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Fri March 1, 2013
Boeing's latest move confirms nationwide trend to end pensions
Boeing has been – until recently – one of the last remaining places in the corporate world where you could still get a pension in retirement. Now Boeing’s technical workers are being asked to drop the pension for new employees – it’s part of a broader strategy at the company.
The amount of money Boeing owes for future pensions is $75-billion – more than the company’s entire stock market value. And it’s only socked away three-quarters of that money. But Boeing is not alone, according to Olivia Mitchell, who specializes in pensions at the University of Pennsylvania Wharton School of Business.
"Today we have the highest level of corporate underfunding that we’ve seen in history," Mitchell said.
Companies started to adopt pensions in a big way in the 1950s. Employees liked the security of a set monthly benefit until they died. Companies found it easy to make big promises about obligations way off in the future. But many didn’t set aside enough money. And it’s gotten worse lately.
"Quite frankly, the last 5-6 years have been terrible," Mitchell said. "The stock market took a big hit in 2008 and corporate pensions lost maybe a third of their asset value."
Boeing has been trying to shore up its pension, and - at the same time - move new employees to a 401(k) retirement plan. That’s where the company contributes a set amount each month and workers decide how to invest the money. They also bear all the investment risk.
Leon Grunberg co-wrote the book Turbulence about Boeing’s workforce. He says this is part of a broader shift in Boeing’s corporate culture. He says the company has been moving away from a kind of compact – employees commit to work for a lifetime, and Boeing takes care of them in retirement. But he says the company risks losing employees’ good will.
"I think the danger in all this is that you lose that commitment, that engagement that you need from engineers and technicians," Grunberg said. "You know, after all, they’re creating things that fly millions of people."
Still, the tide against pensions is strong. Companies like GE, Lockheed Martin and the automakers have already stopped offering pensions to new employees. Some legislators in Olympia want to get rid of pensions for new state hires.
The flip side is American workers are discouraged about their financial prospects in old age - A recent survey shows that few Americans are confident they’ll be able to afford a comfortable retirement.