A significant share of Boeing’s striking assembly workers are digging in their heels on a seemingly quixotic demand: the revival of their pension plans.

When members of the machinists union at Boeing narrowly voted in 2014 to accept a contract extension that froze the pension plan and closed it to new hires, from a distance it appeared to be bowing to the inevitable: pensions were going the way of the Dodo in the United States.

But 10 years later, benefits experts told Forbes pensions are making a quiet comeback, aided by better economic conditions, regulatory changes and new wrinkles on the plans that reduce the risks for employers in promising workers retirement income for the rest of their lives. And some aerospace industry figures say it could be a smart move for Boeing to play ball with the union’s pension demand to help the company retain talent in a tight labor market. The loss of experienced manufacturing workers since the Covid pandemic has played a key role in a steady drumbeat of quality issues that have dogged Boeing, aerospace experts have told Forbes. It can take years for the members of the machinists union to master complicated assembly tasks that are done largely by hand.

“No industry benefits as much as ours for having the same person be employed for his whole career,” said Cliff Collier, an aerospace consultant who negotiated a freezing of the pension plan when he was an executive at parts maker Vought Aircraft Industries in the 2000s. A pension has unmatched power for retaining midcareer workers, he said. “It more or less nails you to wherever you're working — you leave way too much on the table to go somewhere else.”

“Getting the pension back is a longshot,” said Scott Mikus, an analyst at Melius Research. But he also thinks it would help Boeing in the war for talent, including for engineers who might otherwise favor the cutting-edge tech and space companies on the West Coast. In the 1980s, “the pinnacle of engineering was essentially Boeing and Lockheed Martin.” Now, he said, “If you're an engineer and you're really good, why not work at Open AI, Amazon, Alphabet and Microsoft where you're really pushing the boundaries?”

The International Association of Machinists is asking for restoration of the pension plan for its 33,000 members who assemble Boeing’s airplanes in the Seattle area, with retroactive credit for years of service since 2014. Boeing is adamant it won’t do that. "There is no scenario where the company reactivates a defined-benefit pension for this or any other population,” the company said in a statement Thursday after 64% of members voted against a tentative contract agreement that included an increase in funding for workers’ 401(k) retirement savings accounts. The company said pensions are “prohibitively expensive, and that’s why virtually all private employers have transitioned away from them to defined-contribution plans.”

Jon Holden, head of the IAM local representing Boeing workers, said after the vote, “The loss of the pension is still right at the heart of this.” He vowed to push the company for better retirement benefits.

About 35% of private-sector workers were enrolled in a pension plan in 1990, according to Labor Department data. That share had dwindled to 10% as of March, a result of a decades-long trend of companies freezing their pension plans or selling them to insurance companies to deal with their worsening financial condition. The trend was greased in the early 2000s by a triple whammy: a steep decline in stock prices amid the dotcom bust sapped pension fund asset values; a sharp drop in interest rates lowered expected future returns on bonds; and a 2006 law forced companies to add more money to their pension funds to compensate for the resulting shortfalls.

But employee benefits consultants say the pendulum is beginning to swing back toward so-called defined benefit retirement plans like pensions, where employers promise retirees income till death, versus defined contribution options like 401(k) plans, where the employer helps workers save for their retirement – with the worker making the decisions and bearing the financial risk.

Corporate pension funds are at their strongest financially in decades, with the bull market in stocks over the past decade boosting asset values of frozen plans, which companies continue to administer for retirees and current workers who had accrued benefits, and the handful of active ones. Meanwhile the rise of interest rates to over 5% has improved the outlook for future yields on bonds, reducing the amount of money pension plan managers must pay in. Pension plans at companies in the S&P 500 are 101% funded, according to the financial consulting firm Aon, meaning they have all the assets they need to meet their future obligations. That’s up from 74% in 2012.

During the pandemic, Congress gave managers of underfunded plans more time to close the gap so they didn’t have to invest as aggressively.

