(Bloomberg) -- Like so many companies in America,Boeing has largely neglected thegaping deficit in its employee pension as it doled out lavish rewardsto shareholders.

What’s raising eyebrows is how it plans to shore up theretirement plan.

Last month, Boeing made its largest pension contribution in over a decade. Butrather than put up cash and lock in the funding, the planemakertransferred $3.5 billion of its own shares, including those itbought back in years past. (The administrator says it expects tosell them over the coming year.)

It’s a bold move, and one cheered by many on Wall Street. Yet topension experts, it isn’t worth the risk. Aftera record-setting, 58 percent rally this year, Boeing is betting itcan keep producing the kind of earnings that push shares higher. Ifall goes well, not only will the pension benefit, but Boeing saysit will be able to forgo contributions for the next four years.

But if anything goes awry, the $57 billion pension -- whichcovers a majority of its workers and retirees -- could easily endup worse off than before.

“It’s an irresponsible thing to do certainly from theperspective of the plan participants,” said Daniel Bergstresser, afinance professor at the Brandeis International Business School.“Ideally, you would like to put assets in the pension plan thatwon’t fall in value at exactly the same time that the company issuffering.”

Under Chief Executive Officer Dennis Muilenburg, Boeing’spension shortfall has widened as the Chicago-based company steppedup share buybacks. The $20 billion gap is now wider than anyS&P 500 company except General Electric Co. And relative toearnings, Boeing shares are already trading close to the highestlevels in a decade, a sign there might be more downside thanupside.

‘Good value’

Boeing disagrees and sees the strategy as a win-win.

“We continue to see Boeing stock as a good value,” spokesmanChaz Bickers said. “This action further reduces risk to ourbusiness while increasing the funding level of our pension plans.Our employees and retirees benefit as well since this actionprovides funding earlier, giving the plan sponsor more flexibilityto grow the plans’ assets.”

It’s too early to tell how things will play out -- especiallyfor a company whose shares have historically beensensitive to the ups and downs of the economy -- and early returnsare mixed. Gains have slowed markedly since Boeing transferred 14.4million shares to its pension on Aug. 1, but the 2.4 percentadvance is still more than the S&P 500. (The plan has theoption to dispose of the shares at any time.)

Analysts see Boeing climbing to $262.86 a share in the comingyear, supported by a near-record $423 billion backlog of jetorders that’s equal to about seven years of factory output. Thatwould be good for a 7.2 percent gain from Thursday’s price of$245.23, and roughly in line with analysts’ estimates for thebroader market. In the previous 12 months, Boeing stock nearlydoubled.

Price targets

Of course, Boeing isn’t the only company to opt for stockinstead of cash when it comes to its pensions. GE’s plan holds morethan $700 million of shares and IBM had about $28 million ofstock in its U.S. pensions. But Boeing’s transfer is notablebecause it was one of the largest in recent memory and happenedjust one day after the company’s shares reached an all-timehigh.

Pension experts and academics have long debated how much companystock is too much for retirement plans, particularlybecause workers’ livelihoods become even more intertwined withtheir employer’s fortunes when they own shares. The dangers cameinto full view when Enron’s collapse a decade ago saddled itsemployees with millions of worthless shares in their 401(k)s.

With pensions like Boeing’s, the risks to the company can begreater when share prices plunge because employers are on the hookto cover any shortfall. And for Boeing, the deficit is alreadyconsiderable.

“It would have been a cleaner decision to contribute cash to thepension,” said Vitali Kalesnik, the head of equity research atResearch Affiliates. “Boeing to a degree is a very cyclicalcompany.”

Boeing’s pension went deep into the red after the globalfinancial crisis in 2008 hurt aircraft sales, while delays in its787 Dreamliner program burned up cash. Record-low interest rates inthe years since hurt pension returns across corporate America, andmade it hard for Boeing to claw its way out.

Pension freeze

At the end of 2016, its pension had $57 billion in assets and$77 billion in obligations -- a funding ratio of 74 percent, datacompiled by Bloomberg show.

Boeing froze pensions for Seattle-area Machinist union memberslast year under a hard-fought contract amendment. It also switchednon-union workers to a defined contribution plan.

And the stock transfer last month, combined with a planned $500million cash payment this year, would be equal to all the company’scontributions during the previous five years. Nevertheless, itstill leaves Boeing with roughly $15 billion in unfunded pensionliabilities, although the shortfall should gradually shrink overthe next four years, according to Sanford C. Bernstein &Co.

To be clear, Boeing has the money. In the past three years, thecompany generated enough excess cash to buy back $30 billion of itsown shares.

But using equity instead of cash does have its advantages. Itallows Boeing to conserve its free cash flow -- a key metric forinvestors -- by transferring Treasury shares that were repurchasedat far lower values than today’s prices. In addition, Boeingwill get a $700 million tax benefit, which will offset the cost ofits $500 million cash contribution.

Risk strategy

The strategy shows how Boeing can “look at risk differently, beproactive and manage that today, and take that uncertainty out overthe next five years,” Greg Smith, Boeing’s chief financial officerand chief strategist, told an investor conference on Aug.9.

It’s not the first time Boeing has plowed stock into itsunderfunded pension. In 2009, the company contributed $1.5 billion.The shares jumped 27 percent that year and 21 percent in 2010. By2011, the plan had cashed out.

But this time, Boeing’s valuation is much higher. With aprice-earnings ratio of 23, the stock is more than three times aspricey as it was at the start of 2009. Given the nature of Boeing’sbusiness, its earnings could be vulnerable to geopolitical shocksor an economic slowdown that saps demand for air travel.

What’s more, the longer its pension remains under water, themore expensive it becomes to maintain. The Pension Benefit GuarantyCorp., a government agency that acts as a backstop when plans fail,has tripled its rates for companies with funding deficits, and moreincreases are on the way.

There’s a limit to how long Boeing can put off underfundedliabilities. Over the next decade, the company expects to pay outabout $46 billion to retirees.

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