Boeing ends crippling strike as workers accept latest offer(bloomberg.com)
bloomberg.com
Boeing ends crippling strike as workers accept latest offer
https://www.bloomberg.com/news/articles/2024-11-05/boeing-ends-crippling-strike-after-workers-accept-latest-offer
119 comments
Read somewhere that they get 12% match on 401k. No pensions, but there’s almost none of that in today’s world.
Pensions seem nice to have, but IMHO, it's generally better for employer and employee when compensation is paid immediately. The accounting is simpler, accountability is easier, and there's no long term entanglements.
A pension is easier for people who are bad at money. You get your allowance doled out and then spend retirement complaining about prices and the economy.
On paper a well-funded 401k is better. You don't have to worry about the fund collapsing. You're safer against inflation. And your money doesn't disappear when you die. Etc.
12% matching is an insanely good deal for people smart enough to use it well. But you are going to have people who make really bad choices end up in a lurch. So it's a higher-ceiling/lower-floor range of outcomes for each individual.
On paper a well-funded 401k is better. You don't have to worry about the fund collapsing. You're safer against inflation. And your money doesn't disappear when you die. Etc.
12% matching is an insanely good deal for people smart enough to use it well. But you are going to have people who make really bad choices end up in a lurch. So it's a higher-ceiling/lower-floor range of outcomes for each individual.
Main issue: depends on your age. If you're 26 this is a great deal and you'll carry it wherever you go
if you are 50+, worked there 30 years, and had your pension frozen after 20 years of work, you are so far behind the curve even if you max out your 401k for your remaining years. You need to do a lot of work and probably invest in high risk stocks to even begin to make up for that 25 years of lost compound interest in your career.
Also: I realize I'm spoiled, but I had quarter matching 401ks in tech (which apparently isn't that amazing to begin with), so I don't see this as an insane deal for the effort and sacrifice they put out.
if you are 50+, worked there 30 years, and had your pension frozen after 20 years of work, you are so far behind the curve even if you max out your 401k for your remaining years. You need to do a lot of work and probably invest in high risk stocks to even begin to make up for that 25 years of lost compound interest in your career.
Also: I realize I'm spoiled, but I had quarter matching 401ks in tech (which apparently isn't that amazing to begin with), so I don't see this as an insane deal for the effort and sacrifice they put out.
I have no details on the plan, but the assumption would be that the current pension still would pay out as it did before.
Even if you contribute late, you probably don't need to draw down on the 401k until much later in your retirement to make up the difference between your pension payouts and inflation. So that could still mean a few decades of compounding growth.
Even if you contribute late, you probably don't need to draw down on the 401k until much later in your retirement to make up the difference between your pension payouts and inflation. So that could still mean a few decades of compounding growth.
> en if you contribute late, you probably don't need to draw down on the 401k until much later in your retirement to make up the difference between your pension payouts and inflation. So that could still mean a few decades of compounding growth.
I guess you could try living frugally and wait it out for as long as you can. The only hope is that you won't die before you even begin to tap into it but I guess more for your family...
I guess you could try living frugally and wait it out for as long as you can. The only hope is that you won't die before you even begin to tap into it but I guess more for your family...
>you probably don't need to draw down on the 401k until much later in your retirement to make up the difference between your pension payouts and inflation
How much "later" do you have? you're 65, life expectancy is 76 IIRC in America. Worse depending on various socioeconomic factors. If I'm not living after some 40 years of labor what was the point of life?
Also, call me paranoid but I wouldn't be surprised if they tried to raise the retirement age like they did in other countries.
>but the assumption would be that the current pension still would pay out as it did before.
Does a frozen pension accumulate interest? If not, I don't see how the difference is ever made up.
How much "later" do you have? you're 65, life expectancy is 76 IIRC in America. Worse depending on various socioeconomic factors. If I'm not living after some 40 years of labor what was the point of life?
Also, call me paranoid but I wouldn't be surprised if they tried to raise the retirement age like they did in other countries.
>but the assumption would be that the current pension still would pay out as it did before.
Does a frozen pension accumulate interest? If not, I don't see how the difference is ever made up.
An American's life expectancy when they're born is around 76. But the life expectancy among Americans that have already lived to the age of 65 is more like 83.
"A pension is easier for people who are bad at money"
I am pretty sure you did not mean it this way, but you're absolutely right.
The pensions that were granted in the 50s and 60s and not funded have left an enormous debt for many companies that the federal government will have to make good.
Even today, the pensions of many police and firemen are underwater and not likely to be solvent.
So pensions are great for company managers who really don't ever plan to fund them properly.
And don't get me started on social security.
I am pretty sure you did not mean it this way, but you're absolutely right.
The pensions that were granted in the 50s and 60s and not funded have left an enormous debt for many companies that the federal government will have to make good.
Even today, the pensions of many police and firemen are underwater and not likely to be solvent.
