As I approached the end of my tenure as Block 3 Representative and Council 26 Chair, I prepared a "departing" message for the Council. I considered delivering it as part of a podcast which might have included the new Block 3 Representative, but the rare Memphis weather that led to the Memphis Light Gas & Water boil order also led to the closure of the FDX ALPA office building, so that idea was scuttled. At that point, the days required to complete the Policy Manual review process exceeded the number of days remaining on my term in office, and the option to send the message through ALPA Member Services directly expired. My only option then was to have the incoming Rep publish the message for me (with his approval, of course), but that would have required me to accept all of the edits that had been made to my message by the Policy Manual review process.
The FDX MEC Policy Manual describes a process we use to ensure that communications from the MEC are factual and consistent. The paragraph on the first page of the manual begins, "The successful achievement of our collective goals depends on accurate and consistent communication from the MEC to the membership." I have always supported and will continue to support that statement, and I have always submitted proposed communications through this channel. Unfortunately, the process has not always conformed to only this goal.
The policy continues, "Therefore, the MEC communications protocol shall ensure accuracy of information distributed to the membership but shall not unduly limit the elected representatives’ constitutional rights on issues they desire to communicate." I am absolutely committed to ensuring the accuracy of everything I publish, and that applies not only to "official" communications, but to e-mails, texts, spoken word, and, yes, even posts on APC. Where I have taken issue before, and take issue now again, is when the process infringes on the representative's right to communicate on issues as they desire.
The policy continues, "LEC representatives are urged to submit written or website communications to the MEC Communications Committee Chairman and Communications Specialist prior to submitting them to ALPA Council Services." The process is voluntary, and I have always submitted to it. I have always had the right to submit anything I wrote directly to ALPA (National) Council Services and skip "the chop," but I have always started with "the chop." On most occasions, the suggested edits did not infringe on or weaken the message I intended to send. On some occasions, there have been disagreements about certain edits, and I was able to persuade the "chop chain" to retain the verbiage I had selected. Unfortunately, on a couple of occasions, the differences of OPINION were too large, and I availed myself of the right to publish directly with ALPA Council Services.
The Policy Manual continues, "The appropriate MEC staff, committees and officers will review these communications for factual content." Unfortunately, some of those "committees and officers" who review communications have gone beyond reviewing for factual content, and have used the review process to try to make Block Representative communications reflect their own opinions or support their own agendas rather than those of the Block Rep. That, in my opinion, is a problem.
The policy concludes, "This MEC process shall use all reasonable efforts to expeditiously complete that review and representatives shall be contacted to resolve any issues found during that review." As I mentioned above, I did not allow sufficient time for the expeditious completion of the review process. Of course, February ended on a weekend, and the fallback "direct to Council Services" path was not available, so the message I'm about to share with you did not receive the blessing of the "chop chain."
While I appreciate the time the subject matter experts (SMEs) volunteered on the weekend to review my message, I simply cannot accept the deletions which were made to my message. They were not based on facts or accuracy, but rather on opinions that disagreed with my own. That is not the purpose of the Policy Manual review process.
So, I am posting my original message in its entirety, exactly as I submitted it, including the misspelling of Michele La Vigna's name. I used two l's instead of one, and this was -- ironically -- not corrected in the process designed to assure factual, accurate messages. The only thing I have done to the message is to highlight in red those portions which were identified by the review process to be deleted. Green is text that was added by the chop chain. Purple is the original, unchanged text. I will not identify the reviewers, nor have I included their comments.
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February 26,2021
To ALL pilots in FDX Council 26:
As my term as Block 3 Representative and Council 26 Chair winds to a close, I would like to take this final opportunity to express my thanks, to share my perspective, and to issue a challenge. I had intended to do this by way of a podcast, but the Memphis Light, Gas, and Water boil order and consequent closure of our ALPA office building precluded that, so here goes.
