Boeing Co.'s unfunded defined benefit plan liabilities jumped 64% to $17.1 billion as of Dec. 31, compared with $10.4 billion a year earlier, the Chicago-based company reported in a filing Wednesday with the Securities and Exchange Commission.
In a conference call with analysts Wednesday, W. James “Jim” McNerney Jr., chairman and CEO, addressed what he called “the threat to our balance sheet from defined benefit pensions.”
“By the end of next year, approximately 90% of our workforce will participate in defined contribution plans, which provide attractive and competitive benefits to employees without the risks to our balance sheet,” Mr. McNerney said.
Despite the rise in pension liabilities, Greg Smith, executive vice president and chief financial officer, said during the call: “Our required pension contribution in 2015 will be minimal, and as a result of legislative pension changes, we are foregoing discretionary pension funding in 2015.”
The increase in liabilities “was largely driven by interest rates,” spokesman Charles N. Bickers said in an interview.
The Moody's AA corporate bond index yield fell to 3.89% as of last Dec. 31, from 4.68% a year earlier.
The 20-year Treasury rate fell to 2.15% as of Tuesday from 3.68% as of Jan. 2, 2014, according to data from the Treasury Department.
Addressing the defined benefit plan's sensitivity to interest-rate exposure, the Boeing 10-K report, filed Feb. 14, 2014, noted a 25-basis-point fall in interest rates would raise pension liabilities by $2.5 billion.
Boeing had $58.1 billion in defined benefit assets and $68.6 billion in defined benefit liabilities as of Dec. 31, 2013, according to the latest figures, which were reported in the 10-K.
Last year, Boeing contributed $784 million to its pension funds, including $34 million in the quarter ended Dec. 31, Wednesday's filing said. In 2013, Boeing contributed $1.5 billion.