Boeing employees are covered by several different savings plans due to recent mergers. Boeing is combining many of the features of these various plans into the enhanced Voluntary Investment Plan (VIP) for nonrepresented salaried employees.

Read and save this publication for future reference. If you are currently a participant in the Boeing savings plan, you do not have to re-enroll in the VIP. If you are currently a participant in the McDonnell Douglas Salaried Savings Plan (004), no action is required. Your investments will transfer to the VIP funds that most closely align with the current McDonnell Douglas funds in which you are invested.

Enhancements will be made to the Voluntary Investment Plan on Oct. 26. Initially, these enhancements will apply only to heritage Boeing participants. In November, nonrepresented salaried employees at heritage McDonnell Douglas will receive a Personal Identification Number to access the Boeing savings plan information line. On Nov. 23, heritage McDonnell Douglas employees can take advantage of all the features of the Voluntary Investment Plan, including switching their investments to different funds.

These changes initially apply to nonrepresented salaried employees at heritage Boeing and participants in the McDonnell Douglas Salaried Savings Plan (004), including those with inactive accounts. Participants in the McDonnell Douglas Component and Subsidiary Thrift plans will be transferred to the Boeing Voluntary Investment Plan in the future. These changes also will be extended to Boeing North American in the future. Generally, employees of Boeing subsidiaries won’t be affected by these changes. Changes to plans for represented employees are subject to negotiations with the appropriate labor unions.

Information about the Voluntary Investment Plan can be found online at http://www.boeing.com/companyoffices/empinfo/savings/

General information about Total Compensation at Boeing is available through your local People representative or online at http://www.boeing.com/compensation/

Your Savings Plan is the second in a series of publications that offers employees information regarding Total Compensation decisions for the new Boeing. The Voluntary Investment Plan (VIP) is one of your most important and useful employee benefits. It allows you to direct your own investments among 11 different investment funds and save for future needs such as retirement, a new home, or your children’s college education.

In describing changes to plans, we will sometimes use the word "heritage" to specify premerger conditions at Boeing, McDonnell Douglas and the Rockwell Aerospace and Defense units. Once these changes are in place, a common plan will be available for nonrepresented salaried employees at the new Boeing.

The primary reason Boeing offers its employees the Voluntary Investment Plan is to help them prepare for a financially secure retirement. Sometimes, however, you need access to your retirement funds early. Whether you need a down payment for a home or an emergency arises, sometimes you need the money you saved now, not later. But most people use the VIP to save for their retirement years.

Retirement is all about relaxing, having fun, traveling — doing all the things you never had time for when you were working. But your retirement years might also find you helping your grown children buy a home or sending your grandchildren to college. Today, people are living longer than ever. You could spend almost a third of your life in retirement, so the more you save now, the better prepared you’ll be for the pleasures and challenges of retirement.

Your retirement income will likely come from several sources:

• Company-sponsored pension
• Social Security
• Savings, including your investment in the Boeing Voluntary Investment Plan.

Many people discover that the largest portion of their retirement income comes from their personal savings, which includes company-sponsored savings plans such as the Boeing VIP, bank and credit union accounts, and other investments. Save as much as you can, starting today!

You can save a portion of your pay on a pre-tax or after-tax basis — or a combination of both — by contributing 1 to 15 percent of your base pay to VIP. Starting in October, the company will match 75 cents for every dollar you invest in the VIP, up to 8 percent of base pay.

Contributions must be in one percent increments and are automatically deducted from your paycheck. Any changes you make to your contribution percentage through the information line take effect within one to two pay periods, depending on when you make the change. Changes may be made at any time, and a confirmation statement will be mailed to your home following any change.

You are vested in — that is, you own — 100 percent of the value of your own contributions, the company matching contributions, and the earnings on those contributions, at all times.

Contributions (including company match) are typically invested within a day or two after they are deducted from your paycheck.

The Voluntary Investment Plan allows you to direct your own contributions among 11 different investment funds.

