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This page will be updated when Boeing provides a complete offer to SPEEA Prof & Tech Negotiation Teams.
During a teleconference with the news media Friday, Jan. 11, Boeing's Mike Delaney said the company adjusted its compensation offer but the medical, retirement and pension packages are unchanged from Boeing's Sept. 13 offer.

Prof & Tech Negotiations Update
Understanding the issues

The SPEEA Negotiation Teams are frustrated with the company’s lack of substantial movement on the major economic issues.  This document highlights the core economic issues and conveys how The Boeing Company’s proposals negatively impact you with:

  • Increased medical premiums.
  • Inadequate wage pools.

  • Substantial reductions in retirement income for future hires.

  • Insufficient pension growth and untenable risks for current participants.

The negotiation team feels the current proposals are unacceptable.

Wage Pools and Medical Premiums

 At this stage in our negotiations, Boeing has proposed the following wage pools for the SPEEA-represented professional and technical contracts:

Profs:              4.5% in 2013, 4.0% in 2014, 4.5% in 2015 and 4.0% in 2016

Techs:             3.5% in 2013, 3.0% in 2014, 3.5% in 2015, and 3.0% in 2016

Boeing has also proposed medical plan premiums on all available medical plans.  The Traditional Medical Plan (TMP) is currently free from premium contributions, but the Boeing corporate offer increases premium contributions to 8%.  The annual impact of the 8% premium on the TMP will significantly offset the wage pools.

The vast majority of SPEEA-represented Profs and Techs cover their families in the TMP, work with their doctors to manage their health conditions and do not participate in third-party health-risk screenings.     

The tables below show the impact of the medical premiums as a percent of base salary and assume that an individual receives the entire wage pool.  The current average base salary is $109,257 for Profs and $80,539 for Techs. 

Salary 
Prof

Pool

Family Premium TMP

Medical Premium as % of Salary

2013

$114,174

4.50%

$-

0.0%

2014

$118,741

4.00%

($1,535.30)

-1.3%

2015

$124,084

4.50%

($1,651.59)

-1.3%

2016

$129,047

4.00%

($1,765.27)

-1.4%

 

Salary 
Tech

Pool

Family Premium TMP

Medical Premium as % of Salary

2013

$83,358

3.50%

$-

0.0%

2014

$85,858

3.00%

($1,535.30)

-1.8%

2015

$88,863

3.50%

($1,651.59)

-1.9%

2016

$91,529

3.00%

($1,765.27)

-1.9%

The Inflation Factor

The Guaranteed Wage Increase (GWI) in the SPEEA Prof and Tech contracts traditionally served as the functional equivalent of a Cost of Living Adjustment (COLA) to ensure individuals do not lose purchasing power.

SPEEA expects inflation to increase as the economy recovers from the Great Recession which is one of the main reasons why the SPEEA Negotiation teams proposed an increase to the size of the GWI.  In contrast, Boeing has proposed to decrease the GWI to 1.5%.  By way of context, U.S. inflation has only run at lower than 1.5% once since 1964.

The Inflation rate has historically averaged around 3%.  It was lower during the Great Recession but ticked up to 3.2% during 2011.

http://www.usinflationcalculator.com/inflation/historical-inflation-rates/

There are different inflation rates (national, regional, consumer price indexed, etc) and you can pick which one you believe is most appropriate….but factoring in inflation is a key part of understanding the true impact of Boeing’s economic proposal.   Adding inflation to the medical premium charts above exposes the expected purchasing power losses hidden in the company’s proposals.

Salary Prof Pool

Family Premium TMP

Medical Premium as % of Salary

Inflation

Inflation plus cost of medical

2013

$114,174

4.50%

$-

0.0%

-3.0%

-3.0%

2014

$118,741

4.00%

($1,535.30)

-1.3%

-3.0%

-4.3%

2015

$124,084

4.50%

($1,651.59)

-1.3%

-3.0%

-4.3%

2016

$129,047

4.00%

($1,765.27)

-1.4%

-3.0%

-4.4%

 

 

Salary Tech Pool

Family Premium TMP

Medical Premium as % of Salary

Inflation

Inflation plus cost of medical

2013

$83,358

3.50%

$-

0.0%

-3.0%

-3.0%

2014

$85,858

3.00%

($1,535.30)

-1.8%

-3.0%

-4.8%

2015

$88,863

3.50%

($1,651.59)

-1.9%

-3.0%

-4.9%

2016

$91,529

3.00%

($1,765.27)

-1.9%

-3.0%

-4.9%

These premiums may be lessened by completing the health-risk questionnaire and submitting your biometric screening results to Boeing’s third-party administrator. They may also significantly increase if you and/or your spouse smoke.  Additionally, these premiums may be mostly eliminated by moving to a plan that has a $2,500 family annual deductible (the Advantage+ Plan) but this creates the risk of significantly higher out-of-pocket costs than the current TMP.

