Originally Posted by
kronan
White paper that started this internet hypothetical also indicated yearly benefit might be lower in a down year...but up in a great year.
Wasn’t all that long ago when my B plan was down...really glad I Didn’t PASS
B plans looking pretty good this year, hope that’s not Just Me though
A fund = Defined Benefit Plan. They take the investment & mortality risk
B fund = Defined Contribution Plan We take the investment & mortality risk
We are currently well diversified. It’s prudent. The Certainty of the A fund allows you (if you chose) to take increased risk with your B fund
New idea...
New A fund= Variable Benefit Plan. We take the risk & they take mortality risk. (It’s a defined contribution plan, but individual pilots can’t individually control the risk)
B fund = same. Defined Contribution Plan. We take the investment & mortality risk
Add up the investment risks? “New idea” is higher total investment risk, but individual pilots can’t control the risk in the VB Fund is taking for them.
New idea total mortality risks are the same
Bottom line - in order to maintain equal total investment risk a pilot would actually need to invest his B fund more conservatively
I don’t think you will see that discussed in any company literature or reflected in their models
But it’s true - talk with any investment advisor