So pensions are great for company managers who really don't ever plan to fund them properly.
And don't get me started on social security.
The union can provide pension services internally.
The only reason why a pension is a preferred bargaining tactic is because it creates a strong principle-agent problem for the business, where management are more than happy using tomorrow’s income to pay for today’s problems.
The only reason why a pension is a preferred bargaining tactic is because it creates a strong principle-agent problem for the business, where management are more than happy using tomorrow’s income to pay for today’s problems.
Technically a pension is a trust that is independent from the employer. Its duties are to hold the shareholders (employees) funds. The issue is that the trustees is most likely the employer. So in the event of a employer insolvency, the pension is not affected by.
What usually happens is the trust is underfunded, and the company makes it up in real time. When the company goes under, the pension plan gets assigned to the federal government's Pension Guarantee Corporation and if your promised pension is above the guarantee amount and above the funded amount, you take a hair cut.
If you're lucky, you've been getting audit reports about the underfunded pension for years, so you could prepare, but you probably couldn't do anything about it.
If your employer had put the pension funding in a 401k account for you, you would know what you have, and be able to separate from the employer and not have to keep in touch to make sure they're holding their end of the bargain.
If you're lucky, you've been getting audit reports about the underfunded pension for years, so you could prepare, but you probably couldn't do anything about it.
If your employer had put the pension funding in a 401k account for you, you would know what you have, and be able to separate from the employer and not have to keep in touch to make sure they're holding their end of the bargain.
Pension mechanics are always important to remember, but especially important when the company is struggling.
The pension may be held in trust, but if the employer goes under, the pension stops getting new contributions. In many cases, this led to insolvency of the fund as well, since contributions before employer insolvency were usually not high enough to ensure fund assets could cover future obligations.
Indeed. A proper fund should be a managed investment fund like the Canadian Pension Plan fund for example.
I do not think a fund is better than a 401k in terms of returns over investment. But it's for sure easier for the employee, as retirement fund is a complex topic better managed by professionals.
I do not think a fund is better than a 401k in terms of returns over investment. But it's for sure easier for the employee, as retirement fund is a complex topic better managed by professionals.
Only if your tax system supports it.
In germany a pension comes from your gross salary, is untaxed and moved away. It then will be taxed later when you are retired but because you probably earn a lot less as a retire, you pay less taxes on it.
In germany a pension comes from your gross salary, is untaxed and moved away. It then will be taxed later when you are retired but because you probably earn a lot less as a retire, you pay less taxes on it.
Similar in the UK: employers can offer a defined benefit pension plan (usually based on something like 1/60 of final salary time number of years worked) or more commonly now a defined contribution scheme (invest in to a market-based pension fund, where the employer selects the fund manager). Both of these are taken from pre-tax income, though at higher rates of income tax the employee will have to claim some tax back at the end of the tax year. These contrast with the SIPP, which is private to the individual and does not involve the employer, but has similar tax advantages to the DC employer scheme.
You can do this with your own salary through a 401k in the US or an RRSP in Canada.
You can’t come anywhere near maxing tax-exempt contributions to a 401k without substantial employer contributions, though, because of how they’re structured. The employer’s separate cap is higher than the employees. No matter how dedicated to saving a person is, they can’t even hit 50% of the max without the employer separately contributing.
Most pensions involve a substantial employer contribution too.
I'm just saying, if they're contributing, great, I'd rather it go into a 401k where it's in a specific account for me and I can easily track it and complain timely if it's missing and I can fully separate from the employer when I leave versus going into a pension trust which I have much less visibility and a much longer connection with the company.
Of the four companies I've had 401ks with, one is totally dead, I think. Another is merged into Verizon and may as well be dead. The fourth bought the third and might last until I'd get a pension.
I'm quite happy I have no further financial connection to these companies, and don't have to pay attention to their solvency anymore.
I'm just saying, if they're contributing, great, I'd rather it go into a 401k where it's in a specific account for me and I can easily track it and complain timely if it's missing and I can fully separate from the employer when I leave versus going into a pension trust which I have much less visibility and a much longer connection with the company.
Of the four companies I've had 401ks with, one is totally dead, I think. Another is merged into Verizon and may as well be dead. The fourth bought the third and might last until I'd get a pension.
I'm quite happy I have no further financial connection to these companies, and don't have to pay attention to their solvency anymore.
What i don't understand about 401k is why is there such a strict limit on personal contributions, but employer can contribute significantly more? It's all compensation one way or another, why shouldn't I be able to allocate my compensation how I please?
The IRS doesn't want 401k to be a tax-avoidance scheme for the rich so individual plans are heavily capped. But you should have the same cap as your employer in a plan they administer.
There's always a way:
https://www.washingtonexaminer.com/news/1143872/paypal-found...
https://www.washingtonexaminer.com/news/1143872/paypal-found...