Boeing is a fabulously profitable company, and it is rewarding all of its stakeholders (except the Profs and Techs) for that success.  Executives were given double-digit salary increases.  The shareholders are being rewarded with the continuation of the multi-billion dollar stock buyback program designed to increase the stock price and an expected 2013,  9.1% dividend increase that is being given on top of the 2012,  4.8% dividend increase. 

The company has been using vague terminology such as “remaining competitive” and “being sustainable in the future”, but when the negotiation teams asked for supporting data, Boeing refused. In fact, SPEEA filed an unfair labor practice charge with the National Labor Relations Board (NLRB) on this very topic.

The SPEEA negotiating team has heard nothing compelling whatsoever from Boeing corporate to explain why a net negative economic contract is the appropriate reward for the SPEEA represented Profs and Techs largely responsible for record profitability of the company.

Pension - Current Employees

Because you are represented by SPEEA, you are a participant in the Boeing Company Employee Retirement Plan.  As a plan participant, you are eligible to receive the Standard Benefit Formula or the Alternate Benefit Formula. Both are calculated simultaneously, and you get the larger of the two. The vast majority of Prof retirees receive the alternate benefit formula and the majority of Tech retirees receive the standard benefit formula.

Standard Benefit Formula

Boeing’s offer is a significant reduction in the improvement of the standard benefit.  The standard benefit is straightforward and currently $83 per month times years of credited service (a 30-year career benefit equals $2,490 a month at normal retirement age).  Boeing’s offer increases the standard benefit $2 per year from $83 in 2012 to $85 in 2013, $87 in 2014, $89 in 2015 and $91 in 2016. 

For reference, the 2008 contract increased the standard benefit in 2009 from $70 to $81 (15.7%) and the 2005 contract increased the standard benefit in 2006 from $60 to $70 (16.7%).  Boeings proposed $2 per year increase averages 2.3% per year, significantly less than the average increase for the past 40 years (6+%) or even the past 12 years (4+%).

Alternate Benefit Formula

Currently, the Alternate Benefit Formula (affecting a majority of Prof retirees) has a core benefit plus the excess benefit.

  •  The core benefit is based on 1.025% x “final average earnings.”

    • Final average earnings are defined as your highest average base salary over any period of 60 consecutive months during your last 120 months of service.

  • The excess benefit is 0.45% times the net of your “final average earnings” minus “Social Security covered compensation.”

    • Right now, you only pay Social Security taxes on the amount of your income that is below the social security maximum taxable wage (the cap).  The cap is currently at $110,100. It will increase to $113,700 in 2013.

    • The Social Security covered compensation that is used in the excess benefit is the 35 year trailing average of the Social Security maximum taxable wage (covered compensation is currently $64,560 for 2012 and $67,308 for 2013).  

  • The core plus the excess are added together and then multiplied times years of service to create a monthly benefit.

More than ever, there is talk among legislators to “scrap the cap,” and make higher wage earners pay tax on a larger portion (if not all) of their wages.   If the Social Security wage base were eliminated – aka ‘scrap the cap,’ then the “Social Security covered compensation” would become infinite and eliminate the excess benefit entirely.   

If the excess benefit were eliminated, then the pension benefit for the majority of engineers would be frozen for a number of years until the core benefit outpaces what the core + excess produced when the Social Security wage base were eliminated.  This will result in more and more individuals subject to the standard benefit (that’s increasing slower than normal under Boeing’s proposal).  SPEEA’s proposal to Boeing included protections to mitigate the effects of drastic changes to the Social Security maximum taxable wage.

Pension – Future Employees

Boeing has proposed to eliminate the BCERP pension for future hires and replace it with an “enhanced” 401(k) that provides significantly less income in retirement.

