Retirement Benefits Remain a Sticking Point in Boeing Strike

Union workers at Boeing are in their seventh week of a strike against the airplane maker, with higher wages and the restoration of the workers’ pension plans at the center of negotiations.

The union—the International Association of Machinists and Aerospace Workers—last week rejected a Boeing proposal that offered a 35% rise in wages and increased contributions to the company’s 401(k) plan. That proposal got the union closer to its original ask of a 40% pay increase; the company’s previous offer was a 25% increase over the life of the contract.

Retirement benefits and the demand for a return of the company’s defined benefit pension plan, which Boeing froze in 2014, appear to be a sticking point in negotiations.

Jon Holden, president of District 751 of the union, said last week that Boeing had not “gone far enough in other ways” to persuade members to give up their demand to restore the pension plan.

In the latest proposal, which 64% of union members opposed, according to IAM, Boeing offered to make a one-time contribution of $5,000 to 401(k) accounts and said it would match 100% of employee contributions, up from 75%, on the first 8% of a worker’s pay. Boeing already contributes 4% of wages, regardless of an employee’s contribution.

The company also offered to increased pension payouts for the 42% of IAM members who are still part of the pension plan. This would allow a worker with 20 years of eligible employment under the plan to receive a pension payment of about $2,100 a month, up from $1,900.

John Lowell, a partner in October Three Consulting, says he was surprised union members did not agree to the most recent proposal. He says a hybrid solution, such as something like a cash balance plan, could be a way for Boeing and the union to meet in the middle.

IBM replaced its 401(k) matching program last year with a cash balance plan, in which an employee’s account is credited with a yearly 5% contribution and interest. A cash balance plan combines elements of both defined contribution and defined benefit plans.

The United Auto Workers, in its strike against General Motors, Ford and Stellantis last year, failed to convince the automakers to restore pensions, but it did succeed in achieving significant increases to pension payouts and 401(k) contributions, as well as 25% wage increases. The UAW members also gained access to Hueler Income Solutions—an online platform that offers retirement income annuity products—as part of the deal.

Kevin Crain, executive director of the Institutional Retirement Income Council, says it is “very unlikely” that Boeing will go back to offering a full defined benefit plan, as it would come at a huge cost to the employer, and he expects an outcome similar to the UAW deal. He adds that implementing a cash balance plan, as IBM is doing, presents administrative burdens that Boeing may not want to deal with.

With retirement benefits at the forefront of the strike, Crain believes this will bring more attention to the need for guaranteed lifetime income options in retirement plans.

“We know a lot of work needs to be done in the 401(k) system on retirement income,” Crain says. “I think [the strike] will advance the momentum in the 401(k) system to get more robust in-plan retirement income options [and] more robust education and counseling for pre-retirees.”

Boeing is starting to feel the pressure from the strike, as $19 billion in new stock on Monday. The company also reported a $6.1 billion loss in the last quarter and said it was cutting 17,000 jobs.

The IAM told its members on Sunday that it has been in contact with the Department of Labor in an effort to get back to the negotiating table. Additional updates from the union can be found here.