Originally Posted by
Buck Rogers
Hopefully the MEC understands how divisive a"pension" would be. I don't think they are talking about a DB as that is off the table due to PBGC laws(my understanding)
What I would like to see is an increase to the DC if
any excess (above 415C) can be used to avoid taxes ie. an annuity comes to mind. Otherwise an increase in DC helps the less senior more than the more senior because the DC excess comes in the form of straight pay and taxes take 45%(min) of the "benefit"....39% federal, 2% ALPA dues, 4% Obamacare tax above 200k, now tack on state tax of 10% and you are at 55% lost due to transaction fees. Whereas the young guys can choose to shield all of the income from taxes an get $1 benefit for $1 negotiated
I agree the concept of your post. Let's get the numbers correct before we build on this argument though.
The top marginal tax bracket is 37%, not 39% and that is for taxable income above 600k (married) 500k (single). Few pilots, even widebody captains will fall into this range. 400-600 of taxable income is taxed at 37%. If you are 315-400k, the marginal rate is only 32%. Keep in mind, we are talking about the marginal rate on taxable income. If you are making 450K per year as a captain, your taxable income after deductions is most likely in the 315-400 range at 32%.
Secondly, you are mis-applying the 3.8% Obamacare surtax. It is a tax on net investment income, not W-2 income.
Again, the concept is valid, but the amount lost to taxes is closer to 45% not 55%. With that tax penalty in mind, I agree we should be looking for a method of increasing retirement benefits in a tax efficient manner.