Boeing plans to shift its non-union employees away from a defined benefit pension plan, including about 26,000 workers in the Puget Sound region.
In January, machinists here narrowly accepted a similar pension freeze to win the 777X production line. Now, Boeing’s including non-union employees in the retirement plan change because the company says its pension obligation is unsustainable.
Starting in 2016, the company will make contributions into a 401(k)-type retirement plan instead of into the pension, with bigger contributions in the first few years to ease the transition. Workers will still get pension benefits they’ve already accrued.
Olivia Mitchell of the Wharton School at the University of Pennsylvania says Boeing is following the lead of many companies like GE and Lockheed Martin in phasing out its pension plan.
`Inexorable'
"It’s been a slow and steady movement and I think it’s inexorable," Mitchell said. "We won’t see it turn around."
Boeing’s pension fund is short $10.5 billion, even though Mitchell says Boeing has been "kicking in billions of dollars over the last few years." The total pension obligation has almost doubled over the past 11 years to $69 billion in 2013.
Mitchell says Boeing is trying to reduce its long-term risk.
"The company has been whipsawed around by the volatility of the capital markets, interest rates going down, and the defined-benefit plan just got too expensive," Mitchell said. Companies are required to put more money into their pension plans when interest rates are low, as they've been since the Great Recession.
But local machinists fought bitterly to preserve their existing pension plan because they say a 401(k) will mean a less financially secure retirement. And they point to Boeing's sizable profits and record backlog as evidence of the company's strength.
Boeing says the new plan is better than what other companies offer, and the company has said it needs to keep costs in check because of tough competition in the aircraft market.
