About 33,000 Boeing employees have been on strike for seven weeks after voting twice to reject their labor contract, with the latest rejected proposal featuring a 35% pay increase.
But the sticking point for many workers is Boeing’s refusal to reinstate the defunct pension plan.
That plan was scrapped after a 2014 contract extension was narrowly approved by the union, International Machinists and Aerospace Workers Union District 751.
But Boeing views refusing to reinstate pensions as non-negotiable.
“There is no scenario in which the company would reinstate defined benefit pension benefits for this or any other group,” Boeing said in a statement.
“They are prohibitively expensive, which is why virtually all private employers have moved away from them to defined contribution plans.”
According to the U.S. Department of Labor, more than 151 million private sector employees currently have retirement plans.
But fewer than 6% of the 800,000 programs have defined benefit plans like the old Boeing pension.
In 1975, when the Employee Retirement Income Security Act was enacted, one-third of U.S. retirement plans were defined benefit retirement plans, such as Boeing’s old pension plan.
That percentage has fallen to about 7%, with many employers opting for 401K programs that steer most workers into the stock market in hopes of benefiting them in retirement.
Under a pension plan, retired workers receive the same amount each month for the rest of their lives, based on their tenure.
Some workers believe that pensions are safer because they are not linked to the stock market. However, pensions can also be less profitable than 401Ks because they are not adjusted for inflation.
– Payment guarantee –
In 401K plans, known as defined contribution plans, funding comes from a portion of a worker’s salary along with employer contributions.
Employers can contribute up to 3% of a worker’s annual salary under major retirement plans, according to a report by investment firm Vanguard.
The total possible contributions to a 401K, including funds from both employers and employees, are limited to $69,000 in 2024, or $76,500 for people age 50 and older.
Mike Corsetti, a quality inspector for the city of Everett who has worked for Boeing for 13 years, said he voted against the contract in part because his pension was not restored.
“A lot of people feel that it would be great to have a guaranteed monthly payment,” Corsetti said, expressing discomfort with the uncertainty in the stock market.
Corsetti said he was “somewhat optimistic” that the negotiations could lead to pension restoration, but added: “I’m not holding my breath.”
Under the current plan, Boeing automatically puts 4 percent of an employee’s salary into that person’s 401K plan. If employees invest money in the plan, Boeing will match a portion of their payments.
The latest contract offer, which workers rejected on Oct. 23, included provisions that would give Boeing better matches with employers. The company also agreed to pay a special one-time contribution of $5,000 on top of $401,000 for employees.
The rejected deal also increased monthly payments for experienced workers who still received pensions that covered their tenure before the plan was discontinued in 2016.
The rejected proposal would increase monthly payments from $95 to $105 per year of service.
IAM is targeting a 40% increase. The union is seeking pension reinstatement and payments from Boeing to cover the period after the plan is phased out.
A 40% wage hike would increase Boeing’s costs by $1.8 billion by 2028, according to Bank of America.
According to a Bank of America analysis, reinstating the pension would increase annual costs by about $300 million to $400 million, and add about $20 billion to replace pension funds lost since the program was frozen. That’s what it means.
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