2-year education plan to outline unique two plan option
In a show of strong labor-management cooperation and understanding, Plumbers & Pipefitters Local 562 has reached an agreement on a new five-year contract with its two major contractor groups, the Mechanical Contractors Association (MCA) and the Plumbing Industry Council (PIC), Local 562 Business Manager John O’Mara announced last week, calling the agreement a “Win-win for our members, for the industry, for the consumer.” The previous five-year pact expired June 30.
CONTRACT BENEFITS
The new agreement includes:
• A very unique solution to the issue of whether to have a defined benefit pension plan, as they now have, or a defined contribution plan like a 401(k): they could have both. To help make that decision, Local 562 will launch a two-year educational program where the benefits and potential pitfalls of both types of plans will be presented to the union’s members who, after the educational program is over, will decide if they want both options available to them as a union, and if so, which option each person wants for themselves.
“The fact that our members will make the final decision is key,” O’Mara said. “We will be holding meetings in every part of our jurisdiction for our members and their spouses to make sure everyone understand the pros and cons of both plans so they can make an informed decision.”
This concept is a first within the United Association of Plumbers & Pipefitters International Union. The lead contractor negotiator, Dennis Corrigan, CEO of Corrigan Co. Mechanical Contractors, said a management consultant called it “a trailblazer.”
• A wage and fringe benefit package of $7.25 over the life of the pact; $5.75 in direct wages and $1.50 in unallocated monies that will be used for either wages or benefits in future years depending on the union’s needs and the industry’s conditions.
• Several language changes that take into account new commercial mechanical equipment and how its used and staffed designed to keep union contractors competitive in a growing industry.
“This contract puts money in our members’ pockets in recognition that our plumbers and pipefitters are the best in the country,” said O’Mara, adding “it also benefits our contractors in terms of language changes to keep them competitive and it benefits the consumer because they will get high quality products and services for their investment.”
EARLY START, OPEN DIALOGUE
“The key to this successful contract has been an open dialogue our contractors have with Local 562 which allows us to share issues and concerns throughout the contract period so that when we get to negotiations, both sides have a clear understanding of issues and we work together to resolve them in a manner that benefits the union’s members and our contractors,” said Bob Mitchell, chairman of the PIC’s Labor-Management Committee and project director for Franklin Mechanical.
He noted too that contract talks began last February.
Added Corrigan: “There is a lot of respect for one another on both sides of the table. While we don’t always agree on everything, that respect allows us to talk our way through issues and problems and come to reasonable solutions.”
To insure open communications, labor and management meet no less than once a quarter, sometimes more often, to deal with issues that impact the industry as they arise.
“We have a true partnership between our union and our contractors. We work as a team, and this contract is a clear example that cooperation and understanding of each others’ needs works to benefit everyone, including the consumer,” O’Mara stressed.
P&PF 562 pension plan is unique
The issue of defined benefit pension plans is a topic of concern throughout the nation as an aging construction industry sees more retirees begin collecting benefits while more companies go out of business or non-union competition eats into the union workforce thus cutting into contributions to pension funds and straining the fund’s ability to meet pension obligations.
The approach to the issue of pensions of Plumbers & Pipefitters 562 and their two major contractor groups is unique.
While the pension plan is 93 percent funded, making it one of the best-funded plans in the nation, there is concern for the future and the nature of a changing construction industry, notes Bob Mitchell, chairman of the Plumbing Industry Council’s Labor-Management Committee.
“There a solid pros and cons for both a defined benefit plan, such as the one Local 562 has now, and a defined contribution plan like a 401(k) plan where the individual has more control,” Mitchell pointed out.
LOOKING TO THE FUTURE
“The reason we’ve been looking at this dual concept is a simple fact: individuals are living so much longer now then when the defined benefit concept was created 40 or more years ago,” said Dennis Corrigan, CEO of Corrigan Co. Mechanical Contractors and MCA lead negotiator.
“As a result, too often pension funds find themselves in trouble trying to sustain benefits over a period of time that is so much longer than what it was when life spans were shorter. Thus it was important to come up with a concept that takes this into consideration, provides some alternatives to deal with this concern, one that ensures the men have their retirement as promised.
“What makes this dual approach possible is that the management and labor pension trustees have done a remarkable job of keeping the pension fund healthy and viable,” he added.
Stressing that the companies have a strong interest in keeping the union viable because they are constantly selling the value of union jobs that produce quality work so that the union companies can continue to win work, Corrigan make an interesting point:
“We feel this dual approach will not only ensure the current members get the pensions they were promised and expect, it will also serve as a strong recruiting tool to attract the best young mechanics into our trade, ensuring we can get the work because we an provide the best results at the best price,” Corrigan added.
SENSIBLE APPROACH
Local 562 and the industry came to a sensible solution to the changing pension environment:
• EDUCATE: Spend two years for Local 562 to educate its members on the pluses and minuses of both plans.
“We want our members and their spouses to fully understand the issues and their options before asking anyone to make a decision,” said Local 562 Business Manager John O’Mara.
• VOTE: After the extensive educational process, Local 562’s membership will be asked to vote on whether or not to implement a 401(k) style plan alongside, not replace, their existing defined benefit plan.
• INDIVIDUAL DECIDES: If the membership agrees to have both options, each union member will decide whether to stay in the current defined benefit plan or move to the 401(k) style plan. They would have three years from ratification of the dual concept to make up their mind which one they wanted to participate in going forward.
TWO POSSIBLE RETIREMENT
INCOME STREAMS
If a person decides to move into the new 401(k) style plan, their pension benefits from the current plan at the time of a change would still be in effect. The member, upon retirement, would then draw a benefit from both plans.
NEW MEMBERS
For new union members, they would automatically be enrolled in the 401(k) style defined contributions plan and would not participate in the existing defined benefit plan.
Employers would continue to make negotiated pension payments into the plan of the member’s choice.
“It puts the decision on what kind of a pension our member want into their own hands, and that’s a positive step,” O’Mara said.
“No one would be forced to do anything. The decision is entirely up to our members, first, to decide if we want two pension options and second, if we do, what each individual would like for themselves.”
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