Dalpa R&I Roadshow
Today I attended the R&I roadshow on Enhanced Retirement and, before I make any other comment, I want to encourage everyone to attend one of these roadshows. It will be well worth your time. It doesn't matter whether you are young or old, a brand new hire or a 30+ year employee.
The following is a synopsis of the meeting. Much more was discussed but I wanted to throw this out there. First they started out by saying any type of enhanced retirement needs to be equitable for everyone. Then they discussed the two types of "Qualified," meaning pretax, retirement plans, DC & DB. A DC has a maximum contribution of $18,500 this year. It doesn't matter what kind or how many DC plans you have, the max you can defer is $18,500/year and the max that can go into a DC is $55,000 including contributions by the company. Any excess DC is paid out as DPSP CSH.
The roadshow was essentially about how to protect this DPSP CSH from being taxed. The only way to do this is to have some sort of DB. Now I know everyone out there thinks "DB" is a dirty word. If you think so, you really need to go to one of these briefings. Modern DB's are nothing like the old, traditional DB. They talked about an option called a "Market Based Cash Balance Plan." Pros: This plan is always 100% funded and assets remain in a pilots estate if s/he dies before retirement. It is also safe from the company in case of a bankruptcy. There are more than 23,000 of this type of plan out there. Cons: Participation is not voluntary and it is not self-directable.
Here is an analogy. Think of all our money in the plan as many individual bubble within one big bubble. Each individual bubble be a pilot and his particular contributions. The plan would be targeted conservatively to make an average 5% return/year. The contributions would come from DPSP CSH. This would avoid the taxes and Alpa dues.
Establishing this type of DB plan would more than likely not be difficult to negotiate with the company and here is why. Right now Delta pays more than $132 million a year in DPSP CSH. Since this is paid as ordinary income it is ALSO subject to the payroll tax paid by Delta. This payroll tax money now being paid could go towards establishing and maintaining the plan.
Well, that's all I'm going to write now and I will try and answer any questions anyone has. There was so much information given that I cannot do it justice.
Denny