First, I want to express my thanks to the pilots who placed their faith in me with their votes to elect me, and to those who have shown their support for me since then. This is often described as a thankless job, but that’s not entirely true. From in-person conversations to e-mails, phone calls, and text messages, you have continued to express your support for my efforts on your behalf, and for that I am genuinely grateful. I would also like to express my extreme gratitude for the ALPA staff who work tirelessly every day and sacrifice continuously to serve the pilots of FedEx Express. Especially during this past year of COVID-19 hardships, threats to their health and well-being, and numerous other difficulties, they have been the superstars of the operation, and I am indebted to them for their exemplary service.
Next, I’d like to briefly share my perspective on a couple of vital issues. The MEC has determined that our top two priorities for our next CBA Negotiations will be improving our retirement and increasing our compensation. During the next regular MEC meeting in April, the MEC intends to will develop those relatively vague priorities into more specific CBA Openers. Given that the MEC currently has no “table position” to support with a single, unified voice, I believe it’s appropriate to express my perspective on those priorities.
With our 1999 CBA we established the retirement plans that we currently have today. Our “A” Plan is a Defined Benefit plan, and our “B” Plan is a Defined Contribution plan. The Defined Benefit plan provides a fixed benefit which can be easily calculated *, and which will be paid for the life of the pilot, and, if elected, the pilot’s surviving spouse. The Defined Contribution Plan provides for a specific contribution by The Company, subject to twothe IRS limits, to a fund which the pilot ownsan account managed by the pilot. The fund isaccount may be invested in the stock market and thus would be subject to certain inherent risks, and it is managed by the pilot, which attaches certain other risks. The pilot can blow it all in one day, or he might be able to manage to stretch it out for many years. Ultimately, he can pass it on to his or her heirs.
( * My critics will accuse me of oversimplifying the “A” Plan benefit calculation, and here’s why. I cite Paragraph 28.B.2. of our original CBA which states, “A pilot’s retirement benefit at his normal retirement date (the ‘Pension Plan Formula’) shall be equal to the greater of: (i) his final average earnings x 2% x credited years of service with the Company (Max. 25 years) for benefit accrual, …”
Notice there is no definition of or limit to “final average earnings” at this point. It’s just FAE x 2% x Years of Service (up to 25), so a max of 50% of Final Average Earnings – pretty simple.
Next, for pilots having a seniority number as of 31 May 1999, and 10 or more years of service, there is a table of multipliers that increases the “A” Plan calculation by 0.05% to 0.20% per year of service (still Max. 25 years). Unless you have been at FedEx for almost 32 years and on the seniority list since May 31, 1999, this table does not apply to you, and if you have, you know who you are.
Then, for those pilots who were aged 50 and above as of 31 May, 1999, another table of multipliers applies, from 0.02% to 0.12%. If you were aged 50 as of 31 May 1999, you can no longer be employed as a FedEx pilot, so I hope you’re enjoying your retirement. If you’re currently a FedEx pilot, this does not apply to you.
Both tables, both sets of multipliers, were created to address the inequity of establishing a 6% “B” Fund for pilots with little or no time prior to retirement to grow its value. Mind you, no “B” Fund had existed prior to this CBA, and younger pilots could look forward to a benefit that would have time to grow before they retired. As a balance to the benefit the younger pilots received with the establishment of the “B” Plan, pilots closer to retirement and older pilots received the “A” Plan multipliers. Since the establishment of the “B” Plan has long since passed and the inequities vanishing, the tiny multipliers are no longer needed, and therefore only apply in rare cases.
Then, the “Flat Dollar benefit” is mentioned, a benefit based upon a pilot’s flight hours, equipment flown, and seat position during a plan year (or other mutually agreed upon formula). That formula is not given in the CBA. Finally, reference is made to former Flying Tiger pilots whose Flying Tiger Line pension plans were merged into the Federal Express Pension Plan. Again, unless you became a FedEx pilot as a result of the merger, this doesn’t apply to you, and if it does, you know who you are.
In the following CBA paragraph, Final average earnings is defined as the average of the highest five calendar years of compensation while working for the Company. Note that the five calendar years do not have to be consecutive years, nor do they have to be the last five years. Any five years qualify. Still, there is no limit to Final Average Earnings, so the formula up to this point (with the rare exceptions noted above) is still just FAE x 2% x Years of Service (up to 25), so a max of 50% of Final Average Earnings – still pretty simple.
