Originally Posted by
JustInFacts
You obviously aren't getting what I am saying.
I have said all along that the company wants to get rid of the RISK. You know, those variables that change every year that determine the funding level of the pension.
You are the one that stated that if the pension was gone, which it wouldn't be, that the company could invest that money back into the company and make a killing. I have asked you how much money would they have to make that killing. You have counted the liabilities twice. Once for the funding of the pension, and then an additional time once pilots retire. That is not how the accounting works. The service cost for Fedex for 2024 for the domestic pension plan for all US employees covered by that plan was less than $500 million. You have made up a number of $85 million for the pilots, that is not broken out anywhere. Then you add another $400 million plus for retirees each year when they are already counted in the pension funding. When they retire, they are still part of the pension obligation. They don't suddenly switch to the Fedex yearly balance sheet. That is not an additional yearly cost to Fedex. The only way a retiree changes the pension funding is when one of the variables changes.
What we can agree on is that the company hates risk. They want to transfer that risk.
Here’s where our wires are crossing, and why we keep talking past each other. I’m not disagreeing with you about risk. We actually do agree there. The disconnect is over what I meant by “liabilities created each year,” and what you mean by “already counted.”
So let me say this as plainly as possible:
I am not saying the company suddenly adds a brand-new liability to the balance sheet the moment a pilot retires. I’m saying the liability for each pilot is remeasured every year and grows as service accumulates. That growth is the economic cost.
That’s what I was referring to. Not a second, separate charge. Not a duplicate number. Not double-counting. Just the normal annual increase in projected benefit obligations as pilots (1) earn another year of credited service and (2) get one year closer to collecting it.
This is the basic flow regardless of whether someone is active or retired:
- Each year, the pension obligation increases—because of one more year of service accrued, one less year until retirement, changes in discount rates, and updated assumptions.
- The pension assets may or may not keep pace—depending on investment returns.
- If assets fall behind liabilities, FedEx must contribute.
- If assets run ahead, FedEx may not need to contribute for years.
- None of this makes the liability disappear. The whole obligation remains on the books until the pilot dies.
So when I talk about “$399–$456 million per year,” I’m not creating a second cost. I’m describing the annual growth in the pension obligation under the assumptions we were using. You’re describing the funding rules; I’m describing the economic liability footprint. They’re different lenses.
You’re absolutely right that funding doesn’t spike the moment someone retires. But the obligation value still changes every year and remains subject to discount rates and asset performance. Do you think the annual liability combined with service costs is the same today as it was 10 years ago because the $130,000 is still the top number? No. We pay investment companies enormous sums to manage that $25B. Those costs have only grown since 1999. Even though our A-Plan has remained the same. Those are just one example of inflationary pressures. That’s the risk. And yes — that’s exactly what FedEx wants to shed.
Now, on the “invest back into the company” comment:
When I said that, I wasn’t talking about “annual cash savings.” I was talking about the
capital FedEx frees up in the long run by shutting off a liability stream that grows and fluctuates for decades. A DC plan is paid once and done. A DB plan requires the company to track, discount, and carry long-duration obligations until each person dies. When those obligations no longer grow, the company’s balance sheet is cleaner and capital ratios improve. That’s what I meant by investing back into the company — not a pile of annual cash they suddenly save on Day 1.
You and I actually agree on the core point: FedEx wants to eliminate risk — discount-rate risk, longevity risk, and investment-return risk.
We’re simply framing the mechanics differently. You’re talking about the legal funding requirements. I’m talking about the economic effect of obligation growth. Both are true at the same time; they’re just different windows into the same structure.