Boeing [BA] on Thursday said it plans to shift its existing pension plan for 68,000 non-union employees in favor of a 401K retirement savings plan to check its long-term pension liability and boost its competitiveness.
Boeing said the change, which will begin on Jan. 1, 2016, will result in a non-cash pension curtailment charge of $110 million in its first quarter earnings. However, the company said it doesn’t expect the charge to have a material impact on its core earnings, which measure the operating performance of the company.
Photo: Boeing
The $110 million charge is in addition to $220 million in previously announced charges that will be taken in the quarter stemming from changes to retirement plans under new long-term contracts with two of its machinists unions.
“Our objective in making this transition is twofold: continue providing an attractive, market-leading retirement benefit contributing to employees’ retirement security, while also assuring our competitiveness by curbing the unsustainable growth of our long-term pension liability,” Tony Parasida, senior vice president of Human Resources and Administration at Boeing, said in a statement.
Under the shift from a defined benefit pension plan, Boeing will provide a three-year transition benefit to employees’ 401K accounts equal to 9 percent of their eligible income in 2016, 8 percent in 2017 and 7 percent in 2018. Beginning in 2019, Boeing will make pay period contributions to the 401K accounts of 3 percent to 5 percent of eligible income depending on age.
Boeing said that the new benefit will supplement employee’s defined benefit pensions earned through the end of 2015 and that all pension benefits earning through that period are to be kept by the employees.
The non-union employees covered under the pending retirement plan shift also include managers and executives. Boeing said the change does not apply to retirees that are already receiving pension benefits.