I mean I absolutely detest Peter Thiel and all, but I don't get why you think having and using a Roth IRA (which is, BTW, not a 401k) is a loophole? I max mine out every year and you should too. You should also recognize that it is to your tax advantage to make your riskiest investments with your Roth account, because sometimes high risk brings high reward, which is then untaxed reward, which is the entire point of a why the government both incentivized the creation of Roth accounts, and limited the yearly contribution to a small ammount to begin with. It's not gaming the system, it's the system functioning as intended.
Not trying to be a smartass but the rich have quite enough other very profitable ways to avoid being taxed, where bribing lawmakers is only one of them.
The idea is to replace pensions. An ideal structure as envisioned when these were thought up was probably a fixed size contribution from the company plus substantial matching. That didn’t happen and the things are kinda failures absent actual mandates for employer contributions.
There are two reasons you might not want all retirement savings money to be wholly in control of the saver:
1) Some folks are simply really bad at saving, which ends up being rough for others around them and for society, not only affecting them. This reason tends to rub some folks the wrong way on principle, so they may prefer to disregard it, but it is true as far as it goes (principle aside) [edit: I mean doing anything about this for this reason rubs some folks the wrong way, not that they disagree it’s a real phenomenon]
2) Money directly available to people is freed up for rivalrous zero-sum spending. Think: bidding up scarce resources for your kids, like good schools (which can mean housing). In a world where 100% of comp is employee-directed, this punishes responsible savers.
There are two reasons you might not want all retirement savings money to be wholly in control of the saver:
1) Some folks are simply really bad at saving, which ends up being rough for others around them and for society, not only affecting them. This reason tends to rub some folks the wrong way on principle, so they may prefer to disregard it, but it is true as far as it goes (principle aside) [edit: I mean doing anything about this for this reason rubs some folks the wrong way, not that they disagree it’s a real phenomenon]
2) Money directly available to people is freed up for rivalrous zero-sum spending. Think: bidding up scarce resources for your kids, like good schools (which can mean housing). In a world where 100% of comp is employee-directed, this punishes responsible savers.
Regarding point #1, Singapore uses mandatory retirement savings. If you're pedantic it's not much different than a tax. But functionally it's more like workers are mandated to pay a certain percentag into their 401k.
There's some pressure towards matching, in that there are penalties if they find only "key" or "highly-compensated" employees have a lot matched or choose to contribute a lot to the plan.
Income contributed to a 401k is not taxed at the time of earning. Not putting a limit on contributions would mean you could pay very little income tax. A wealthy person making 200k a year could contribute 100k to their 401k and more than halve their total income tax paid.
But OP's point is that the 200k a year person could instead negotiate a 100k salary with an additional 100k into the 401k (by the employer) and that would be allowed.
Edit: Although it does appear there is a cap to the employer's contribution ($69,000 for 2024 [1]). But I think the general point still stands, why bother to have employer and employee limits.
[1]: https://www.irs.gov/retirement-plans/plan-participant-employ...
Edit: Although it does appear there is a cap to the employer's contribution ($69,000 for 2024 [1]). But I think the general point still stands, why bother to have employer and employee limits.
[1]: https://www.irs.gov/retirement-plans/plan-participant-employ...
Well… they could negotiate $70k/yr from the employer, and that would be allowed (in 2025) without further employee contributions (as that hits the total max contribution limit).
A $200k/yr employee with no employer contribution would be limited to $23,500 contribution (in 2025 limits).
[edit] actually that’s not quite true, though, because IIRC contribution rules have to be uniform, to avoid horse-shit like maxing out upper management at $70k and contributing nothing for lower-level employees, limiting them to $23.5k tax-advantaged no matter how much hard try to save, I.e. to prevent the whole damn scheme from benefiting mostly the already well-off more than it’s probably going to regardless.
A $200k/yr employee with no employer contribution would be limited to $23,500 contribution (in 2025 limits).
[edit] actually that’s not quite true, though, because IIRC contribution rules have to be uniform, to avoid horse-shit like maxing out upper management at $70k and contributing nothing for lower-level employees, limiting them to $23.5k tax-advantaged no matter how much hard try to save, I.e. to prevent the whole damn scheme from benefiting mostly the already well-off more than it’s probably going to regardless.
>A wealthy person making 200k a year could contribute 100k to their 401k and more than halve their total income tax paid.
They'll pay it when they take it back out. At best they're saving the difference between the bracket rates in exchange for letting your money slosh around the markets for your working life.
They'll pay it when they take it back out. At best they're saving the difference between the bracket rates in exchange for letting your money slosh around the markets for your working life.
401k is taxed at the time of withdrawal, but that's usually at a lower tax bracket.
500k in income 1 year is ~$162k in income tax.
500k in income split across 2 years is $68.5k each year totalling $137k.
It's not massive but it's still a decent chunk of taxes people can avoid.
500k in income 1 year is ~$162k in income tax.
500k in income split across 2 years is $68.5k each year totalling $137k.
