Originally Posted by
kronan
Originally Posted by
TonyC
Originally Posted by
kronan
I'm not sure why we'd agree to any Floor Percentage less than 2%, But what if we went to 1.9% and tied the Calculation limit to twice the DB limit, which would be a huge, huge improvement (and equally as hugely unlikely IMO) or tie it to WB Capt pay.
We can't tie the calculation to twice the DB limit because the IRS has set the rules for how the calculations are done. The limit is the IRS
DEFINED CONTRIBUTION Compensation limit because that's the law. Reference the above-linked video at 25:36.
Does that same law apply to a Traditional Pension?
No. I'll type this slowly.
- IRS Defined Contribution limits apply to Defined Contribution plans
- The IRS Defined Contribution "Compensation Limit" caps the amount of an employee's salary which can be used to calculate the contribution
- The IRS Defined Contribution "Contribution Limit" caps the total number of dollars which can be contributed
- IRS Defined Benefit limits apply to Defined Benefit plans
- The IRS Defined Contribution "Annual Benefit Limit" caps the annual benefit a retired employee can receive from a Defined Benefit plan
- IRS Defined Contribution limits DO NOT APPLY to Defined Benefit plans
- IRS Defined Benefit limits DO NOT APPLY to Defined Contribution plans
I don't know how to make it more clear.
Originally Posted by
kronan
Does that mean our only solution is increasing the multiple to improve our Traditional Pension?
No. Actually, there are several ways to improve our Defined Benefit Plan.
We could change the multiplier. It is currently 2% per year of Service. We could change it to 2.2%, just like we did for pilots who had 25 years of service as of June 1, 1999. Or we could change it to 2.03% like we did for pilots aged 54 with 20 years of service as of October 30, 2006. We could change it to 2.5% for the first five years, and 2.1 for the next 20 years.
How any such change would affect each and every pilot would have to be analyzed, understood, and accepted as our preferred way of "improving" our "A" Plan. In any event, the numbers would have to be negotiated.
We could change the Years of Service Cap. Instead of 25, we might choose 27, or 30, or 35. Some pilots would benefit from such a change, specifically those hired at a young age. Anyone hired after age 35 would have to work beyond the Normal Retirement Age of 60 in order to take advantage of a higher Years of Service Cap, and those hired after age 40 would never benefit from such a change. In fact, The Company might want to negotiate a penalty for retiring before Age 65 in exchange for such a change. I know, doesn't mean we'd have to agree to it, but my point is that it's not as simple as it might seem at first look.
We could change the "High Five" aspect of the Final Average Earnings calculation. The IRS says the Defined Benefit is to be based on the Highest THREE years of earnings; our High Five is more restrictive.
Regardless of how we might change any of the above, the final calculation is limited by the FAE Cap of $260,000. Raising that cap is the single improvement that helps EVERY PILOT, now and in the future.
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