It’s rare, the person who spends their entire working life with one company. And mostly gone, too, are the pension plans designed to help support those loyal employees in their retirement years. The pension was the Boeing benefit at the center of the controversial Machinists’ vote.
Defined benefit pensions date back to the Revolutionary War. Boeing is one of the few companies that still offers a retirement plan where the payment is based on salary and years of service.
“That’s kind of gone away with the gold watch,” said Janet Pack, a financial adviser with Senior Care Alliance. She hosts a radio show Sundays at 9 a.m. on AM 770 KTTH in Seattle. “When you start talking about companies still paying a defined benefit pension plan, it’s very expensive and in this world of competition, it’s difficult.”
A defined benefit pension is a plan funded by the company. That’s why Boeing demanded that Machinists agree to an end to the traditional pension as part of a proposed eight-year contract extension.
“It’s big all the way around. In the competition with Airbus and these other companies, they’ve got to trim everything back and this is the last kind of hold that they’ve got with the Machinists,” Pack explained.
Pack’s clients include Boeing retirees and she said Boeing also has a good 401(k) plan, called a V.I.P., a separate retirement benefit in which the employer matches employee contributions.
“It’s very rich, with stock options in there, we’re allowed to maneuver in and out of the markets and most of our customers have done very well with their V.I.P.’s,” said Pack.
The 401(k)s put control in the hands of the employee but there are concerns about fees. Congressman George Miller, D-Calif., is sponsoring a bill to require 401(k) plans to disclose fees in clear and simple terms.
“Many 401(k)-style plans charge hidden fees that can cut deeply into workers’ retirement savings [including] revenue sharing fees, wrap fees, shelf space fees, surrender fees, 12B-1 fees.,” said Miller.
“Meaningful information is vital because fees significantly reduce the assets available for retirement,” said David Certner, with AARP, who spoke in favor of the disclosure bill at a recent Capitol Hill hearing. “Plan fees compound over time and the larger the fee, the bigger the reduction.”
While some Machinists vowed to fight for their pensions, some younger Boeing workers have no expectation that pensions will still be around when they retire.
In Pack’s experience, “We meet very few people in the retirement world any more that have pension plans.”