It's not massive but it's still a decent chunk of taxes people can avoid.
If you are self-employed, you can make the normal employee contributions and your employer (also you) can make the additional contributions of roughly 25% of salary. For 2025 this would be a total of 70k instead of the normal 23k
It depends on your income level in the US, but in general a 401k is a tax dodge for the employee
In an ideal world yes, but the amount of money people lose from the 10% early withdrawal penalty is huge. You don’t want anywhere close to 100% of your long term savings in a 401k.
What does early withdrawal have to do with this? I'm talking about the tax status of contributions
Contributions are taxed at withdrawal, cash in your bank account isn’t. If you’re saving 30% when you contribute but paying 40% when you withdraw, that can be worse than paying upfront.
Obviously, long term capital gains should be part of the equation but if you’re young in a lower tax bracket but a lucrative career, 401k can be a terrible financial decision.
Obviously, long term capital gains should be part of the equation but if you’re young in a lower tax bracket but a lucrative career, 401k can be a terrible financial decision.
I get where you’re coming from, but keeping retirement separate from an ‘in case shit happens’ fund is key. A nominal contribution to a 401k isn’t entirely a bad move, though—it still offers tax deferral and potential employer matches, which can be worthwhile even if you’re not going all-in on it as your only long-term savings strategy.
that isn't how Roth 401ks work. Also you still aren't explaining what an early withdrawal has to do with this
Roth 401(k)’s are actually worse here. Unlike 401k’s it use post tax deposit so there’s zero tax advantage upfront. You also need to both pay taxes and a 10% penalty on early withdrawal of any gains, so it’s a significant risk with minimal upside considering the low rates of capital gains.
There’s nuances around things like divorce, but people overlook just how tax advantaged traditional investments currently are.
There’s nuances around things like divorce, but people overlook just how tax advantaged traditional investments currently are.
Why do you keep bringing up early withdrawal? It's like saying crypto zoo is a bad investment. Yeah, it is. Don't do it.
Because my point was people shouldn’t limit their savings to these systems.
I’ve seen far to many people lose thousands and some tens of thousands by doing so.
I’ve seen far to many people lose thousands and some tens of thousands by doing so.
You're sort of right but for the wrong reasons. Early withdrawal penalty is not the only problem.
People only need to crack open the piggy bank when shit hits the fan. During those times (layoffs, etc.), the value of what's in the pig is probably depressed to begin with. So your hypothetical scenario is actually worse than you're suggesting, since you pay a 10% penalty on depreciated holdings.
If you legit need the 401k money, they do allow some circumstances for hardship withdrawal penalty free. You just have a higher tax liability that year.
But yes, don't use your 401k for general savings. Depending on your credit you are better off taking out a loan against it.
People only need to crack open the piggy bank when shit hits the fan. During those times (layoffs, etc.), the value of what's in the pig is probably depressed to begin with. So your hypothetical scenario is actually worse than you're suggesting, since you pay a 10% penalty on depreciated holdings.
If you legit need the 401k money, they do allow some circumstances for hardship withdrawal penalty free. You just have a higher tax liability that year.
But yes, don't use your 401k for general savings. Depending on your credit you are better off taking out a loan against it.
Yep, though the nuance is again important. Hardship is a tricky thing because being able to max out a credit card or get other loans including ones under terrible terms means many otherwise hardship situations don’t qualify.
It's more of a tax deferral than a dodge.
> and there's no long term entanglements.
Well, except for our crippling lifelong dependency on index funds.
Well, except for our crippling lifelong dependency on index funds.
So it's better to assume my current employer is insolvent and to just follow that old conservative truism, "Fuck you, got mine."?
If the employer goes insolvent your 401k still has money. The whole point of 401k match is to prevent the "fuck you, got mine" when a company goes belly up
More of the same; just follow our idea and it wo 't hurt your future outcome....
It's better to not gamble your retirement on the assumption that your company will be solvent in 40 years. That's not really antagonistic in any way.
You require the company to fund a pension held at a custodian. If the company goes bust, your pension benefits are not impacted. Importantly, the retirement contributions are on top of your wages, versus being expected to find the cash for retirement exposure out of your own wages such that a 401k requires.
Australia's system is a model: https://en.wikipedia.org/wiki/Superannuation_in_Australia
Australia's system is a model: https://en.wikipedia.org/wiki/Superannuation_in_Australia
The pension funds are protected, but that does not mean anything close to your promised benefit is available for you to receive. It also creates a recurring liability that the company is on the hook for. This has historically worked out to cases where employees must either get a partial payout from available funds and tank the loss, or have the company fold and everyone gets laid off.
Pensions are a better deal until they catastrophically fail.
Pensions are a better deal until they catastrophically fail.
See also state governments' pension problems.
Employers match employee contributions to a 401(k), so it's not purely out of one's own wages. In this case, Boeing is matching up to 12% of the employee's income, which is very high.
