HOUSTON -- Waste Management Inc. will terminate its defined benefit plan, following a previous decision to freeze the $200 million pension plan.
The company's management changed direction last month as part of an announcement to investors that second-quarter earnings would be less than anticipated.
The company later said it might restate first quarter earnings, lowering them by $55.4 million.
The board also said its chief financial officer and general counsel resigned, and that it would initiate a stock buyback program and sell assets in an attempt to raise the company's stock price.
Waste Management's stock has dropped almost 8% since the announcement, to $23.87 from $25.94.
In its announcement, the company said it hoped to improve employee morale by proceeding with the termination of the pension plan. Management, last year, said it would terminate the pension plan following the acquisition of Waste Management Inc. by USA Waste Services.
USA Waste Services, a smaller company, decided to keep the Waste Management name.
In June, after the acquisition, Waste Management Inc. changed course and said it would freeze the plan. Termination costs ballooned to $215 million from initial projections of $125 million.
Company spokeswoman Cherie Rice said she did not know why the costs were so much higher than anticipated.
"We handed over information to an outside (actuarial) firm to calculate the cost of terminating the plan," said Ms. Rice. "A variety of factors made it cost more.
"Some of the data originally given (to the firm) was incorrect."
Towers Perrin is the actuary of the Waste Management pension fund. A company spokesman declined to elaborate about the miscalculation.
"There are a number of variables and elements that can come into play over time that can change these numbers," said Stanley Davis, a Towers Perrin spokesman.
"It's Towers Perrin's policy not to comment on the details of work we do for clients, so we can't tell you specific reasons."
Freezing the plan would have allowed the company to spread the cost of termination over several years vs. taking an immediate big hit, Ms. Rice said.
The decision to freeze the plan was unpopular with employees, who were anticipating a lump-sum payout from the defined benefit plan.
"It was a bigger issue to employees than we anticipated," she said.
The employees might have become emboldended by USA Waste Services' decision to terminate a non-qualified supplemental executive retirement plan for more than 100 top executives that resulted in lump-sum payouts for that group, including $13.4 million to Waste Management Chairman and founder Dean Buntrock.
Waste Management has not submitted the required filings to terminate the pension plan with the Pension Benefit Guaranty Corp., said an agency spokesman.
Waste Management decided to terminate the pension plan because management wanted a consistent benefits package for all employees. USA Waste Services' employees have a 401(k) but no defined benefit plan, Ms. Rice said.
"The goal was to get a consistent set of benefits," she said. "There has been a trend away from defined benefit and we chose to go with that trend.
"For those that had their pension plan deleted, they received a better 401(k) plan, an employee stock purchase plan and improvement to their health benefits."
