The issue that we (DL) have is different groups. There are those who are senior in both age and seniority ranges that saw the previous DB die (obviously, by this thread, in a few different ways, but none have the initial promise-however you slice it). There are those with a military pension and tricare. There are those with only the 401k after shambles (DZ folks). There are new folks who never had a DB. We all get to meet 401C as a “soft limit” (in simply my opinion) with a realization that the next contract will likely be the last for close to half of DL pilots. Yes, it’s easy to say 10 years will be half, harder to say where a contract 1-5 years from now will bring, and where folks in the last 5 years will try to shelter their money-health and other unknowns, known. Life happens. So what do folks want? Well, sure, (real time) give me 50% FAE for some that want the pension restored. That’s not happening. Reality says so. Some want to bank away as much as possible, safely, for the next 1-10 years in something tax sheltered, others have a longer horizon ranging from maybe 10-35 years.

So what can be done?
Billon(s) dollar question.

Well, 401C is higher in 2019, but not by much. Roth IRA rules (backdoor for most) was raised a little for 2019. HSA is a thing now to max out, for those without tricare. For those with more than 10 years, a 401C max/back door Roth IRA/HSA is all that can be done, in pure “retirement labeled” accounts. That’s a good chunk of money in coffers for retirement. Yes, you can do a mega Roth with 401A, but those doing that likely have a tax professional helping with that and/or have other taxable income streams, by opinion. Those with 20+ to go can max everything out in tax shelters and have plenty for retirement with a little personal finance of a savings account and taxable brokerage. Not saying that’s what to do, but the numbers support it if you are doing a Roth 401k/Roth IRA and using some 401A profit sharing to help bolster, with a full HSA to boot. The numbers can be quite amazing, with tax sheltering, with historical returns.

Cool stuff, but what about the other 50% of the pilot group that doesn’t have that time?!

Well that’s the conundrum. Regardless of time left on property the last stats have more than half the DL group hitting 401C limits of 55K hitting the 401K. (2019-56k, Ira backdoor-6k, catchups still the same by my math~$7k between the 401/IRA)

So this is a first world problem. Yup, it’s still a problem. For higher income earners, another “silo” is needed. Only thing untapped? Hello DB. That’s the only other avenue for a retirement tax shelter. The new “hybrid DB” is a far cry from the previous idea of a pension. Everyone shares the risk from day 1. The company must fund it, they can’t count it on it’s books (this sounds like a 401k...right?) but the money is pooled for those involved. The 16%DPSP on the check, it’s not taxed now, but growing in an account of the world economy instead of a IOU in a pension. That helps those making their top dollars now, to retire shortly to a (nominally, lower tax bracket). It also allows the company to contribute. Not owe, payday by payday contribute. I have yet to find PBGC insurance costs on this plan. So it’s a pool of money, off company books, managed outside of the company, with accounts in our names and DL contributions each paycheck. Sure, the market has been in a tailspin, and will likely remain volatile with politics, but it’s a tax shelter of 16% for more than half the pilots’ income, with additional contributions, for tax savings and growth prior to retirement.

So I ask, what do you do in your CURRENTLY taxable account of DPSP cash, without company contribution? Well, you are already down 30%ish by taxes, now have capital gains (if you made any in 2018....), and you have no contributions.

Back to square 1- where are you at DL?-.... nobody loses if your DPSP goes to an account that is tax sheltered now, gets a contribution from the company, and grows with the market (managed by those who manage money-in lue of those who fly planes and think they are market professionals).

That’s the new DB. Yes, the 401K and DC remains, BUT.... that overage AKA- 16% on the check as DPSP cash? Yup, that goes to an account that grows as retirement and not immediate income with a x% contribution from DL to help it grow... we call that the new (hybrid) DB.

Holy crap I sound like a salesman. Just do the damn research yourself to find the loophole not explored. The kicker becomes taxes. The company gets to write off the contribution, you get to defer the taxes. Uncle Sam always collects in the end, and by my understanding... upon retirement the account is obviously yours, but it’s a taxable account. So you can put it into an IRA (RMD at 70.5) or cash out (taxes now). I imagine (can’t find confirmation) that you could roll it into an immediate annuity, which has its own yearly tax implications, but less than immediate. Still ends up better than full taxes in your high income years.

At the end of the day, the reps will decide, all will adapt.