trying to push for a 401(k) plan instead. Wow!