CHICAGO Boeing Co. will propose dropping its defined benefit plan for new employees in contract negotiations with one of its two biggest unions, said spokesman Tim Healy.
The Chicago-based company plans to disclose this week details of its proposed defined contribution plan for new employees represented by the International Association of Machinists.. The proposal will become part of contract talks between Boeing and the unions. (See Boeing labor talks may include DC plan, PIOnline, April 18.) Boeing has talked with Society of Professional Engineering Employees in Aerospace officials about the companys intention to make the proposal for new employees in that union but has not yet made a formal presentation, Mr. Healy said.
The retirement benefits of employees have escalated rapidly in recent negotiations, at an average annual rate of over 7% since 1999, a rate far exceeding the rate of inflation, according to a Boeing statement about the contract negotiations. While we are willing to discuss increases in retirement benefits, this rate of increase cannot be sustained.
Boeing, which already began preliminary negotiations with the two unions, is scheduled to start the main talks with the Machinists union Aug. 21 and with the Engineers union Oct. 27.
The IAM contract expires Sept. 3 and the SPEEA contract, Dec. 1. The unions represent some 27,000 and 20,000 Boeing employees, respectively.
Boeing also plans to propose ending its retiree medical plan for new IAM- and SPEEA- represented employees, placing them into a new plan that enables future employees to save for long-term medical expenses on a tax-advantaged basis.
The proposed changes wouldnt affect defined benefit and retiree medical programs for existing IAM and SPEEA employees.
The new IAM and SPEEA employees would be vested immediately in the new retirement plan.
Boeing plans to also include new employees in its existing 401(k) plan, giving them a second retirement benefit along with the proposed new DC plan.
Boeings defined benefit pension plan is 20% overfunded on an accumulated benefit obligation basis, with assets of $50.4 billion as of last Sept. 30, according to its most recent 10-K. Boeings defined contribution plan has a total $31.4 billion in assets, including a $26 billion 401(k) fund.