As a participating employee, you are issued a Personal Identification Number (PIN), enabling you to access your account via telephone 24 hours a day, seven days a week. Over the phone, you can change the amount you contribute to the VIP and move money between the various investment funds.

Heritage McDonnell Douglas employees will receive their new PIN numbers in the mail in November. Heritage Boeing employees should continue using their existing PIN numbers.

When you contribute to the VIP, you can choose to save on either a pre-tax or after-tax basis, or a combination of both. Your combined before- and after-tax contributions cannot be more than 15 percent of your pay.

Pre-tax savings means you’re putting money into your plan account before federal income taxes are withheld. In some, but not all, states, you can even put money into the VIP before state income taxes are withheld.

Your current tax bill is reduced because the amount you save lowers your taxable income dollar-for-dollar. (However, federal tax laws require certain taxes such as FICA to be withheld from earnings without regard to any pre-tax contribution you make to the plan.) Your money grows tax-deferred until it is withdrawn. At that time, you pay taxes on your original contributions, the company matching funds and your earnings.

The government places some restrictions on pre-tax savings. These include a limit on how much any one person can contribute annually (currently set at $10,000). In addition, it’s more difficult to access pre-tax savings before you retire. If you have questions about these restrictions, talk with a tax consultant.

After-tax savings means you’re putting money into your plan account after your taxes have been calculated, so your contribution does not reduce your taxable income. But just like pre-tax savings, your after-tax investment earnings grow tax-deferred until you withdraw them.

Money you save after taxes have been paid can be accessed without paying an early-withdrawal penalty. After your reach the $10,000 pre-tax savings limit, you can continue to save by putting your money in an after-tax account.

Investment options increase from seven to 11 funds — five index funds, four actively-managed mutual funds, plus a Stable Value Fund, and the Boeing Stock Fund. (See Pages 10 and 11 for information about the individual fund choices.)

Your account activity is updated every day. You can review your account balance and investment performance data, transfer money among funds, and change salary contribution percentages anytime using the Boeing savings plans information line.

You can have up to two outstanding loans. Loans generally are processed within days instead of weeks, and there is no waiting period between loans. You may not refinance a VIP loan. Loans originally issued under the McDonnell Douglas Salaried Savings Plan, however, still will be eligible for refinancing.

The investment of company matching funds follows your investment elections. If you contribute to multiple funds with each paycheck, the company match will be divided among the same funds in the same percentage as your own contribution.

You may withdraw the value of your after-tax funds without taking any company matching funds. There is no suspension of company matching funds for this type of withdrawal.

You can save up to 15 percent of your pay in the VIP, up from 14 percent under the McDonnell Douglas Salaried Savings Plan. And you own 100 percent of the money in your accounts – including company contributions – as soon as it is invested.

Boeing and its plan mangers are working diligently to make sure the transition from the heritage McDonnell Douglas plan to the VIP takes place with as little disruption in service as possible. Converting 40,000 accounts is a tremendous task so no plan transactions will be allowed after 4 p.m. Eastern time (when the stock market closes) on Oct. 9. Transactions can begin again when the markets open on Monday, November 23. This transition period insures the efficient transfer of accounts.

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The company will match 75 percent (up from 50 percent) of the first 8 percent of your contributions. This increased match will begin showing on the last paycheck stub you receive in October.

You can invest some or all of your money in the Boeing Stock Fund. Previously, the limit was 50 percent.

When taking distributions or withdrawals from your Boeing Stock Fund, you may choose to receive actual stock certificates. You may still request a distribution in cash if you prefer.

If you have completed five years of service, you will have the option of withdrawing all vested employer matching funds. If you choose this option, employer matching contributions will be suspended for six months.

No additional contributions will be made to the Financial Security Plan (FSP) after Dec. 31, 1998. As with most other elements of Total Compensation, this change applies only to nonrepresented salaried employees.

