Originally Posted by
NotMrNiceGuy
You’re asking what the company would save each year if a new TA put all new hires on an 18% DC plan with either cash-over-cap and/or MBCBP spillover instead of the pension.
FedEx does not save money on an annual cash basis by switching new hires to an 18% DC plan. The cost is higher.
No, I am asking you to tell us how much money the company is going to save, invest back into the company and make a killing as you stated below.
Originally Posted by
NotMrNiceGuy
Disagree. If the pension is gone, they can invest that money back into the business and make a killing. You’re forgetting the opportunity cost to the company having the pension contrasted with not having it.
Originally Posted by
NotMrNiceGuy
Where the company would actually see long-term savings—and the reason they prefer DC for future pilots—is in liability elimination. Let’s assume FedEx retires 175 to 200 pilots per year, and let’s also assume each retiree ultimately receives about $120,000 per year from the pension for roughly 19 years. That would imply each retiree represents around $2.28 million in long-term pension obligations. Under those assumptions, each year’s retirement group would create between $399 million (175 × $2.28M) and $456 million (200 × $2.28M) in new long-term liabilities. Extending that over 20 years produces approximately $8 to $9.1 billion in cumulative new pension obligations.
I will agree that the company would like to get rid of the liability risk, however, you seem to be failing to recognize that the company has already accounted for the retirement liabity when the actuaries determine the funding of the pension. Like you agreed, the company doesn't fund the pension on the day the pilot retires. They fund it based on a multitude of factors, including projected maximum benefit, years until that benefit is paid, longevity of benefit payments and projected returns. When a pilot retires, it is not a new liability on the company. The pension was funded all along for that pilot as long as it was funded properly.