Congress is considering cutting premiums for pension insurance to encourage the introduction of more plans.

“There's never been a time that I could remember that's been so favorable to the defined benefit pension plan,” said Zorast Wadia, an actuary and consultant with the benefits firm Milliman.

Many companies are considering reintroducing defined benefits plans, said Wadia and Jonathan Price, a benefits specialist at the consultancy Segal, particularly in industries with talent shortages like healthcare. Price said aerospace and defense companies are among his clients who are studying the possibility.

Leading the way is IBM. Big Blue turned heads late last year when it announced that it was halting contributions to the 401(k) accounts of its U.S. employees and reopening its pension plan, which it froze in 2008 – but with a twist. Traditionally pension payouts have been based on workers’ salaries in the final years of employment. IBM, which is seen as a benefits trendsetter, is now giving its workers a so-called cash balance plan, in which the company credits workers a percentage of their salary for each year of service and promises a conservative rate of return, reducing the financial risk for the employer. Workers can take the balance in their account as a lump sum when they retire, or as a lifetime annuity.

Another hybrid pension option that could be an alternative for Boeing and the machinists is a variable annuity plan, where payouts are indexed to investment returns, making employers less exposed in the event of underperformance.

The renewed interest in pensions is also a function of growing recognition that asking workers to manage their own retirement savings through 401(k) accounts is leaving many in trouble. Only half of households with working Americans aged 55 to 64 have any savings in a 401(k) or IRA, and the median balance for that age group is just $87,000 among 5 million accounts held with Vanguard. “Just having Social Security or a 401(k) plan in your retirement is not enough,” said Wadia. “With a pension plan, you can never die broke or bankrupt.”

Companies like IBM whose frozen pension funds are overfunded, with more assets than projected payment obligations, are more likely to reopen them since it could save them substantial amounts of money. For IBM, the move eliminates hundreds of millions of dollars a year in 401(k) contributions; its new cash balance plans will be funded solely through use of its $3.6 billion surplus in pension assets.

Boeing’s pension finances aren’t in as good shape as IBM’s but they’re in much better health than a decade ago. The fair market value of its pension assets as of the end of 2023, $48.9 billion, trailed its projected future obligations to retirees by $5.4 billion, giving it a funding ratio of 90%. That’s a substantial improvement from 2014, when it was 78% funded.

Like many other U.S. companies, that’s allowed Boeing to invest more conservatively: 60% of its assets were in fixed income at the end of 2023, up from 48% in 2014. By federal rules, Boeing’s pension plans were fully funded as of the end of 2023.

Fully restoring the pension would be expensive: Bank of America analysts estimate it would cost $1.6 billion a year. (They also estimate the strike, now in its sixth week, is costing Boeing $1.5 billion a month.)

But Boeing’s pension finances are in decent enough shape that it can afford to meet the machinists somewhere in the middle, said Collier – and the hard line that workers are taking on the issue puts pressure on Boeing to give ground. “They're going to have to do something creative on taking some of the risks from the workers on their retirement.”

In the proposed contract the workers rejected this week, Boeing offered a one-time $5,000 contribution to employees’ 401(k) accounts, and to match employees’ contributions up to 8% of their pay. It also offered to cover transaction fees for workers to convert 401(k) savings into an annuity.

If Boeing doesn’t bend on pensions, Collier thinks it’s only a matter of time before another aerospace and defense company reintroduces a defined benefit plan to gain ground in the war for talent. Three companies in the sector had financial firepower to do so courtesy of funding surpluses for their frozen pension plans as of the end of 2023, according to financial statements: Textron, Huntington Ingalls and L3Harris. Northrop Grumman was not far off at 99.4% funded, followed by RTX at 98.4%.

To Collier, who rued the wave of pension freezes that made aerospace and defense workers “free agents,” it makes sense. “A defined benefit plan is the best method I've ever seen of keeping highly paid, highly skilled people at the same company.”