• 

  Boeing

  Stock Code:

  BA

  Date Founded:

  1916-07-15

  CEO:

  Dave Calhoun

  Headquarters Location:

  Chicago, USA

  Key Product Lines:

  Boeing 737, Boeing 747, Boeing 757, Boeing 767, Boeing 777, Boeing 787

  Business Type:

  Planemaker

Due to recent increases in interest rates, Boeing risks losing hundreds of experienced engineers to early retirement. The dramatic increases in rates in the US over the past year will lead to cuts in pensions for many Boeing engineers who decide to take a lump sum pension payout. The air manufacturing industry is already hurting qualified engineers. Many engineers have stated that they do not wish to retire early but that the interest rate increase may force their hand.

Premature exodus

Between 600 and 700 engineers and technical staff at Boeing are eligible for early retirement. The engineers are a part of a workers union known as the Society of Professional Engineering Employees in Aerospace(SPEEA). The pension plan the Boeing provides to Union members offers two choices for payouts. The first is a lump sum of due funds upon retirement. The second is a monthly check distributed monthly over multiple years. In recent years, roughly half of all retiring engineers have chosen the lump-sum option.

As interest rates are raised, the pension payout is affected for the engineers who choose the lump sum payment option; the payment for employees who choose a monthly payment is not affected. For the average employee nearing retirement within the next five years, a 1% increase in interest would cut $78,000 off the total lump sum paid out upon retirement. Between November 2021 and July 2022, the first-rate segment has increased from 1.02% to 3.67%. It is anticipated that these rates may reach 5% by November 2022. This increase would cut the lump sum payout by 25%. With many pensions reaching around one million dollars, some engineers, if they choose to stay another year, could lose $200,000 to $300,000 in pension payments due to the increases in interest.

UPDATE: 2022/08/18 11:37 EST BY RILEY PICKETT

Added a statement from Boeing

A spokesperson for Boeing told Simple Flying,

“Decisions about when to retire and how to receive retirement benefits are deeply personal and unique to the individual. We provide most pension-eligible Boeing employees with a choice between receiving their benefits in a lump sum or monthly annuity. We remain focused on ensuring our employees can live great lives while they work for us and through retirement. A choice to continue employment enables our teammates to work on some of the world’s most complex challenges and collaborate with the brightest minds in the industry.

"In addition, those who continue their career are eligible for other benefits, including bonus payout opportunities, company 401(k) contributions, active health and insurance coverage, ongoing wages and more. With this approach we are confident in our ability to retain top talent and our pipeline of future employees.”

A production predicament

The aviation industry slowed during the pandemic, and Boeing cut roughly 2,900 engineering and technical employees. With the returning demand for air travel, airlines have again placed orders for Boeing aircraft. Coupled with the global labor shortage, Boeing has paid out massive sums of money in retention bonuses to retain its experienced staff. The company paid over $22 million to engineers in the form of bonuses last year.

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Reluctant to leave

Many of the engineers weighing the decision to retire early have shown a reluctance to leave. Many of them enjoy and take pride in their work. Many have commented about their disappointment, knowing that terminating their relationship with Boeing early is the logical decision. The Director for Compensation and Retirement for SPEEA stated,

“Our folks have a decision to make, go or no go. If you want the lump sum, 2022 is the time to go.”

Despite a desire to stay, the best financial decision for some may be to leave in 2022 before the pension cuts arrive in 2023.

What do you think of this predicament? Let us know in the comments below.

Source: The Seattle Times