((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto)) by Niket Nishant
Efforts by Boeing BA.N workers to restore the traditional pension plans they abandoned a decade ago appear to many to be doomed to failure, as reinstating such a structure could exacerbate the precarious financial situation of the aircraft manufacturer.
The reinstatement of defined benefit schemes – where responsibility for pensions is primarily borne by the employer – will require a major concession from business, especially as most companies have moved away from this model.
Boeing has resisted attempts to reinstate the regime. Jon Holden, the negotiator for the 33,000 striking Boeing workers, suggested after the union’s rejection of the company’s offer () that workers might be happy with another solution.
“This is about possibly exploring other defined benefit options, which we are prepared to do,” he said at a press conference on October 24.
The dispute highlights the delicate balancing act facing new CEO Kelly Ortberg, who is tasked with quickly ending the crippling strike while avoiding overpromising.
Alternatives are more likely to resemble defined contribution plans, which represent an expense for the company but do not add to its liabilities.
During its strike against General Motors GM.N , Ford FN and Stellantis STLAM.MI last year, the United Auto Workers (UAW) succeeded in obtaining a generous increase in employer contributions to 401(k) plans without requiring workers that they subscribe to it first.
“What the UAW ended up getting was an increase in this non-elective contribution without it being tied to employee contributions,” said Craig Copeland, director of legacy benefits research at the institute. non-profit research institute Employee Benefit Research Institute in Washington.
401(k) plans are one of the most popular forms of retirement savings accounts in the United States and are funded by both employers and employees.
AN EVOLVING LANDSCAPE
Defined benefit plans promise a predetermined monthly payment to retired employees, based on factors such as their salary and years of service.
Companies have abandoned this model and adopted defined contribution plans, which transfer the responsibility for building a retirement nest egg to employees.
These plans do not guarantee a fixed income in retirement. Employees contribute to a retirement account and the final payout depends on the money saved over time.
“Over the past 30 years, most employers have worked to end defined benefit plans. It would be extremely rare for them to return to them,” said James Angel, associate professor at the McDonough School of Business at Georgetown University.
The number of workers with only defined benefit plans has fallen from 62% in 1983 to 18% in 2022, according to the Center for Retirement Research at Boston College.
The Big Three automakers ended their pension plans following the 2008 financial crisis that nearly drove them to bankruptcy.
Boeing abandoned the structure in 2014 as part of a deal with union machinists to build its 777X jetliner in Washington, aiming to curb “unsustainable growth in our long-term pension liabilities,” the company said. company at the time.
The company referred Reuters to its statement in early September that a restart of the pension plan was not proposed.
The plan maker has exhausted cash through the first three quarters of 2024 and its investment-grade credit rating is currently at risk of being downgraded to “junk” status.
“With defined benefit plans, liabilities have to be recorded on the employer’s balance sheet. Once that happens, it changes the dynamic of their profitability and potentially their credit rating,” Mr Copeland said.
However, experts say it is remarkable that the UAW and the International Longshoremen’s Association, which briefly struck at the site in early October, have attempted to reinstate defined benefit plans.
“Unions are starting to incorporate this issue into their demands,” said John Logan, a labor law professor at San Francisco State University.
“Even though the UAW did not succeed and Boeing workers may not succeed either, the issue is likely to loom even larger in union negotiations in the future