Based on a preponderance of the evidence, how successful has that token match been in achieving successful outcomes? It is a match, if you don't contribute, there is no match. That is not how pension contributions and benefits work.
I guess it depends on what you define as a successful outcome. Recent changes to the law mean that employees are automatically enrolled at the matching rate and then their contribution automatically escalates by 1 percentage point per year up to a max of 15%. I suspect that that's pretty effective at getting people to contribute and get the match.
Most employees are bright enough to at least contribute as much to max out the company match. It's free money.
I'm skeptical. A quick search suggests that 41% of eligible employees don't contribute anything to a 401-K.
The main argument for defined benefit pensions is that while they never covered most employees, they did represent money that people got in retirement without doing anything and which "society" would otherwise have been on the hook for to some degree.
The main argument for defined benefit pensions is that while they never covered most employees, they did represent money that people got in retirement without doing anything and which "society" would otherwise have been on the hook for to some degree.
A younger me was not so bright. At the time I needed the few extra bucks and retirement seemed a lifetime away; I had all the time in the world to make up for it.
Years later I got a mortgage and learned what compound interest is.
I'd been underfunding for most of my career. You overestimate collective intelligence.
Years later I got a mortgage and learned what compound interest is.
I'd been underfunding for most of my career. You overestimate collective intelligence.
Well if it is an equal amount of money contributes, yes a 401k match would be strictly better than a pension because it gives control over to the employee of the money.
> It is a match, if you don't contribute, there is no match.
That choice should be left to the employee.
Why are you upset with how the employee is choosing to do with their retirement?
> It is a match, if you don't contribute, there is no match.
That choice should be left to the employee.
Why are you upset with how the employee is choosing to do with their retirement?
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This is no silver bullet. If the pension custodian assumed retirees would live to 75 on average and they start living until 90 then it's going to have a problem.
Superannuation is very very similar to the 401k honestly. I remember when Australia brought in superannuation system and the biggest pushback was that it was blatantly a move to the us system (we had government pensions in the 90s). The tax treatment isn’t that different since 401k contributions aren’t taxed like income either. I work for an employer that pays 15% 401k contributions on top of salary. The main difference is that employers aren’t required to pay 401k contributions and I think that would be the better point to make.
Pensions are absolutely crippling to a company long term.
Nah, Boeing management and shareholder comp crippled the org on its own just fine. Getting rid of pensions is what enabled more comp to go to these folks. "401k experiment failure" are the keywords you can search for on the topic.
Are we going to claw back all the comp and shareholder returns from the folks who stole from Boeing while it went down the drain? No, we'll just say that's the cost, even though it is obvious that is what crippled the org. "Pensions are absolutely crippling" while orgs are strip mined in plain site, with a noticeable lack of hand ringing over said strip mining.
https://www.epi.org/publication/retirement-in-america/
https://www.pionline.com/defined-contribution/401k-experimen...
https://www.nytimes.com/2024/05/08/magazine/401k-retirement-...
https://www.nbcnews.com/business/retirement/great-401-k-expe...
Are we going to claw back all the comp and shareholder returns from the folks who stole from Boeing while it went down the drain? No, we'll just say that's the cost, even though it is obvious that is what crippled the org. "Pensions are absolutely crippling" while orgs are strip mined in plain site, with a noticeable lack of hand ringing over said strip mining.
https://www.epi.org/publication/retirement-in-america/
https://www.pionline.com/defined-contribution/401k-experimen...
https://www.nytimes.com/2024/05/08/magazine/401k-retirement-...
https://www.nbcnews.com/business/retirement/great-401-k-expe...
> Boeing management and shareholder comp crippled the org on its own just fine
Don’t get me wrong, I think the private equity model of financially oriented management is a problem. Employees and unions do share blame though. Remember, an IAM worker forgot bolts on the door plug. And SPEEA workers (the other union) designed MCAS poorly and didn’t build redundancy on dirt cheap sensors where there was no reason to avoid it. Boeing’s floor is inefficient and a shock to anyone who works with Boeing, due to union territorial issues and frankly a lazy culture. All these things have contributed significantly to Boeing’s decline, in addition to bad leadership.
Don’t get me wrong, I think the private equity model of financially oriented management is a problem. Employees and unions do share blame though. Remember, an IAM worker forgot bolts on the door plug. And SPEEA workers (the other union) designed MCAS poorly and didn’t build redundancy on dirt cheap sensors where there was no reason to avoid it. Boeing’s floor is inefficient and a shock to anyone who works with Boeing, due to union territorial issues and frankly a lazy culture. All these things have contributed significantly to Boeing’s decline, in addition to bad leadership.
The unstated implication is that retirement is not economically feasible except to a privileged few. Our healthcare system has a similar implication. Cannot afford universal healthcare, meaning the system only works if we can allow some people to go without.
yes, this is what happens when you dont work on the next generation
The resolution seems to be for governments, not random private companies, to look after our people in their old age.
