The strike at Boeing has brought to the forefront one of the most contentious issues between labor and management: the discontinuation of traditional pension plans for union members in 2014. This dispute resonates with past labor conflicts not only at Boeing but also across various industries, where employees have seen a key component of their retirement security vanish. Companies have increasingly shifted the burden of retirement risks from their own financial responsibilities to those of the employees themselves.

Now, unions are fighting back, advocating for the reinstatement of the pension plans that were sacrificed in previous agreements. This demand is a significant factor behind the strike initiated by 33,000 members of the International Association of Machinists (IAM), who overwhelmingly rejected a tentative labor deal. The deal would have increased Boeing's contributions to their 401(k) plans but failed to reinstate the traditional pension plans lost a decade ago.

Jon Holden, president of the largest union local at Boeing, acknowledged that the wound of losing the pension plans still smarts for many members. However, traditional pension plans have become exceedingly rare in contemporary American workplaces. Once a company transitions from these plans to 401(k)-style retirement accounts, the former are almost never reinstated.

The IAM initially aimed to restore pension plans, but the rejected deal last week did not include such a provision. While other unions, such as the United Auto Workers during their strike at General Motors, Ford, and Stellantis, have also sought to restore pension plans, none have been successful. Even the auto strike, which resulted in record pay raises and other benefits for the UAW, did not reinstate pension plans for workers hired after 2007.

Employers often argue that employees and retirees may fare better with a 401(k) plan, particularly if their investments perform well. During the UAW strike, Ford's CFO, John Lawler, referred to traditional pension plans as "a plan of the past." The two main types of retirement plans available to American workers are defined benefit plans, which offer a fixed monthly payout until death, and defined contribution plans, such as 401(k)s, where employers contribute to individual accounts.

Defined benefit plans are now only available to about 8% of U.S. business workers, a stark drop from 39% in 1980, according to the Employee Benefit Research Institute. This decline closely mirrors the decrease in union membership among businesses, from 17% in 1983 to 6% in 2023. Meanwhile, individual retirement accounts like 401(k)s have risen from covering 19% of business employees to 50% today.

The few remaining sectors where pensions are prevalent are government jobs, with about 80% of public sector workers still having access to traditional pension plans. However, even these plans offer less generous benefits than in the past.

Boeing's rank-and-file union members narrowly approved a 2014 contract that eliminated pensions for new hires and froze existing members' accrued benefits, fearing that Boeing would build its next jet, the 777X, at a nonunion plant out of state if the deal was not accepted. The loss of the pension plan a decade ago is a significant reason why rank-and-file members nearly unanimously rejected the recent tentative agreement, even with Boeing's offer to increase 401(k) contributions.

Brian Bryant, international president of the IAM, emphasized the need for Boeing to address retirement security, stating that the company's offer did not meet members' expectations. However, he did not specify that only the return of traditional pension plans would satisfy members, suggesting that another form of equivalent value might be acceptable.

Employers prefer 401(k) plans over traditional pensions because they transfer the risks to the workers. Under pension plans, companies contribute to funds that are invested in assets like stocks and bonds, with the returns used to pay promised benefits. If assets lose value, employers must make up the difference. In contrast, 401(k) plans place the entire risk on the individual, who suffers losses if the value of their retirement savings declines.

Additionally, retirees can outlive their assets in a defined contribution account, unlike defined benefit plans, which are obligated to pay out for as long as the recipient or a survivor is alive. Traditional pension plans in the private sector also offer the advantage of being guaranteed by the Pension Benefit Guaranty Corp. (PBGC) in the event of employer bankruptcy.

The only example of a company reopening a closed pension plan was IBM last year, but this was not part of labor negotiations. Instead, it was due to the pension plan becoming overfunded due to market growth. IBM made this unilateral move to improve employee financial well-being.

However, the chances of Boeing reopening its pension plan are slim, despite the current strike and the "pension or bust" sentiment on the picket lines. History suggests that the union members will likely return to work without having this demand met.