To compensate for this change, Boeing is increasing the amount of money it will match for your investments in the Voluntary Investment Plan. In addition, the new company-paid disability insurance provides the protection that was previously available only through the FSP or insurance that you had to purchase.

Your current account will remain in the FSP and can be invested in a selection of funds. As has been the case in the past, you can access your FSP account when you have used all your regular sick leave hours. In addition, you will continue to be able to access your FSP account when you retire or leave the company.

When FSP initially was established, employees could tap into their accounts without paying tax penalties. Recent laws, however, have placed greater restrictions on accessing the FSP.

• You can save up to 15 percent of your base pay.
• The company matches your savings by giving you 75 cents for every dollar you save, up to the first 8 percent of your pay.
• You can reduce your current taxes by contributing on a pre-tax basis.
• You don’t pay taxes on any investment earnings until you withdraw the money.

For every dollar you contribute — up to 8 percent of your base salary — Boeing adds 75 cents to your account. If your salary is $40,000 and you contribute 8 percent of your pay — $3,200 — to the VIP, Boeing adds another $2,400 to your account for a total of $5,600. You get a 75 percent return on your money immediately!

Phone number: 1-800-553-9809

TDD number: 1-800-755-6363

Information line hours: 24 hours a day, 7 days a week including holidays.

Customer service hours: Representatives are available to talk with you and answer your questions Mondays through Fridays, except on U.S. stock market holidays, during the following hours:

Call 1-800-553-9809

Enter your Social Security number then press 1 for a PIN reminder.

Voluntary Investment Plan participants have the option of investing in any — or all — of the following funds:

The fund seeks to match the returns of the Lehman Brothers Aggregate Index by investing primarily in government, corporate, mortgage-backed and asset-backed securities that are representative of the broad domestic bond market.

The performance of the fund depends primarily on the value of its bond holdings, changes in interest rates, and the credit quality and maturity of its investments. In general, bond prices tend to increase when the interest rates decrease, and vice versa. This movement is often greater for longer-maturity bonds. The fund’s investment in high-quality bonds with a medium-term duration can mean steady returns with reduced risk compared with funds that invest only in longer-maturity bonds.

This fund seeks to provide opportunities for growth balanced with stable income by matching the returns of a benchmark portfolio composed of 60 percent S&P 500 Index and 40 percent Lehman Brothers Aggregate Index. The fund is a pre-mixed portfolio of stock and bond funds. The stock fund provides the opportunity for growth over the long term, and the bond fund provides stable income and lower risk. The fund is periodically rebalanced to an allocation of 60 percent in the S&P 500 Index Fund and 40 percent in the Bond Market Index Fund.

The fund seeks to match the performance of the Standard & Poor’s 500 Index by investing in all 500 stocks in the S&P 500 Index in proportion to their weighting in the Index. The fund typically holds 2 to 5 percent of its value in futures contracts.

The fund seeks to provide a predictable, stable yield and, over the long term, a return greater than money market rates. A fixed rate of interest is announced periodically and is credited to account balances daily by investing in interest-bearing contracts or other arrangements issued by life insurance companies or other financial institutions. These types of contracts or arrangements provide a stated interest rate that is determined and announced periodically and might vary from period to period. The fund’s announced, credited interest rate reflects the blend of prevailing rates and the outlook for investing in the next period. The current strategy for the fund’s underlying investments include high-quality government, corporate, mortgage-backed and asset-backed securities.

This fund seeks long-term growth of capital plus current dividend income by investing its assets almost entirely in Boeing common stock. As with all other company stock funds, the fund also holds a small amount (up to 4 percent) in cash or cash equivalents. The cash is used when employees transfer their investments from the Boeing Stock Fund to some of the other available investment funds.

The fund seeks to match the performance of the Russell 2000 Index, which is considered a benchmark for small cap companies in the U.S. market, by investing in all 2,000 stocks in the Russell 2000 Index in proportion to their weighting. The fund typically holds 2 to 5 percent of its value in futures contracts.

