Originally Posted by
m3113n1a1
2000-2001 hires do seem to have fared the worst. Surprisingly, most of the guys from that demographic who I've flown with actually complain the least and seem more willing to help out their junior co-workers than the guys hired in the 90s. Of course I'm generalizing here and there are exceptions to either side.
There are too many nuances to this discussion to really be able to target something effectively. It's unfortunately a crappy, unfair industry where you really have very little control over your destiny. It's all determined by when you get hired (which is a function of mostly when you were born), the state of the industry, the state of your airline, and (recently) government generosity.
I’d argue you’re on to something here. A NW 98-01 hire had very little in the way of an accrued DB benefit. Not only was there little in the way of benefit service, but it was in the lowest paying aircraft.
But understand that right up to the point of 9/11, the pension was essentially fully funded. I remember reading the ERISA reports posted on the bulletin boards. They were always >100%...until they weren’t.
There were a lot of issues that went into the fund shortfall. Short term, the value of the plan assets caused an immediate shortfall, but long term, the value of those assets eventually recovered. What drove the final nails in the coffin was the collapse of long term interest rates. ERISA calculations center around those numbers, and if they are low enough (which they have been since the mid-2000s, and have been hovering near zero since 2008), it can drive extremely high plan contribution requirements. It is mostly irrelevant how the well the plan assets actually perform, it’s all about that long term interest rate.
You hear a lot of complaints about how underfunded some pensions find themselves, especially public pensions. That’s true, but only because the near zero interest rate is driving the calculations. They don’t look at a reasonable market return. What’s not explained is the same phenomenon giving people 2% mortgages and 0.25% CD rates is exactly the same problem causing the “underfunded” status. If the long term interest rate returned, even to the bottom of the historical average, say 4-5%, many of those same pensions would find themselves fully funded overnight.
Managements love DB plans with normal interest rates and just average returns. The plans pay for themselves and no real money is required. DC plans, OTOH, cost real money every two weeks.
What burned many of the NW guys hired from 98-01 that is talked about above is the way the targeted DC worked. There was a point calculation that was the sum of your age and longevity. With that calculation was a fairly severe “cliff”. If you were young enough or new enough, you got a fraction of what someone a couple years older/more senior got. By the time those pilots “aged into” the other side of the break, the merger happened, which replaced what they had been getting with a flat DC, which in many cases was a reduction.
So to summarize the problem these guys face, a minimal to zero frozen DB benefit, a >40% pay cut, stagnated in bottom paying positions/furloughed, comparatively small targeted benefit, and elimination of a higher targeted benefit in favor of a flat DC in the merger.