Originally Posted by
Timbo
No, the 'funding' for our DB plan varied year to year, based on what it had earned in the market. In up years, when the fund increased by more than 6% (?) the company didn't have to make ANY contributions at all! NOTHING! There was as period in the mid 90's I think when the company made ZERO contributions for about 5 years straight, due to the market runup. But when it tanked after 9-11, the bill came due.
In down years, the company had to make contributions to bring the fund up to that 6% line, which could cost them a bundle depending on how little the fund had earned (or how much it lost) in the market.
I'm no R+I expert, perhaps there's one here who can give all the gory details, but the company absolutely saved Billions by flushing our DB plan and putting us on a DC plan.
Today, one of Delta's biggest outstanding debts (in the Billions) is the funding of the frozen NW DB plans.
OK, now we are "discussing" something. No food fights. I think when the plan was terminated it was 40 something percent funded and would have required an infusion of over a billion$ plus the ongoing $$ to save it. I asked a lot of questions of a lot of people at the time. Of course DAL saved $$ with the termination--how much? I dunno. We got reamed, roger that. For a newbie starting out 15% DC with a reasonable return could add up to pretty big money. Obviously, there are a ton of problems with 401k vs DB plans. Companies give employees less $ in DC plans than they would have spent on DB plans (how many times have you read articles about "conversions" and "savings" to the corporation?-100% of the time). Throw in market risk, longevity risk, no company $ to back you up in a decline, probably higher fees vs what "the plan" would pay, and how many of us are professional money managers in the first place? Knowing I was making a ton of assumptions I tried to ballpark what it would take to replace a 60% DB plan--reasonable rate of return--no black swans in the intake. 30yr career--age 60--IMO 15% won't do it. 35yr career--age 65--16%--maybe: but the individual is still shouldering all the aforementioned risks, ie you'ld still need some pad. Again, these are my rough calculations and I don't play an accountant on TV. I'm guessing 16% DC is low hanging fruit. More is better IMO. But, not everyone agrees with me. A bunch of us would prefer more $ in their own names as they would rather own rental houses or their own side business. How many want to go back to a DB plan even if we could negotiate it? I'm guessing not many. To each their own. OFG