A new Boeing 787 Dreamliner in Everett in 2020. Some experienced engineers who designed this plane are weighing retirement as a big cut to their lump-sum pension payout looms later this year. (Mike Siegel / The Seattle Times)
Boeing may see hundreds of veteran engineers retire this fall ahead of a pension adjustment that will dramatically slash the payouts to those who choose to take the money in a single lump sum.
The interest rates used to determine the lump sum will be updated in November, after which one 35-year Boeing employee calculates that his payout will be cut by more than $200,000.
His base salary in 2023 would barely make up that difference.
“I’d be working another year for free,” said the engineer, who asked not to be named to keep his finances private.
A high-grade engineer designated an associate technical fellow, he’s only 57 and loves his job. “It’s been fun,” he said. But he now plans to retire at the end of November.
“To recover that kind of money, in the short time I was going to work before I retired, would not be possible,” he added. “That’s lost money.”
He said many colleagues about his age have done a similar financial calculation and “are going to bail this year.”
When the COVID-19 pandemic hit in 2020, Boeing cut about 2,900 engineering and technical employees in the region through attrition and voluntary buyouts.
Now, with the aviation business springing back amid an acute industry labor shortage, Boeing is scrambling to retain experienced engineers.
It has offered stock options and retention bonuses to top talent. And last year, the company handed out $22 million to engineers in promotions and out-of-sequence pay raises — triple the amount required in the union contract and providing an average additional raise of $10,300 to about 20% of its local engineers.
Yet the cold financial math of the pension deadline brings the prospect this year of higher than normal attrition among some of the most experienced Boeing engineers.
Members of Boeing’s white-collar union, the Society of Professional Engineering Employees in Aerospace, have the option to take their pension either as a lump sum or fixed income monthly checks for life. Typically, about half want the lump sum.
Matt Kempf, senior director for compensation and retirement for SPEEA, estimates around 600 or 700 experienced local engineers and technical staff close to retirement will have to at least consider an early exit.
“The fact that you might lose $200,000 or $300,000 can really shock you,” Kempf said. “Some people might not believe it, but it is really happening.”
“Our folks have a decision to make, go or no go,” he added. “If you want the lump sum, 2022 is the time to go.”
For those on the brink of retirement, the pension calculation provides a hefty nudge to jump now rather than later.
A 60-year-old senior airplane safety engineer, with 34 years at Boeing, who also asked not to be named to preserve his financial privacy, said the pension hit has “pushed my plans for retirement ahead.”
“I feel very bad about having to leave because I really care about this team,” he said. “They are quality people.”
But when the prospect of losing as much as one fifth of his lump sum retirement payment became clear, he said, “I decided, it’s time.”
Pension calculations
This looming cut to the pension lump-sum payout is not unique to Boeing. It applies to any similar traditional pension plan.
However, typical public employee pension plans, such as Washington state’s Public Employees’ Retirement System do not offer a lump-sum alternative to the monthly pension checks, so the dilemma facing the Boeing engineers doesn’t arise.
Likewise, Machinists union members at Boeing don’t have a lump-sum option in their plan and are unaffected.