SEATTLE - Despite howls of protest against cash balance plans at companies nationwide, some Boeing Co. unionized employees actually want the company to include them in its new cash balance plan.
Boeing converted its traditional pension plan, with $15 billion in assets, to a cash balance plan on Jan. 1, but did not offer that option to union workers.
Now, the Society of Professional Engineering Employees in Aerospace, which represents 22,000 of Boeing's 203,800 employees, is expected to mention the issue, informally, in upcoming contract talks. Union executives hope the company will offer the choice of switching to the cash balance plan or staying in the old plan, whichever provides higher benefits.
Boeing's contract talks with the SPEEA begin Oct. 25; the contract expires Dec. 1.
The engineers currently are covered by the company's traditional pension plan and receive retirement benefits based on one of two formulas - $40 per month for each year worked, or 1.025% of final average pay, whichever is higher.
In the hybrid plans, employers credit hypothetical accounts with an annual amount linked to wages, with returns typically tied to Treasury bills or a similar index. As with traditional pension plans, employers continue to manage the underlying pool of assets in investments of their choice.
Stanley Sorscher, a member of the union's executive board and the negotiating committee, said a lot of unionized employees would fare better under the cash balance plan.
"I spent a lot of time looking at the calculations, and for the conditions I ran and the salary histories I looked at, we generally did better. It was fairly unusual," he said.
Young, job-hopping employees, as well as those retiring before age 55, would do better under the new plan, while older, career service employees would probably do better under the existing pension plan, Mr. Sorscher's analysis showed. Employees taking early retirement and quitting at 55 would do better under the existing plan.
The average age of union members is about 35, he said.
"Someone whose salary is increasing rapidly at the end of their career will do better under the old plan," he explained.
But for mid-career employees, the new plan actually could work out better, as the benefits catch up to and eventually exceed those under the traditional plan, Mr. Sorscher said.
Unlike a lot of companies that have switched to cash balance plans, Boeing did not attempt to convert employees' accrued retirement benefits into an opening account balance in the new plan. Instead, Boeing preserved the traditional pension plan for current employees, so accrued benefits will keep pace with pay increases, while starting new accounts from scratch under the cash balance plan. When those employees retire, they will receive benefits from both the old and new plans. Employees hired after Jan. 1 are covered only by the cash balance plan.
Because Boeing skipped recalculating accrued benefits into an opening account balance, older employees will not suffer benefit cuts, and the company did not incur their wrath.
This, in part, is what Mr. Sorscher finds attractive about Boeing's cash balance pension plan.
"There is no wearaway at all," he said.
Moreover, under Boeing's cash balance plan, employees receive annual contributions to their account balances ranging from 3% of pay for young employees to 11% for employees aged 50 and older. The hypothetical accounts are credited with interest linked to the benchmark 30-year Treasury bill, but no less than 5.25%, and topping off at 10%.
Boeing also retained in the cash balance plan the early retirement subsidies form the old plan.
Peter Conte, a company spokesman, said the cash balance plan was not offered to union workers when salaried employees were switched over, because it was expected to come up during the current round of negotiations with unionized workers. The International Association of Machinists and Aerospace Workers union, which represents 44,000 Boeing employees, signed a new contract last month. They wanted to move out of the Boeing plan and be covered by the IAM plan.
Also on the table during the contract talks between Boeing and the SPEEA are:
* An increase in the standard benefit formula from $40 a month per year of service to $50 a month, the same increase the IAM workers received as part of their new contract.
* An increase in the 401(k) employer match from 50 cents to 75 cents on the dollar for the first 8% of pay. That was the increase salaried employees received late last year, compensating for the shut-down of the Financial Security Plan, in which employees could claim up to 2% of company contributions in exchange for unused sick leave.
* Continuation of retiree medical coverage. Boeing discontinued this feature for employees who started after Jan. 1, but Mr. Sorscher said it is an important benefit the union would like to retain for new members. The issue also came up during the talks with the IAM, and the company agreed to retain the benefit for new IAM workers.
* The firing of State Street Global Advisors as administrator for the company's 401(k) plan. While the union does not expect the action, it put this on the agenda as a symbolic gesture because of SSgA's poor service, Mr. Sorscher said. Boeing hired SSgA in 1997 when it outsourced the administration of the 401(k) plan. "SSgA has a very low regard for customer service. They seem to be indifferent to the complaints we have, and their error rate is very high," he said.
