Originally Posted by
dckozak
I'm not sure what the common theme of this discussion other than, "leave everything alone and don't let ALPA mess with my retirement". Look, the A plan is DIEING, when we voted in the last contract we agreed with the company to let it wither on the vine and accept a puny improvement in the B plan as compensation.
Unless the caps for the A plan were increased with (at a minimum, the rate of inflation or our pay increases, which ever were less) this benefit, the fixed, company (incurs the risk part) is and was going to become less and less of our future retirees total income. With a flat value A plan pay out, at a low 2% inflation, a dollar 20 years from now will be worth 33% less, 40 years 55% less. At 5% inflation, 20y =62% and 40y =85% less value than todays money. There is no question of whether we individually take on more risk, its happening. The only question is what the vehicles will look like that we support.
I think its a valid proposition that we get the company to continue to incur part of the risk. How its done and whether the benefits out weigh the increased risk, is TBD.
This is just sticking your head in the sand
Don,
The only way that this can meet current DB laws is if the rate of return is no less than 5%. At that 5% rate of return, the company would have to contribute $45K per year per pilot just to match our current plan and then we take all of the risk. The company would still have to pay the PBGC the same amount as they do today because our plan is fully funded.
The question is, how much does the company currently contribute to the DB plan each year per pilot? The only numbers we have seen are what the company contributed to the retirement plan for everyone in the company. Remember, we aren't the only ones in the current retirement plan. Some employees had there plan frozen, but there are still financial commitments for the company to fund the plan as those employees collect their retirements. Also, management falls in the same retirement plan.
Most retirement experts will tell you that you should plan on no more than a 6-7% rate of return over the life of your investments to plan for retirement. If we have to base the funding on no less than 5%, then are you really willing to take on 100% of the risk to get a possible 1-2% extra in return.
All of this is still predicated on the current guarantee of $130K per year. If you want to raise the funding to get a minimum of $160K per year, you need to raise the contribution by about $15K per year. And on top of it all, we have no control over how the money is invested.
We assume all of the risk and pay someone else to invest our money and hope that they do a good job. If they don't that 5% ROR by the time you retire, you lose money. By the way, brokers no longer are required to make investments or recommendations that are best for us, they can now make investments and recommendations that are best for their bottom line and not tell you.