NEW YORK (Reuters) - Boeing Co BA.N said on Thursday it will end pension plans for 68,000 nonunion employees, including its chief executive, marking the latest step in the company’s shift away from defined-benefit plans.
The change takes effect January 1, 2016, and reflects the company’s effort to reduce the growing costs of its pension plans. Boeing said it expects to take a $110 million non-cash charge in the first quarter for the pension change.
The company previously announced charges of $140 million and $80 million for making similar changes to labor agreements with union machinists in the Seattle area and in St. Louis.
Since 2009, all new hires of nonunion employees and new hires of union employees represented by 28 unions have received defined-contribution plans instead of pensions.
Boeing said the defined-contribution plans allow it to “better predict and manage financial risks.”
Nonunion workers including managers and executives will keep what they have earned in their pensions through December 31, 2015, and then switch to a new defined-contribution retirement plan, Boeing said.
The employees will also keep an existing 401(k) plan in which Boeing matches a portion of their savings.
The changes mirror those made to benefits of union workers.
Earlier this year, 31,000 union machinists in the Pacific Northwest narrowly approved a similar change as part of an eight-year extension of their labor contract.
In exchange for that and other concessions, Boeing agreed to build its new 777X jetliner and its wings in Washington state, ensuring that the machinists would continue to perform that work.
Boeing said it is making the changes so it can continue paying “market-leading” retirement benefits while also “assuring our competitiveness by curbing the unsustainable growth of our long-term pension liability.”
(Refiles to add previously omitted advisory line for Update 2: “Adds details on defined-contribution plans, union agreements”)
Reporting by Alwyn Scott; Editing by Saumyadeb Chakrabarty and Meredith Mazzilli