The fund seeks to match the performance of the Morgan Stanley Capital International Europe, Australia, Far East Index while minimizing transaction costs. It typically invests in all the stocks in the index in proportion to their weighting. To the extent that all the stocks in the index cannot be purchased, the fund purchases a representative sample of all stocks listed in the Index.

The fund seeks to provide investors with an above-average, long-term total return compared to the broad stock market by investing in stocks that can provide the potential for high total return. Total return is the combination of capital appreciation and income or dividends minus any costs or fees. The fund generally invests in undervalued, dividend-paying stocks of companies with market capitalizations of more than $3 billion and employs a strict sell discipline. Undervalued stocks are stocks selling for less than their future earnings power would suggest they are worth. This is sometimes referred to as a "contrarian" investment approach since the fund is buying stocks whose prices have recently fallen.

This fund seeks to maximize total return through investments in smaller capitalized companies by investing primarily in stocks of companies having market capitalization ranging in value from $100 million to $1.5 billion. The fund is actively managed and its goal is to meet or exceed the returns of the Russell 2000 Index, which provides a comprehensive representation of the U.S. small-cap stock market.

The fund seeks capital appreciation from stocks by investing in stocks of companies across all market capitalizations. The fund focuses on companies showing a history of positive earnings and increasing earnings momentum, coupled with stock prices that represent good value relative to future growth prospects.

The fund seeks long-term capital appreciation from technology-related stocks by investing primarily in the stock of U.S. and foreign companies in technology-related industries. These areas might include computers, communications, video, electronics, biotechnology, oceanography, office and factory automation, and robotics. The fund may not invest more than 25 percent of its assets in any one technology-related industry.

Boeing does not underwrite, warrant, guarantee or in any way insure the performance of any investment option available through the plans. Before investing in these funds, you might wish to consult with a financial advisor.

Actively managed fund: A fund in which the fund manager selects individual securities in an attempt to outperform a corresponding market index.

Bonds: A way for a corporation or government to raise money. When you buy a bond (or invest in a bond fund), you are loaning money to the bond issuer in exchange for fixed interest payments over a specified period of time.

Bond fund: A fund managed by an investment company that invests primarily in fixed-income securities such as government, corporate or mortgage bonds.

Futures: An agreement to buy or sell a specific security by a specific date at an agreed-upon price.

Index (also called benchmark): An industry-standard method to measure the overall performance of specific types of investments. Used to compare performance of different funds within a particular investment category. For example, the Standard & Poor’s 500 Index is a typical benchmark for large capitalization stocks. There are many indexes available.

Index fund: A fund that invests in the same securities, or a representative sampling of the same securities, as a specific index in an effort to match the total return of the index.

Large company (large cap, or large capitalization company): A reference not to physical size or extent of workforce, but to an established company with a market capitalization of $1 billion or more.

Market capitalization: The total value of a company, figured by multiplying the stock price by the total number of outstanding shares.

Risk: Generally, the extent to which an investment’s value can go up and down, especially over short time periods. There are many different kinds of risk, such as market risk, interest rate risk and inflation risk, but they all concern the chance for loss of principal or for accumulating returns that fall below a set goal.

Small company (small cap, or small capitalization, company): A reference not to physical size or extent of workforce, but to a company with a market capitalization under $1 billion.

Stable value fund: A fund that seeks to provide income from interest payments on fixed income investments, and protection against loss of principal by maintaining a share value that does not fluctuate as much or as often as a stock fund.

Stock: The basic unit of ownership in a corporation.

Stock fund: A fund managed by an investment company that invests primarily in shares of common stock of corporations.

Total return: A measurement of how much an investment has gained or lost, including income such as interest and dividends, minus the management fees. Expressed as a percentage amount.

