Received on FEB 20th- I did notify Perkins Coie by phone that I objected to the paragraph words shown in boldface and italics, but would wait until I heard on my appeal to the SEC in case any other changes were needed. Most of the wording is identical to that of last year.
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ITEM 12 SHAREHOLDER PROPOSAL ON PENSION PLANS
Board of Directors' Response
Boeing designed its new pension plan, the Pension Value Plan or
PVP, to provide a single plan for the Company's non-represented
salaried employees. Before the PVP was implemented in 1999, these
employees earned benefits under more than 20 different plans and
formulas that were sponsored by the "premerger" companies:
Boeing, McDonnell Douglas and Rockwell. The PVP was designed to
provide benefits that would be comparable to the benefits provided
to current employees under the prior plans and that would allow
employees to earn future benefits under a single benefit formula..
The Company did not adopt the PVP to reduce pension-related costs.
On the contrary, the PVP increased the Company's pension liability
substantially, as was disclosed in the 1998 Annual Report. The
PVP is not subject to the same criticisms as other cash-balance
plans because it includes important features that are different
from most other cash-balance pension plans:
The PVP preserves all benefits earned under the former plans,
and allows these benefits to continue growing in proportion to
the employee's salary, l Employees began earning new benefits
under the PVP formula immediately upon the PVP's implementation
rather than having a "wear-away" transition period before
they could accrue any new benefits under the cash-balance plan.
. The PVP increases the percentage of pay that is credited to
the employee's cash-balance "account" as the employee's
age increases. Thus, the PVP gives the Company's oldest employees
nearly four times more benefit credits each year than their youngest
counterparts receive.
The Company believes, based on its analysis, that for most employees
who were near retirement age or who had long service when the
PVP took effect, there is little difference in projected retirement
benefits. In fact, due to the PVP's unusual features and the extra
costs associated with this change, the Company further believes
(based on its analysis) that many employees' projected PVP benefits
are slightly higher than the projected benefits from their former
plans. Of course, different employees will be impacted differently,
Overall, the PVP provides a level of benefits that is very close
to, and in some cases better than, the benefits provided by the
prior plans. All benefits that employees had already accrued under
their prior plans have been preserved, as required by federal
pension law. Both federal pension law and the terms of the prior
pension plans gave the Company the right to change its pension
plans for the future, as long as it did not reduce the benefits
employees had already accrued. Boeing exceeded its legal obligation
to merely preserve accrued benefits by not only protecting all
of the prior plans' accrued benefits, but providing for the future
growth of those benefits in proportion to employees' future salary
growth, instead of merely freezing the prior accrued benefits.
The proposal's recommendation to permit employees to choose between
the PVP and their former plan upon termination or retirement would
undermine a primary purpose of the PVP: to create a single, simplified
plan for all salaried non-represented employees. Employers
are not required to offer their employees a choice between pension
plans and, in most circumstances, permitting employees a retroactive
choice at the time of termination or retirement would raise serious
issues under federal pension laws, including laws relating eligibility,
vesting, and funding. Even when employers are permitted
to offer a choice, most do not, for good business reasons. Large
costs and significant administrative difficulties would be associated
with maintaining numerous plans and benefit formulas, meeting
the myriad federal regulations that apply to each plan, and offering
and implementing employees' choices as they terminate or retire
over a period of decades.
The proponent's supporting statement observes that favorable investment earnings of the PVP trust fund do not increase plan benefits, but instead reduce future Company contributions. The PVP provides employees with a benefit determined under the plan's benefit formula; the benefit does not depend on investment performance of the plan's trust fund. Nevertheless, the trust fund's investment earnings are used exclusively for the benefit of plan participants, While favorable investment earnings do not increase plan benefits, neither do unfavorable earnings decrease plan benefits. Rather, trust fund earnings in favorable years serve to offset trust fund losses in unfavorable years, thereby helping to ensure the financial security of the plan.
The Company pays all costs associated with the PVP and contributes
to the plan's trust fund when necessary. Boeing strives to provide
its employees with a total compensation and benefits package that
is competitive and that helps the Company attract and retain the
best performers. Management believes that the PVP meets these
criteria, and that the PVP's generous, carefully thought-out transition
measures have protected the transition-date workforce, Boeing
will continually review its benefit plans and programs, making
changes where appropriate. At this time, the Board of Directors
is satisfied that the measures recommended by the proposal would
be unnecessarily detrimental to the Company's pension and compensation
programs,
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST PROPOSAL
12.