The limit comes into play in subparagraph 6., which begins like this:
“To the extent permitted by applicable law, the Company will amend the Pension Plan to provide the Pension Plan Formula thereunder.” The Pension Plan Formula was just described above – Years of Service (Max 25) x 2% (with rare exceptions) x Final Average Earnings. There is still no limit on Final Average Earnings up to this point. That limit comes into play only when the discussion involving the IRS begins.
The paragraph goes on to describe the process that will be used to apply to the IRS to receive approval for the Pension Plan as a qualified plan, and to establish alternative, non-qualified means to provide any benefits which fall outside of the IRS approved qualified plan. It is in this context that the $260,000 limit on Final Average Earnings is mentioned. It should be noted that $260,000 is exactly twice the IRS limit that year for the annual benefit from a defined benefit plan. (Those who want to make this sound more complicated than it needs to be will throw in an IRS code paragraph number to impress you – it’s 26 U.S. Code § 415(b)(1)(A), just in case you want to know.)
Thus, the maximum annual Defined Benefit under the 1999 CBA was exactly the same as the IRS maximum for annual Defined Benefit that year.
And, most importantly, the Defined Benefit established in the 1999 CBA represented a 50% Replacement Ratio. In other words, the annual benefit would be 50% of the Final Average Earnings.
There’s one more chapter to the Defined Benefit, another “complication” that applies to an age and seniority “band” defined in the 2006 CBA. Once again, an improvement was made in that CBA to our Defined Contribution Plan (an increase from 6% to 7% 1 year after date of signing) which would benefit younger pilots disproportionately, so pilots having attained age 50 and with 10 or more years of service saw their Defined Benefit multiplier enhanced by a factor of between 0.01% and 0.05%. Here again, if you were 50 years old and therefore qualified for this “A” Plan enhancement 15 years ago, you are now too old to be a FedEx pilot. Again, I hope you are enjoying your retirement.
The “B” Fund saw further increases with the 2015 CBA to 8% and then 9%, but no “A” Plan multipliers were negotiated to balance the disproportionate benefit to younger pilots.
So, after all that, with rare exceptions (and if those exceptions apply, you already know who you are), the “A” Plan Defined Benefit is easily calculated. It’s 2% x Years of Service (Max 25) x High Five Final Average Earnings.
I stand my assertion that the benefit it easily calculated.)
While our Pay Rates have increased numerous times over the past 22 years, and the “B” Plan has seen three incremental 1% improvements, the limit to the “A” Plan Final Average Earnings has not. Why not?
This is a good place to provide my perspective on our second Negotiating Priority – Pay rates. There is an urban myth that since the original 1999 CBA we get annual pay rate increases on an average of 3% per year. The myth goes that when pay rate increases are delayed by CBA negotiations, the gaps are filled in by larger individual pay rate increases and signing bonuses. If it were true that we are on that mythical 3% slope, the $183.37 a 15-year wide body Captain received for a Credit Hour in June 1, 1999, would be $341.12 today, and $351.36 in a few months. That’s a gap of 4.7% above our actual current rate of $335.56. If it takes a year to consummate our next CBA, the gap will grow to 7.9%. By then, many would consider an 8% pay rate increase to be quite generous. However, given the erosion of buying power over the years, it would ultimately provide the pilot with only enough money to put the same amount of food on the family’s dinner table as a pilot in the same seat with the same tenure 22 years ago.
It’s always good to look at other carriers’ contracts and compare our benefits, our pay rates, etc., with our peers in the industry. That’s one perspective that can be useful. After all, our Founder and CEO did once promise us “Delta plus a nickel.” However, I believe we are without peer, far above the industry, and deserving of compensation far in excess of “other carriers.” Yes, our pay rates have increased 83% over the past 22 years. However, they would have had to increase 86% just to keep pace with the declining spending power. Over the course of 22 years, that represents a savings to the Company of nearly $200,000 for every 15-year widebody Captain. Run the numbers for nearly 6,000 pilots, and pretty soon you’re talking about real money. That’s money that the Company has saved off our backs. That’s a perspective I would ask you to consider when you decide what we mean by improved compensation.