Pensions are fine if you actually pay for them by purchasing guaranteed annuities to offload the liability. Except nobody wants to do that because they’re insanely expensive. Even more so if they’re going to be inflation adjusted.
In reality if workers want pensions, the company should give them a fix annual amount that the worker can use to purchase an annuity.
In reality if workers want pensions, the company should give them a fix annual amount that the worker can use to purchase an annuity.
Guaranteed annuities have the same problem: who's paying workers in their old age, and what happens when that entity becomes insolvent? Nothing is truly guaranteed in finance, especially when life expectancies rise faster than the pension scheme assumed.
Longevity is not what did them in. It was regulators allowing them to PAYGO on medical costs. Only cash pensions were required to be actuarially sound. Medical benefits were yolo.
Longevity is absolutely a big factor in underfunded pensions. "Actuarially sound" is based on projections of how long retirees will draw from pension funds. When retirees start consistently outliving those projections, a sound pension rapidly becomes unsound.
Pensions only hurt companies long term if they are lying about the long-term cost. If the pension is funded, how can it hurt a firm? A fully-funded pension attracts employees, and encourages retention in a competitive market.
Unless your argument is that management will always lie about the cost, and under-fund. Which is more of a comment about American management and the regulators than about pensions.
Normally I'd say corporate pensions are a terrible idea because no firm around today can credibly promise to be good for its debts in 40 years. But Boeing really is TBTF, so a pension from Boeing might actually be worth something.
Unless your argument is that management will always lie about the cost, and under-fund. Which is more of a comment about American management and the regulators than about pensions.
Normally I'd say corporate pensions are a terrible idea because no firm around today can credibly promise to be good for its debts in 40 years. But Boeing really is TBTF, so a pension from Boeing might actually be worth something.
A "fully funded" pension requires ongoing contributions made into the fund by the company to make sure returns are high enough, especially during a market downturn, when the company can least afford to make such top-up contributions.
some public transit agencies spend over half of their operating budget on pensions
And?
It’s problematic, it means a politician can offer pensions to make themselves look better and kick the can down the road
What does that have to do with their budget?
And to governments, not just companies. Public sector pensions in America are basically scamming and stealing from taxpayers.
If it's so obvious, why offer them? Why do deferred compensation? Why promise to pay in the future for anything?
Hedging your bets some will die before they get it/all of it? Keeping your employees sustained while also not giving them enough immediate overhead for creating any kind of wealth?
I'm not serious, these are just the first cynical thoughts that came to mind, but I feel like this question should be one we can actually answer? We've had both pensions and time to see varying degrees of successes and failures regarding them.
I'm not serious, these are just the first cynical thoughts that came to mind, but I feel like this question should be one we can actually answer? We've had both pensions and time to see varying degrees of successes and failures regarding them.
No, you're right about the death thing. That's how all life insurance works. They bet on the statistics that most people will die by Y, so the retirement age of X means they will make money if (Y-X) is positive. Pensions are basically just "rest of your life" insurance before the real life insuarance kicks in for your family.
And you see why they died out. Y-X consistently became negative as people lived longer, especially when we moved to a service industry. So they ended it and front-loaded the money. There's probably a lieu of tax codes and other benefit they get from matching 401ks as well that I do not know of without researching.
And you see why they died out. Y-X consistently became negative as people lived longer, especially when we moved to a service industry. So they ended it and front-loaded the money. There's probably a lieu of tax codes and other benefit they get from matching 401ks as well that I do not know of without researching.
Because of the principal-agent problem and the fact that there is no structure to reward future success reliably? If the Chicago parking meter plan is so outrageous, why do it? It's obviously bad. So why do it? You know why. There's a guy with controls over a lot of money. He's going to find a way to access some of it.
> So why do it? You know why.
I don't get it. Maybe every single S&P500 CEO has a deferred compensation plan, but when a union asks for it, it's always corruption?
I don't get it. Maybe every single S&P500 CEO has a deferred compensation plan, but when a union asks for it, it's always corruption?
If a company can't calculate something like this, you should not work there.
Otherwise absolutly not. You just have a company doing the pension plan for you and thats it.
Otherwise absolutly not. You just have a company doing the pension plan for you and thats it.
Pensions are very rare in private industry because they’re incredibly expensive and amount to a Ponzi scheme due to chronic underfunding. In the US everyone has moved onto 401k, except government jobs. But almost all state pensions are in a bad shape. Taxpayers are wasting tons of money paying out pensions that simply never made sense and were never deserved - after all offering up something that is “risk free” would be insanely expensive in theory. Unfortunately some states like California make it impossible for states to get out of those of obligations. Private companies can go bankrupt, but the state will keep taking from taxpayers
https://www.boeingbenefits.com/employee/emp-retirement.html
Regular nonunion employees get 10% match, immediately vested.