Facts:

  • SPEEA’s analysis of Boeing’s “enhanced” 401(k) shows that it produces a retirement income of approximately 40% less during retirement than the existing pension.  

  • Boeing’s analysis of its “enhanced” 401(k) shows that it produces a retirement income of approximately 33% less during retirement than the existing pension. 

  • Boeing has historically contributed between 10 to 12% of salary into the BCERP pension trust.  The trust is professionally managed, is currently 100% funded, and Boeing is currently making discretionary contributions to the fund.

  • Boeing’s contribution for participants in the “enhanced” 401(k) is 3, 4, or 5% based on age.                                                                                                                           

Boeing’s offer eliminates the pension for new hires beginning in 2013.  Boeing acknowledged having “future plans” to eliminate the pension entirely. The company negotiators did not state the timing of “future plans” but freezing the pension for existing employees would be the probable next step.  

Your vested benefits are protected by federal law and cannot be taken away.  However, future participation and growth can be bargained away.  If Boeing eliminates the pension for new hires beginning in 2013, it will only be a matter of time before the majority of SPEEA members have the “enhanced” 401(k).  Once this group is in the majority, Boeing is likely to propose to freeze the pension for those who still have the pension. 

Status of the Pension

Boeing executive vice president and CFO Gregory D. Smith reported in October 2012 that the BCERP pension is “over 100% funded” using the ERISA funding guidelines (ERISA is the federal law that governs pensions).   Boeing’s pension trust is managed by a team of experts and the assets often exceed investment expectations.

In summary, Boeing is seeking to eliminate the pension as part of a multi-stage process of cutting the retirement benefit for ALL Profs and Techs by 40% (or 33% if you use their math).

Leakage and Wage Pools

When discussing the SPEEA wage proposal, the company uses vague terminology such as “remaining competitive” and “being sustainable in the future” to dismiss SPEEA’s proposals.  What Boeing fails to disclose in their analysis is the effect of leakage.  Leakage (defined below) means that a 6% raise pool will not cost Boeing 6%. Due to the number of postponed retirements, leakage is expected to be higher than typical in the coming years.  Surprisingly, a 6% wage pool in 2013 is expected to increase the average salaries less than the 5% wage pools did in 2009, 2010, 2011 or 2012.

Leakage is the difference between the negotiated wage pool percentage and the change in the average salary over the next 12 months.  SPEEA checks every individual salary increase to ensure that the entire negotiated wage pool is spent on eligible individuals.  After a couple of months, retirements of higher paid individuals and the hiring of lower paid individuals means that the average salary increases less than the wage pool.   If you compare the average salary after the wage increase to the average salary right before the next year’s salary increase, the difference is leakage. 

Example from Prof Unit

For the Prof unit, the leakage has historically been 2% per year.  For example, the 2004 negotiated salary increase was 4.0%.  The increase was given to employees, but the average salary only increased 1.45% over the next 12 months due to leakage.       

As seen from the data below, when the global recession began in 2007, Profs changed their retirement behavior, which resulted in a drastic reduction in leakage.

Professional Unit

 

Before

After

Wage Pool

Leakage

Actual Cost

2004

$79,679

$82,873

4.00%

-2.55%

1.45%

2005

$80,762

$84,002

4.00%

-2.25%

1.75%

2006

$82,111

$87,454

6.50%

-2.13%

4.37%

2007

$85,593

$89,110

4.00%

-0.40%

3.60%

2008

$88,755

$92,460

4.00%

0.14%

4.14%

2009

$92,591

$97,227

5.00%

0.63%

5.63%

2010

$97,843

$102,738

5.00%

0.05%

5.05%

2011

$102,793

$107,942

5.00%

-1.77%

3.23%

2012

$106,030

$111,333

5.00%

.

As the national and global economy begins to slowly recover, leakage will increase to higher levels enabling Boeing to provide larger salary pools at a less than expected cost per employee.  Boeing is currently projecting the retirement of 5,000 SPEEA represented engineers in the next five years. 

In conclusion, Boeing’s proposals on the main three economic issues are unacceptable.    Inflation and increased medical premium contributions significantly reduce the value of the salary increases that you receive over the term of this proposal.   

Boeing’s elimination of the pension for future hires jeopardizes their ability to have the same secure and dignified retirement as current employees.

We are focused on getting a contract proposal that reflects the economic value generated by the SPEEA membership for The Boeing Company.