But back to retirement … pay rates up 83%, should have been at least 86%, “B” Fund up from 6% to 7%, then 8% and 9% … and no increase to the “A” Fund FAE cap. While it was established to be a vehicle to provide a lifetime benefit with 50% replacement ratio, it doesn’t come close today. In order for it to continue to provide the benefit as designed, the FAE cap MUST be raised.
In its original design, the FAE cap was exactly double the IRS annual Defined Benefit limit. For 2021, that limit is $230,000. A corresponding FAE limit would be $460,000. In my opinion, that should be our goal. 2% x Years of Service (max 25) x $460,000 is $230,000, which is the IRS limit.
It’s simple. We can all multiply 3 numbers. Even a caveman could (probably) do it.
It benefits everyone. A lifetime benefit for every pilot, young, old, senior, junior.
It maintains the balance of risks and benefits which we currently enjoy, the benefits upon which many of us based our choice of employer.
It leaves nobody behind with a “make whole” promise.
It maintains the paradigm of career planning which now exists that allows pilots to choose which years they want to establish their “High Five.” It allows pilots to bid aircraft and seats to emphasize quality of life over maximum income each and every month, each and every year.
It’s something we can all support.
That’s my perspective. Here’s my challenge.
In the days to come, our MEC will be defining our Negotiations Openers. In a few days, new Block Reps will assume their seats on the MEC. I am challenging you to fill your Block Reps’ e-mail inboxes, text messages, and voice-mailboxes with YOUR perspectives on these vital issues. I believe it’s important that they know what you want in order for them to achieve a Tentative Agreement which will satisfy your wants and needs. If the leadership and the membership are not in agreement about our destination before we depart, there will be surprise, and most likely disappointment, when we arrive at a place completely different than what we wanted and expected. Let them know NOW, before we depart on this journey, where you want to go.
In Council 26 your new Block Reps will be Mark Hollis, Michelle LaVigna, and Nick Bolander. I challenge you to contact all 3. Please welcome them, and let them know, first hand, where you stand. If you’re reading this and you’re not in Council 26, I challenge you to contact your Block Rep(s). If you are Memphis based, you have 3 elected Reps in your Council – contact all 3. We elect Reps, we recall Reps, we hold them accountable – they should represent us.
Again, I thank you for the honor and privilege of serving you.
In Solidarity,
Tony Cutler
Council 26 Chair
Block 3 Representative
[email protected]
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There was one suggestion that I would have adopted had the review process continued. That was to mention that the details of the Flat Dollar Formula amount calculation can be found in the FedEx Document, the Pilot Benefit Book (PBB).
I have not been shy about sharing my opinions about our retirement, and the necessity of fixing our "A" Plan, the Defined Benefit Plan, by raising the Final Average Earnings cap. I don't believe the proponents of the alternative plan have been as open and honest. Based on the comments I received on this message alone, I believe the "pancake plan" is alive and well in the hearts and minds of those who ask us to trust them and their expertise to negotiate our future. I believe the most recent polls and surveys have been intentionally vague on the subject of retirement so the proponents of the variable benefit plan can twist the results to support their views. I believe they have invested so much of themselves (and so much of our dues money along the way) to develop this plan that they are unwilling to recognize it's a failure and walk away. We should count it as a learning experience and move on -- but they are too proud to shift gears. Based on the suggested deletions in my message, they don't want you to communicate directly with your own Block Reps -- they want your Block Reps to rely only on vague poll and survey results and listen to the agenda-driven SMEs.
My biggest fear is that they will convince the MEC to go down the pancake path when they are developing their Negotiating Openers. Every pilot is entitled to their own opinion. I'd like you to agree with my opinion, but that's not what I'm asking for right now. What I'm asking for is for you to share YOUR opinion with YOUR Block Reps. What they didn't hear in the polls and surveys, they need to hear NOW. It is IMPERATIVE that they know exactly what we want BEFORE we pass openers. Once that ship sails, it will be extremely difficult to make huge course corrections.
Please. Contact your Block Reps and tell them what you want.
.