Regular nonunion employees get 10% match, immediately vested.
That's crazy. 4% is a pretty common match.
Which sucks absolute ass because 401ks working as a replacement for pensions requires employer contributions more like this 12%.
The plans are clearly structured on the assumption that’s what would happen—there are separate limits for how much an employee can contribute, and how much an employer can, and the employer limit is significantly higher. Even if an employee wants to max out the plan, they can’t, because their contribution level is capped way under the hypothetical max.
The idea was plainly that employers would contribute heavily to these. Instead they barely do, making them better than nothing, but kinda shit considering how they were supposed to work.
[edit] to put some numbers on it, for 2025 an employee maxes out at $23,500 contribution. Meanwhile, the overall max is $70,000. An employee isn’t allowed to contribute more than 1/3 of the max allowed. In fact, with straight matching only and no fixed or multiplier-based matching from the employer, you can still only hit about 2/3 of the max. It’s hard to overstate how entirely the 401k has failed to achieve its apparent purpose in practice.
The plans are clearly structured on the assumption that’s what would happen—there are separate limits for how much an employee can contribute, and how much an employer can, and the employer limit is significantly higher. Even if an employee wants to max out the plan, they can’t, because their contribution level is capped way under the hypothetical max.
The idea was plainly that employers would contribute heavily to these. Instead they barely do, making them better than nothing, but kinda shit considering how they were supposed to work.
[edit] to put some numbers on it, for 2025 an employee maxes out at $23,500 contribution. Meanwhile, the overall max is $70,000. An employee isn’t allowed to contribute more than 1/3 of the max allowed. In fact, with straight matching only and no fixed or multiplier-based matching from the employer, you can still only hit about 2/3 of the max. It’s hard to overstate how entirely the 401k has failed to achieve its apparent purpose in practice.
Wow, that sucks! You should form a union and strike for more.
Why these pension plans needs to be so complicated? 8% from the employee, 15% from the employer. Paid to a separately managed fund each month. That's how its being done where I work.
A true pension provides a guaranteed benefit in retirement (regardless of contributions). You get a certain amount of income, no matter what. So it is not based on the amount of contribution, but what you are given in a risk-free manner. That’s what makes it overly expensive and problematic - nothing is truly risk-free and such a generous benefit end up functioning more like a Ponzi scheme.
The issue is that the defined benefit pension was replaced with a 401k, where your retirement income is subject to the vagaries and collusions of the market as well as your own investment choices and skills over time. The 401k just passes the risk from the employer to the employee, but the employee is playing the game at a significant disadvantage. Pension funds can afford to hire full time money managers to play this game, I cannot.
The other problem is that the investment choices in the 401k are extraordinarily limited. You get your choice of - two index funds that track the S&P and R2K, two "actively managed large / small company funds" that really just track the S&P and R2K but with higher fees. You can choose from 10 different target date funds with high fees and low returns. You can choose the company's own stock, if you did not learn the lesson of ENRON. There are also a few "international company funds" and "bond market index funds" and similar that consistently under perform all the other choices.
There's no way to invest in individual stocks other than the employer's stock, sector targeted mutual funds, REITs, SPACs, actual real estate, annuities, non-US companies, precious metals, or numerous other investment vehicles that leave one less exposed than just "Follow the DJIA". You can't even gamble your money away on Crypto.
The other problem is that the investment choices in the 401k are extraordinarily limited. You get your choice of - two index funds that track the S&P and R2K, two "actively managed large / small company funds" that really just track the S&P and R2K but with higher fees. You can choose from 10 different target date funds with high fees and low returns. You can choose the company's own stock, if you did not learn the lesson of ENRON. There are also a few "international company funds" and "bond market index funds" and similar that consistently under perform all the other choices.
There's no way to invest in individual stocks other than the employer's stock, sector targeted mutual funds, REITs, SPACs, actual real estate, annuities, non-US companies, precious metals, or numerous other investment vehicles that leave one less exposed than just "Follow the DJIA". You can't even gamble your money away on Crypto.
> where your retirement income is subject to the vagaries and collusions of the market
Isn’t this normal and expected? Pensions are also subject to the same thing since they’re invested in the same stock market, right? It is why most pensions don’t have enough money. You simply can’t make something totally risk free. I think pensions are misleading by offering this guarantee and it always results in the company having difficulties for unrealistic obligations or people not getting their pension that they expected when the company collapses.
> as well as your own investment choices and skills over time
401k plans usually have a default investment suggestion that provides a reasonable place to start. People can choose to stick with those recommendations or not. But the 401k is required by some regulation to make responsible choices as a default strategy. Not all companies have the same flexibility in what you can invest in, but mine have always had low cost funds available. I do agree they should have the ability to freely invest in anything though.
