Boeing retirement revamp may shape outcome of vote
The outcome of the critical Boeing 777X contract offer vote by the Machinists appeared unpredictable as union members sifted through widely conflicting information about the company offer.
Seattle Times aerospace reporter
Basics of the vote
Who: 32,000 members of Machinists union, including 1,500 in Portland and Wichita, Kan.
What: Vote on Boeing’s proposal to extend the Machinists’ contract from 2016 to 2024, trading significant benefit concessions for a commitment to build 777X jet and its large wings at Boeing plants in the Puget Sound area.
When: Voting at five local union halls goes from 5 a.m. to 6 p.m. Results to be announced Friday evening.
Why: Union’s national leadership ordered the vote over the opposition of local leaders, who say revised offer isn’t much improved from the previously rejected version.
How: Unlike in other Machinist elections, electronic-absentee ballots are allowed this time.
The Seattle Times
On the eve of the critical vote that could determine whether Boeing builds its 777X jet in Washington state, the outcome appeared unpredictable as Machinists sifted through wildly conflicting information about the company offer.
The most contested issue is pensions. Statements by the union’s District 751 leaders have fanned fears that if members accept the offer, they could lose the pensions they have accrued or could see their pension fund raided to pay the lavish pensions of Boeing executives.
Boeing scrambled this week to give assurances that because the union’s pension fund is protected by federal law, this cannot happen.
One Everett Machinist and his wife, interviewed together, said that since the husband is just a few years from retirement they went back and forth on how to vote because of “a real big fear the pension would go away.”
“The local union has been putting out stuff about the pension fund being raided. That has scared a lot of people,” said the wife, Nancy, who asked that their last name not be used.
After reading Boeing’s assurances, the two decided that legally they are protected.
Nancy’s husband, a veteran of more than 30 years, said he’ll therefore vote Friday to accept the company offer.
In contrast, another veteran Machinist who works at Boeing Field refused to believe the assurances.
For him, the bottom line is that he won’t make any concessions.
“Any money out of my pocket, whatsoever; any dilution of my benefits, whatsoever, is no. Period,” he said.
In an email to employees Thursday, reiterating what was in an earlier letter mailed to their homes, Boeing laid out what’s at stake and tried to justify the concessions that management is demanding.
Boeing Vice President Alan May said the current high level of company profit is based on building airplanes priced when ordered more than five years ago.
“Our markets have become much more competitive,” May wrote. “The planes we are selling now are at significant relative price discounts to those in the past.”
May’s letter says that “All employees will retain all pension benefits” through the end of the current contract in 2016 and that “The company will continue to fund the existing pension plan and is required to do so by federal law.”
He said that under federal law, the Machinists pension money “cannot be merged or co-mingled” with other company plans, such as the executive-pension fund.
The Machinists pension benefits also are insured by the federal Pension Benefit Guaranty Corp., company spokesman Doug Alder added Thursday.
Boeing’s offer to the union freezes the traditional, defined-benefit pension as of October 2016 and replaces it with a new retirement-savings plan.
In that new plan, Boeing would pay into each Machinist’s account 10 percent of gross wages the first two years of the extended contract, 6 percent the third year and 4 percent every year thereafter.
This new retirement account requires no employee contribution and is on top of the existing Machinists 401(k) plan.
For the latter, Boeing already matches up to 4 percent of base salary. The new offer would increase that to a 6 percent match.
How it works out
Here’s how that would play out for Nancy’s husband, who has a base salary of $80,000, and in 2013 with overtime grossed $112,000:
By 2016, he would have accrued a traditional 35-year pension frozen at a value of $3,325 per month.
He’d also have Social Security and whatever has accumulated in his 401(k) account.
Provided he put in at least $6,400 a year into the 401(k), the company would each year from 2017 add more than $4,800 to that.
And in lieu of the frozen pension, from 2017 on, the company would pay into his new retirement-savings plan (assuming his gross pay stayed as high as it was in 2013) an additional $11,000 each year for a couple of years, $6,700 the next year and $4,500 each year thereafter.
The Machinist at Boeing Field who said he’ll vote no doesn’t work overtime; in 2013, he earned $76,000. By 2016, he will have accrued a similar monthly pension of $3,325 per month.
From 2017, the company would match his 401(k) contributions with $4,600 per year, and would pay into his new retirement-savings account an additional $7,600 each year for a couple of years, $4,600 the next year and just over $3,000 each year thereafter.
What’s available to each man upon retirement from both the new retirement account and the existing 401(k) would depend on growth in stocks and other investments.
The District 751 leadership, which posted messages this week urging rejection of Boeing’s offer, told its members that, if accepted, “Boeing’s contributions to your retirement would decrease by two-thirds” compared with the traditional pension.
Yet Boeing projects that the new retirement plan plus the increased 401(k) match together will provide employees with an annual retirement income slightly higher than their income on leaving the company. The projection assumes an annual 7 percent return on investments in the 401(k) and retirement-savings plan.
Another Machinist, who also asked to remain anonymous, said he doesn’t like the pension change, but will vote to accept Boeing’s offer.
“This isn’t what we all wanted,” he said, “but times have changed.”
He said that among his friends outside Boeing, very few still have a pension. Whatever way the vote goes, he said, he plans to retire in 2016 with his full pension.
The outcome of Friday’s vote will have a potentially enormous impact on the state’s economy.
Boeing employs more than 82,000 people here, and suppliers bump up the number of aerospace jobs in the state to around 132,000.
Winning the assembly of the 777X and the construction of its large composite wings would maintain current aerospace jobs in the state.
But work on future airplanes appears also to be at stake.
“If the contract is ratified, the 777X will be built in the Puget Sound area by Boeing employees represented by the IAM,” Boeing said.
It itemized what that means: fuselage build, composite wing fabrication and assembly, final assembly of the airplane and fabrication of major components such as cabin interiors and wires.
In a meeting earlier this week, Boeing Commercial Airplanes chief Ray Conner told a delegation of local politicians that if the vote is no, the giant 777X composite wing will be built elsewhere.
He left hanging what would happen with final assembly, though Bob Drewel, president of the Washington Aerospace Partnership and former Snohomish County chief executive, said, “My impression was that wherever that wing is built, that’s where the plane will be built.”
In any case, Everett Mayor Ray Stephanson said Conner delivered a clear message that building the wing from advanced composite plastics “is really about the future.”
“The implication was that wherever that wing ends up probably has the strongest opportunity for future airplanes,” Stephanson said.
Boeing emphasized that point again Thursday.
“There is no other composite wing-production facility in the U.S. today,” said Boeing’s Alder. “Current mechanics will have the opportunity to be trained for this new composite work, which could set the stage for the next generation of manufacturing innovation in the Puget Sound region.”
Stephanson said the long-term economy of his city could thrive or dive depending on Friday’s decision by the Machinists.
“This is such a critical vote for Washington state’s future,” he said. “I’m very anxious to learn the outcome.”
Dominic Gates: (206) 464-2963 or email@example.com