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Your VIP is designed to help you save for retirement. Loans and early withdrawals may undo many of the gains you get from compounding and significantly reduce the amount of money you have at retirement. For example, if you took an early withdrawal of $18,000 at age 35, after paying taxes and penalties you would net $11,000. Even if you continued to contribute $2,000 a year for the next 30 years, your total account balance could be up to $179,574 less than if you had not made the early withdrawal. (This is a hypothetical example and does not predict the returns of any fund in the plan.)

Residential and general loans are available for a minimum loan amount of $1,000. Loans are available for an amount equal to 50 percent of your account minus any current outstanding loan balances or $50,000 minus your highest outstanding loan balance(s) in the past 12 month, whichever is less. A maximum of two loans may be outstanding at any time.

The interest rate is the Prime Rate as quoted in The Wall Street Journal on the last business day of the month before you secure the loan. Once you take a loan, the interest rate is fixed for the life of the loan. Loans are paid back through automatic payroll deduction. Loan repayments, including interest, are deposited directly into your current account, following your current investment fund election.

Loans may be paid off early, but partial prepayments are not allowed.

IRS rules allow you to apply for a hardship withdrawal to meet specific financial hardships that can’t be met by any other financial resources. If you take a hardship withdrawal, you’ll owe regular income taxes on the money you withdraw from your pre-tax account, employer matching funds, rollover accounts and after-tax earnings. In addition, you will be subject to a 10 percent early-withdrawal penalty.

Hardship withdrawals are permitted for medical expenses; purchase of a principal residence (excluding mortgage payments); higher education; prevention of eviction or foreclosure; funeral expenses of a dependent family member; repairs of principal residence; lump-sum payment of court-ordered child support; and federal or state taxes that are past due.

If you take a hardship withdrawal, your company matching contributions will be suspended for six months.

You may withdraw all or part of the after-tax contributions you have made to the plan. Additional taxes may apply. Unlike hardship withdrawals, your company matching contributions will not be suspended following an after-tax withdrawal.

Active participants are allowed to withdraw their entire pre-tax, after-tax, company and rollover contributions after age 59-1/2 . Additional taxes may apply.

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If you retire or leave your job at Boeing for any reason, the new enhancements offer you a wide variety of options regarding your Voluntary Investment Plan account. However, you should remember that rules governing distribution choices are complicated. You are encouraged to talk with a tax advisor or financial consultant before deciding how to take your distribution.

You can keep your money in the VIP even after you leave Boeing. Your money continues to grow tax-deferred and you can continue to manage your account over the phone by calling the Boeing savings plan information line. Required minimum distributions must begin once you reach age 70-1/2.

You can request that installment distributions be made to you on a monthly, quarterly, semi-annual, or annual basis. Distributions are treated as taxable income except the portion that represents a return of any after-tax contributions you may have made to the plan.

You may withdraw any portion of your account balance and leave the rest in the plan to grow tax-deferred.

You may roll over all or part of your account balance into another qualified savings plan or an Individual Retirement Account (IRA).

This full distribution generally will be treated as taxable income. However, no income taxes will be due on the portion that represents a return of any after-tax contributions you may have made in the plan. If you’re under age 59-1/2, you may be subject to a 10 percent early-withdrawal penalty on taxable income. You also are liable for federal and state income taxes.

If you are retiring, you may elect to have your account balance transferred to purchase an annuity account that will provide you monthly payments for a certain period of time.

"If it is to be, it is up to me." So goes the old saying, but that could be the theme song for retirement planning.

Boeing does its part by providing you with a package of Total Compensation. Your salary and benefits help you meet your today’s needs. At the same time, you’re earning your future pension. And you have the opportunity to join with the company to build a substantial nest egg for tomorrow.

Social Security will provide a little of your retirement income. Your pension plans will be another piece. But the third and strongest leg of the three-legged stool that holds your retirement dreams is under your control.

The amount you save...

Your investment decisions...

Your risk tolerance...

Avoiding the temptation of loans and early withdrawals...

It’s all up to you. Invest early, have a plan and stick to it. Your retirement could be everything you dream it can be if you pay yourself first. Now is the time to begin.