Isn’t this normal and expected? Pensions are also subject to the same thing since they’re invested in the same stock market, right? It is why most pensions don’t have enough money. You simply can’t make something totally risk free. I think pensions are misleading by offering this guarantee and it always results in the company having difficulties for unrealistic obligations or people not getting their pension that they expected when the company collapses.
> as well as your own investment choices and skills over time
401k plans usually have a default investment suggestion that provides a reasonable place to start. People can choose to stick with those recommendations or not. But the 401k is required by some regulation to make responsible choices as a default strategy. Not all companies have the same flexibility in what you can invest in, but mine have always had low cost funds available. I do agree they should have the ability to freely invest in anything though.
I wonder how much money Boeing could have saved by averting the costly strike action if it had just agreed to the original proposal from the union.
They probably would have lost way more by agreeing to the pension plan the union demanded.
Same story from the Associated Press: https://apnews.com/article/boeing-contract-vote-strike-machi...
>Although she voted “yes,” Seattle-based calibration specialist Eep Bolaño said the outcome was “most certainly not a victory.” Bolaño said she and her fellow workers made a wise but infuriating choice to accept the offer.
>“We were threatened by a company that was crippled, dying, bleeding on the ground, and us as one of the biggest unions in the country couldn’t even extract two-thirds of our demands from them. This is humiliating,” she said.
Yeah. I never expected the pensions to return, sadly. But 38% over 4 year after a 2 month walkout seems like this strike more or less settled.
For reference:
>Machinists voted down another offer — 35% raises over four years, and still no revival of pensions — on Oct. 23, the same day that Boeing reported a third-quarter loss of more than $6 billion.
I can't blame them at the end of the day because mouths need to be fed, but this paints a grim picture in my eyes. The only way this can be salvaged is if someone in the background is giving other deals like what happened with the train strike (which we wouldn't hear about for months on end).
>“We were threatened by a company that was crippled, dying, bleeding on the ground, and us as one of the biggest unions in the country couldn’t even extract two-thirds of our demands from them. This is humiliating,” she said.
Yeah. I never expected the pensions to return, sadly. But 38% over 4 year after a 2 month walkout seems like this strike more or less settled.
For reference:
>Machinists voted down another offer — 35% raises over four years, and still no revival of pensions — on Oct. 23, the same day that Boeing reported a third-quarter loss of more than $6 billion.
I can't blame them at the end of the day because mouths need to be fed, but this paints a grim picture in my eyes. The only way this can be salvaged is if someone in the background is giving other deals like what happened with the train strike (which we wouldn't hear about for months on end).
Considering Boeing's prospects, what faith could there be in a pension plan tied to their company?
Boeing is a vital defense contractor, despite all the PR disasters. They are definitely in the territory of government bailout if they were truly to go under.
Would I bet on Boeing being alive in 40 years? Not really, not without a huge overhaul in their business. Would I bet on them being alive in 15 years when I retire? Probably.
Would I bet on Boeing being alive in 40 years? Not really, not without a huge overhaul in their business. Would I bet on them being alive in 15 years when I retire? Probably.
I agree that Boeing will still exist in some capacity in the near-medium future. But a healthy pension fund requires more than just existing in my opinion. It needs a healthy, young base of employees who are contributing while you're retired and good governance of investments.
What happened with the train strike?
The bad news: the government stepped in and ruled the strike illegal. So horrible PR. December 2nd, 2022: https://www.reuters.com/world/us/biden-signs-bill-block-us-r...
They did get a pay raise, but the main issue was over paid sick days and this was denied.
My only small sympathy is that this was still at the tail end of the pandemic. So the strike could have legitimately made things really bad and accelerated a recession.
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Good news: There were still negotiations, and mid-february 2023 a few unions announces a deal that would give them 4 sick days + 3 personal days to convert to sick days. They apparently credit the senate for putting pressure on the railroads to allow this.
So despite calling off the strikes, there was essentially more negotiations behind the scene to prevent long term damages to morale (i.e. workers simply retiring early or otherwise leaving the industry).
They did get a pay raise, but the main issue was over paid sick days and this was denied.
My only small sympathy is that this was still at the tail end of the pandemic. So the strike could have legitimately made things really bad and accelerated a recession.
-----------
Good news: There were still negotiations, and mid-february 2023 a few unions announces a deal that would give them 4 sick days + 3 personal days to convert to sick days. They apparently credit the senate for putting pressure on the railroads to allow this.
So despite calling off the strikes, there was essentially more negotiations behind the scene to prevent long term damages to morale (i.e. workers simply retiring early or otherwise leaving the industry).
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Well, thats good news that striking still works in this semi-dystopian world.
Striking will always work under capitalism, because profits are a portion of the value workers create through their labour. Withdrawing labour will always cripple production.
Just "semi-" dystopian?
I still have a job, can sleep and eat. Prices are hiking and we are all being slowly replaced.
Once I loose all those three things I'll ring the bell of dystopia.
Once I loose all those three things I'll ring the bell of dystopia.
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