Boeing's pension investments soar above assumed rate

Boeing

Boeing Co.'s pension plan investments have returned about 10% so far in 2012, exceeding its 7.75% assumed rate of return on pension assets, said Gregory D. Smith, executive vice president and CFO, in a conference call Wednesday on the company's third-quarter financial results.

Mr. Smith didn't specify the ending date of the period for this year.

“Our liability-driven investing continues to pay off,” Mr. Smith said in attributing the investment performance. ”We have been proactive in changing our investment strategy some time ago, and fortunately we did, (moving) to really match our investment strategy with our liability.”

“From an ERISA perspective we are over 100% funded,” Mr. Smith added. “ERISA … drives the funding requirements,” Mr. Smith said.

The pension plans had $51 billion in assets and $67.6 billion in liabilities, according to its 10-K report, issued Feb. 9. That would give Boeing a 75% funded status.

Charles Bickers, Boeing spokesman, attributed the funding difference to the discount rate under ERISA that differs from the FASB-mandated reporting rate in the 10-K.

Jeremy Gold, consulting actuary at Jeremy Gold Pensions, who isn't involved with Boeing, suggested the difference in funding levels might come from the company using higher 25-year average discount rates called for in federal highway bill — Moving Ahead for Progress in the 21st Century Act, or MAP-21 — enacted in July, than current market discount rates.

Chicago-based Boeing contributed $750 million to its pension plans in the third quarter, bringing to $1.5 billion the total it has contributed so far this year, Mr. Smith said.

The contributions were discretionary, Mr. Smith said. Contributing above ERISA requirements adds to shareholder value because “it improves the funded status and over time improves the expense,” Mr. Smith added.

For 2013, Boeing expects minimal required contributions but plans to make discretionary contributions, Mr. Smith said, without quantifying amounts.

The pension fund's actual asset allocation is 53% fixed income, 26% global equity, 6% private equity, 6% combined in real estate and real assets, 5% hedge funds and 4% other global strategies, according to its 10-K.