SEATTLE -- The Boeing Co. is resisting a union proposal to move thousands of unionized employees out of the company pension plan and into a multiemployer plan.
As part of negotiations over a new contract, the International Association of Machinists and Aerospace Workers union wants the company to switch from covering its 44,000 members through the Boeing pension plan to letting them participate in the I.A.M. National Pension Fund, a Washington-based multiemployer pension plan with $5.3 billion in assets and about 1,500 contributing employers.
Boeing would become the plan's largest contributing employer if it were to agree.
If Boeing were to accept the proposal, it would freeze benefit accruals for those workers and start contributing separately to the multiemployer plan. But, because the Boeing Co. Employee Retirement Plan is hugely overfunded and the aerospace giant doesn't have to contribute a cent, it is not surprising that it is resisting the Machinists' demand.
No contributions since '97
The Boeing plan has $15 billion in assets and approximately $11 billion in liabilities; the company has not put any money into the plan since 1997, according to Peter Conte, a company spokesman. The plan covers 126,000 workers besides the Machinists.
Because federal pension law forbids the company from tapping surplus pension assets to contribute to another plan, Boeing would have to fork out money from its general coffers to contribute to the I.A.M. fund at a cost of between $45 million and $50 million a year, according to Mr. Conte.
But a top Machinists official disputes those numbers.
It would cost the company $1.75/hour per worker to contribute to the I.A.M. plan, said Richard Schneider, chief negotiator for the union and coordinator for the company's aerospace department. At that rate, it would actually cost the company $154 million a year to contribute to the I.A.M. pension fund, according to a back-of-the-envelope calculation. Boeing and the union are using their own actuaries to determine costs.
The Machinists union wants its members to be covered by the I.A.M. plan because of concerns the company might use its excess pension assets to pay for top executives' golden parachutes in case of a merger.
Mr. Schneider referred to a January U.S. Supreme Court ruling in Hughes Aircraft Co. vs. Jacobson, which said employees are not entitled to a share of an employer's pension plan surplus.
Moreover, members would receive more generous benefits if they participated in the I.A.M. pension fund instead of the Boeing plan, Mr. Schneider said.
Under the current contract, unionized workers receive pension benefits amounting to $40 per month for each year they have worked, but under the I.A.M. pension plan, they would receive $120.80 per month. Mr. Schneider declined to explain how this would work.
The I.A.M. pension plan is 110% funded, according to the January 1998 valuation, said Alan W. Skolnick, fund director.
Because of the long bull market, a lot of union pension funds are overfunded and forced to improve benefits for their members in order to keep employers contributing to their plans, noted Ian Lanoff, a partner at The Groom Law Group, a Washington-based employee benefits law firm.
"It's clever on the union's part. You can't blame them for trying," he said.
In essence, Boeing would be subsidizing benefit improvements for workers at other companies as well, if it joined the I.A.M. plan, Mr. Lanoff explained.
Boeing officials believe the unionized workers would be better off staying in the company plan.
"Boeing would no longer be able to negotiate the benefit amount with the union, or be able to guarantee the benefit amount any more," Mr. Conte said. In a multiemployer plan, benefits are set by a jointly trusteed board made up of union and management representatives.
In fact, since Boeing would become the largest contributing employer to the I.A.M. national plan, it could ask for representation on the board.
"If Boeing wanted to be a little bit flexible and be creative, they could join the multiemployer plan . . . and say they'd join if there's one or more management representative than the union representatives on the board," Mr. Lanoff suggested.
The Bath Iron Works Corp. now is the largest contributing employer with 6,000 participants; Trans World Airlines -- with 16,000 participants -- is going to join the plan next year, according to Mr. Skolnick.
It is not uncommon for unions to try to get companies to switch coverage for their members to multi-employer plans from a single employer plan.
Nor is it unusual for companies to resist contributing to a multiemployer pension fund, or for those participating in such industry plans to attempt to withdraw from them.
Boeing, which has 54 different retirement plans, does contribute to a multiemployer Teamsters pension plan for a few hundred employees in California and Washington, Mr. Conte said.
Still, most companies with single employer pension plans "prefer running their own plans" rather than ceding control, Mr. Lanoff said.
The issue of board representation might come up during the negotiations, but Boeing officials and Mr. Schneider declined to discuss whether they are amenable to a compromise in which the union members would stay in the company plan and get representation on the pension fund's board of trustees.
The negotiations with Boeing "are going very well," Mr. Schneider said, declining to say more.
The company hopes to wrap up negotiations with the union by Aug. 27 and present a contract proposal to the union members Sept. 1. The current contract expires midnight Sept. 2.