After almost two months of striking, Boeing’s Puget Sound-area machinists are back to work with a new contract. The machinists stepped off the line with many of their initial demands met: pay raises of between 38% to about 44% over the life of the contract, a $12,000 ratification bonus, improved overtime rules, and job security provisions.
One demand, however, was unmet: the return of Boeing’s once-vaunted pension plan. Instead, workers accepted a hefty dollar-for-dollar company match of 8% for 401(k) contributions — a substantial benefit, comparatively, but not a defined-benefit pension.
Boeing workers aren’t the only manufacturing union agitating for the old-school retirement plans. The UAW made headlines when pensions for some workers appeared in their 2023 strike of General Motors, Ford, and Stellantis. Like Boeing workers, though, the final contracts accepted by UAW workers had more in the way of 401(k) contributions than defined benefits.
The one-time standard for retirement is slipping into obsolescence. According to a December 2021 report from the Congressional Research Service, 27.2 million private-sector U.S. workers were on “defined benefit” pension plans: as of 2019, that number has fallen to 12.6 million workers. “Defined contribution” plans, such as the ubiquitous 401(k), have grown in the same period from 11.2 million workers to 85.5 million in 2019.
According to Jane Jacobs, an employment lawyer at Tarter, Prinsky and Drogan who has represented members on both sides of union negotiations, pension demands still show up in union membership negotiations at least in part as a bargaining chip.
“It’s a sop to the membership,” Jacobs told IndustryWeek. “Nobody expects a company to agree to it. … It’s not even aspirational as much as it is, we’re going to start with a hard bargain position that the company has to do more. If you’re hoping to get 30, you ask for 60, and pensions seem to be a common way of doing that.” If Jacobs is correct, the proposal for increased pension plans resembles nothing so much as another publicized demand from the 2023 UAW strikes — a 36-hour workweek for 40 hours’ pay.
In fact, as far as likely innovations in workforce benefits go, the shortened workweek may be more palatable to companies than the return of defined benefits. According to Jacobs, traditional pension plans aren’t just expensive for companies, they’re risky. In a defined benefit pension plan, employers are required to pay a set amount to retirees. “In a bad market, in a recession, in whatever happens, those amounts can become prohibitive,” Jacobs said.
One company that appears to be bucking the trend of ditching pensions is IBM, albeit in an unusual way. In late 2023, the computer hardware giant announced it would end its 401(k) matching program and replace it with a “retirement benefit account.” Instead of making 6% matching contributions to an investment account, the new program gives employees credit equal to 5% of their salary in 10-year Treasury bonds with a floor of 3%. Unlike a 401(k), this means employees don’t have the option to invest in whatever they want.
Yet, IBM’s fix isn’t likely to be adopted by many other companies. Part of IBM’s reasoning for switching back to the plan is that it used to have a pension plan that it froze in 2008. Its pension assets continued to accrue, but U.S. law bars them from spending the funds on non-defined benefit pensions like 401(k) matching. That money can, however, be spent in the company’s new retirement benefit account because of how it works like a defined benefit. Companies without similar leftover funds from previously-frozen pension plans, however, are unlikely to adopt the same tactic.
So, despite IBM’s new program and demands from workers hungry for better benefits, it’s likely that pension plans will remain in retirement.
