By: Russ Kamp, Managing Director, Ryan ALM, Inc.

The Great Resignation, aka the Big Quit or the Great Reshuffle, has been raging on since early 2021. We have witnessed a tremendous migration of workers from one job to another. Commentators have identified many factors as to why workers have voluntarily left their jobs, including stagnant wages, deep dissatisfaction with their current roles, safety concerns related to Covid-19, and a desire to work remotely/hybrid work week. These trends don’t seem to be easing at this time. One of the ways to retain staff and reduce the cost of training new employees is to expand/enhance benefits in addition to wages in an environment of significant inflation.

I’ve written in this blog about how I believe (hope) that the Great Resignation, coupled with rising rates and the creation of pension income (first time in aggregate for the past two decades), might be enough to encourage corporate plan sponsors to re-open frozen defined benefit (DB) pension plans. Define contribution plans which have become the dominant “retirement” savings vehicle are inferior to DB plans as they are dependent on the individual’s ability to fund, manage, and then disburse a benefit for the remainder of their lives – no easy task given the lack of financial resources/training/experience!

Well, it appears that at least one firm may not have gotten the message. Boeing Company is facing a possible August 1st strike involving roughly 2,500 St. Louis area union employees from District Lodge No. 837, International Association of Machinists and Aerospace Workers, AFL-CIO. This union saw its DB pension frozen in 2016 as a result of a 2014 contract negotiation. Boeing is willing to match up to 100% of the first 10% contributed by employees, but as part of the negotiation, they are REDUCING their automatic employer contribution from 4% to 2%. So, in an environment of high inflation where wages for many Americans fall short of covering their monthly expenses, Boeing is further reducing retirement benefits. Do they really believe that the average American worker has the financial wherewithal to take advantage of their “offer” to match greater contributions?

The hiring and training of new workers can be very expensive and time-consuming. Putting in place enhanced benefits, including retirement, that encourage valuable employees to remain at their current place of work seems like quite a reasonable trade-off. The fact that rising US interest rates make the present value of pension liabilities cheaper while also possibly producing pension income is a bonus. DC plans are a terrific supplemental retirement benefit. They were never intended to be anyone’s primary source of retirement income. Perhaps US employees, if not their employers, are finally waking up to this fact.