Boeing recently presented a new contract that would have Seattle aircraft manufacturer buildings its new 777X airplanes at union-represented Seattle plants. Despite having moved its headquarters to Chicago in 2001, Boeing has been an airline manufacturing mainstay in Seattle since the early 1900s. So the company felt fairly secure in the prospects of its newly presented contract. Prior to presenting the contract to the union Boeing received an offer for a $9 billion tax break from Washington state. Additionally, Boeing received a $50 billion contract for its new 777X planes with Dubai. The manufacturing of the 777X could provide a steady supply of jobs for the state and Seattle over the next few years, which would be a nice change from the recent layoffs and reorganization within the company and in Washington specifically. However, it is believed that if Boeing chooses a different state for its 777X planes, Washington could lose nearly 20,000 jobs.
Interestingly, the majority of members of the International Association of Machinists voted against the deal because it would require machinists to switch from their traditional pension plans to a 401(k) system. The new contract would have also provided signing bonuses and pay increases over the course of the contract. Even with the bonuses and pay increases, the change in retirement options was the sticking point that led to the “no” vote. There has been no mention of the union and Boeing discussing plans to modify the contract or make compromises that would allow the union members to accept the offer. In the meantime, Boeing is seeking bids from other states wanting to gain the multiyear manufacturing contract.
Traditional Pensions vs The 401(k)
Most people, whether they have one or not, know about 401(k)’s. Fewer probably know about traditional pensions, beyond the fact that they are some sort of retirement plan for government employees. It is true that both government agencies and unions have traditionally provided pension plans for their employees or union members. There are various ways for employers or unions to set up and handle pensions. One of the more popular and traditional pensions is like an annuity. Employees pay into the plan, employers may also pay in, and upon retirement the employee will receive a set amount of money every month for life. Interestingly with pensions, an employee does not have to reach retirement age, for some plans, in order to collect the pension. In some cases pension plans will vest, or become available, after a set number of years worked or there is a formula that uses the employee’s age, years worked at the agency and salary at the time of “retirement” to calculate the monthly amount the employee will receive until death. This is unlike 401(k)’s which only truly vest when a person reaches the federal retirement age and any withdrawals from the plan before retirement age are penalized. Given the potential benefits of traditional pensions, early benefit withdrawal and the lifetime guarantee, it is fairly easy to understand why the union members would be reluctant to agree to a new contract that would take away their pensions in exchange for a 401(k), even with signing bonuses and promises of pay increases,
If you have concerns about your employee benefits and retirement plans, an HKM employment law attorney can be of assistance.