Boeing Co., Chicago, is proposing closing its defined benefit plan to new hires in its West Coast engineers union and placing them in an enhanced 401(k) plan as part of its overall strategy to close its DB plans to new employees.
Doug Alder, Boeing spokesman, said the proposal is in line with market trends and peer companies, and allows Boeing to “better manage retirement plan expenses and reduce financial risk.”
Boeing's proposal, part of contract talks with the Society of Professional Engineering Employees in Aerospace, includes a 3% to 5% age-based automatic company contribution along with the current 6% company match on employee deferrals to the 401(k) plan, totaling a 9% to 11% total contribution from the company each year, Mr. Alder said.
“The proposed retirement benefit for SPEEA-represented new hires is a market leader compared to the plans offered by our aerospace competitors to their new hires and will give our new hires an opportunity to build significant savings for retirement,” Mr. Alder said in an e-mail.
Charles Bickers, director of corporate communications at Boeing, said the company's goal for years has been to move all new hires into a DC plan. The SPEEA and the International Association of Machinists and Aerospace Workers are the last main groups of new hires to still participate in the DB plan, he said. The IAM in December reached a four-year contract extension with Boeing, starting this month, that will keep new hires in the DB plan.
Mr. Bickers said Boeing executives were not being made available for interviews during negotiations.
Union officials are blasting the offer. Matthew Kempf, SPEEA's benefits director and contract administrator, said Boeing's proposal would amount to a 40% reduction in benefits from current levels. The union's contract with Boeing expires Oct. 6.
“It's not good. There's no question about that,” Mr. Kempf said in a telephone interview.
On June 15, the union proposed extending the current contract, which would keep new employees in the DB plan, with minor adjustments. Mr. Kempf said the union's proposal included money necessary for acceptable benefits regardless of retirement plan type, but he said Boeing was committed to offering only a defined contribution plan for new hires.
“We were willing to have that conversation” about a DC plan, said Ray Goforth, SPEEA executive director. “But at a time of record profits, it doesn't make sense to reduce benefits. ... It's pretty hard to get over that this is a cut in retirement benefits.”
Boeing reported net income of $1 billion on $20 billion in revenue for the second quarter this year, according to its most recent earnings statement. The $1.9 billion in net income in the first half of 2012 is a 24% increase from the same time period last year.