As the Boeing strike continues, an important point for union members is being made

Since going on strike last month, Boeing factory workers have repeated one theme on their picket line: They want their pensions back.

Boeing suspended its traditional pension plan as part of a concession union members voted for a decade ago to keep the airline’s aircraft production in the Seattle area.

Like other large employers, the aerospace giant argued at the time that ballooning pension payments threatened Boeing’s long-term financial stability. But the decision has nevertheless come back to have financial consequences for the company.

The International Association of Machinists and Aerospace Workers announced Wednesday night that 64% of its members at Boeing voted to reject the company’s latest contract and remain on strike. The proposal includes a 35% pay rise over four years for the 33,000 striking strategists but no reinstatement of pension benefits.

The extension of the six-week strike has focused Boeing – which is deeply in debt and lost another 6.2 billion in the third quarter – in the biggest financial risk. The walkout halted production of the company’s 737, 767 and 777 jets, cutting off a key source of revenue for Boeing when it delivers new planes.

The company revealed on Thursday that the return of pensions is always a non-starter in future negotiations. Union members were consistent.

“I feel sorry for the young people,” said Charles Fromong, an instrument repair technician who has spent 38 years at Boeing, at a Seattle union hall after the vote. “I’ve spent my life here, I’m getting ready to leave but they deserve a pension, I deserve a raise.”

What are traditional pensions?

Pensions are plans where retirees receive a set amount of money every month for the rest of their lives. Payments are generally based on years of service and prior earnings.

However, over the past few decades, traditional pensions have been replaced in many workplaces by retirement savings accounts such as 401(k) plans. Rather than having a guaranteed monthly income in retirement, employees invest for themselves and the company they contribute to.

In theory, investments such as stocks and bonds will grow in value over workers’ jobs and provide them with enough money for retirement. However, the number of accounts may vary based on the performance of the financial markets and the investment of each employee.

Why are employers moving away from pensions?

The shift began after 401(k) plans became available in the 1980s. As the stock market performed well over the next two decades, “people thought they were smart investors,” says Alicia Munnell, director of the Center for Retirement Research at Boston College. After the dot-com bubble burst in the early 2000s took a toll on pension plan investments, employers “started to freeze their plans and close them,” he added.

In the 1980s, about four in 10 US private sector workers had pension plans, but today only 1 in 10 do, and they are concentrated in the financial sector, said Jake Rosenfeld, chairman of the sociology department at Washington University-St. Louis.

Companies realized that being on the hook to guarantee a certain percentage of workers’ wages in retirement carried more risk and difficulty than defined contribution plans that “shift the risk of retirement to the worker and the retiree,” Rosenfeld said.

“And that became a big trend in company after company,” he said.

Rosenfeld said he was surprised that the pension system “remains very strong on the rank and file side” at Boeing. “These are the types of programs that have been collapsing for decades. So you don’t just hear about a company retooling or starting from scratch a defined contribution plan.”

What happened to Boeing’s pension plan?

Boeing demanded in 2013 that mechanics give up their pension plan as part of a deal to build a new model of the 777 plane in Washington state. Union leaders were horrified to think that Boeing would build the plane elsewhere, with non-union workers.

After a bitter campaign, a 51% union majority in January 2014 approved a contract extension that allowed union members to be hired after they became ineligible for pensions and blocked raises for existing workers starting in October 2016. Accordingly, Boeing contributed a percentage of workers’ wages. in retirement accounts and employee contributions matched in a specific area.

The company later froze the pensions of 68,000 non-employees. Boeing’s chief human resources officer at the time said the move was about “ensuring our competitiveness by curbing the unsustainable growth of our long-term pension liability.”

How true is the demand of Boeing workers?

Boeing raised its wage offer twice after the strike began on September 13 but has remained steadfast in its opposition to reinstatement of pensions.

“Under no circumstances is the company renewing defined benefit pensions for this or any other population,” Boeing said in a statement Thursday. “They are very expensive, which is why almost all private employers are moving away from them to contribution plans.”

Boeing says that 42% of its engineers have been working for the company for a long time to be paid by this pension plan, although their benefits have been suspended for many years. In the contract rejected Wednesday, the company proposed raising monthly payments for those covered workers from $95 to $105 per year of service.

The company said in a securities filing that its accumulated pension plan liability was $6.1 billion as of Sept. 30. Paying back the pension could cost Boeing more than $1.6 billion a year, Bank of America analysts estimate.

Jon Holden, president of IAM District 751, which represents the striking workers, said after the vote that if Boeing wasn’t willing to restore the pension plan, “we have to find something to replace it.”

Do companies ever bring back pension plans?

It is not uncommon for a company to restore a pension plan once it has been frozen, although a few have. IBM replaced its matching 401(k) with a contribution to a defined benefit plan earlier this year.

Pension plans have become rare in corporate America, so the move could help IBM attract talent, experts say. But IBM’s motivation may have been financial; The pension plan had the most money after the company set it up two decades ago, according to actuarial firm Milliman.

“The IBM example is not an indication that there has been a movement toward defined benefit plans,” said Boston College’s Munnell.

Milliman analyzed 100 of the largest corporate defined benefit plans this year and found that 48 were fully funded or better, and 36 were frozen with additional assets.

Could Boeing be pressured to change its mind?

Pressure to end the strike is mounting on new CEO Kelly Ortberg. Since the trip began, he has announced layoffs of about 17,000 people and steps to raise more money through the sale of stock or debt.

Bank of America analysts estimate that Boeing is losing about $50 million a day during the strike. If it continues for 58 days — the average of the last few strikes at Boeing — the cost could reach nearly $3 billion.

“We see an additional benefit (Boeing) to improve the agreement and reach a quick solution,” analysts said. “In the long run, we see the benefits of making an open offer and dealing with increased staffing outweigh the financial difficulties caused by the long-term disruption.”

Manuel Valdes in Seattle contributed to this report. Koenig reported from Dallas, and Bussewitz reported from New York.

-David Koenig and Cathy Bussewitz, The Associated Press