Airline Pilot Forums

Airline Pilot Forums was designed to be a community where working airline pilots can share ideas and information about the aviation field. In the forum you will find information about major and regional airline carriers, career training, interview and job seeker help, finance, and living the airline pilot lifestyle.




Cujo665
10-01-2019, 11:22 AM
Former Envoy Pilots 401k

Notice to Former Envoy Pilots With 401(k) Accounts
There is an opportunity to transfer your 401(k) account balance from the Envoy plan to the American Airlines Pilot Only 401(k) Plan. If you wish to have your account transferred, you must act quickly. Envoy must receive your completed transfer request by mail, delivery, or fax no later than Oct. 11.

Please submit your completed Voluntary In-Service Plan-to-Plan Transfer Election Form to the Envoy Air Inc. 401(k) Plan by either:

Facsimile at 972-374-5609
Email at [email protected]
Management has provided the following schedule for the transferred amounts (this will not apply to amounts in the AA Pilot Only 401(k) Plan):

Oct. 11: Last day for elections to be received at Envoy
Oct. 25: Blackout notice mail date
Nov. 18: Self-directed brokerage account liquidation date
Nov. 29: Blackout period start date
Dec. 5: Valuation date
Dec. 6: Asset transfer date
Dec. 15: Blackout end week
If you have any questions about the Voluntary In-Service Plan-to-Plan Transfer Election Form before the transfer, please contact Empower Retirement at 1-800-345-2345. If you have questions after the transfer, please contact Fidelity Investments at 1-800-354-3412. You can also email [email protected] with questions as well.


rickshaw
10-01-2019, 05:31 PM
Does AA even have a relationship with this IRA account provder? What is the benefit to using this IRA provider? Any company to Company switch should entice a 401K - IRA transfer. Just do not get paid out and be certain to get it transferred within statute of limitations to avoid large tax liabilities. Please clarify the affiliation of your advertised company with AA just to be clear.

rickshaw
10-01-2019, 05:34 PM
is Empower retirement somehow maintaining it as a 401K post transfer? Or is it just an IRA w empower ?


Name User
10-01-2019, 06:27 PM
I'm not former Envoy. But I think this is to just roll your 401k into the AA pilot 401k plan.

I'm not sure what options exist in the Envoy plan but at AA you can designate up to 95% into a brokerage account (still under your 401k) allowing you to buy any stock, mutual fund, or ETF you desire. You aren't limited to the (still good) AA pilot choices.

If you miss this opportunity you can always roll your 401k into IRAs (traditional and/or Roth) and THEN roll that into the AA pilot plan. This way you can keep doing those backdoor Roths (it's important to clear out any IRA balances before doing it).

Also keep in mind with AA's plan you can also do mega backdoor Roths at least for the first 5 years or so until you start to butt up against the company contribution and IRS limits.

Al Czervik
10-02-2019, 04:43 PM
One of the few times you can roll it into a Roth IRA if you’ve annexed yourself out via modified AGI.

Name User
10-02-2019, 05:19 PM
You can actually convert any traditional monies to a Roth. There is no income limit. There is only an income limit on directly contributing to a Roth IRA. You can get around that by contributing to a traditional IRA and then immediately converting that money into your Roth.

You may owe tax on money that was previously contributed pretax (deducted from your income before federal income tax was paid). This is where it gets sticky, and why I recommend you roll any previous Traditional IRA money into our 401k plan first.

Most people with a past 401k will roll that over into a traditional IRA for the pretax portion and if they contributed toward the Roth 401k that portion would end up in a Roth IRA. But AA's plan is so good I would personally roll it directly into our plan with the 95% brokerage link option and buy whatever fund you want.

Al Czervik
10-03-2019, 02:23 AM
You can actually convert any traditional monies to a Roth. There is no income limit. There is only an income limit on directly contributing to a Roth IRA. You can get around that by contributing to a traditional IRA and then immediately converting that money into your Roth.

You may owe tax on money that was previously contributed pretax (deducted from your income before federal income tax was paid). This is where it gets sticky, and why I recommend you roll any previous Traditional IRA money into our 401k plan first.

Most people with a past 401k will roll that over into a traditional IRA for the pretax portion and if they contributed toward the Roth 401k that portion would end up in a Roth IRA. But AA's plan is so good I would personally roll it directly into our plan with the 95% brokerage link option and buy whatever fund you want.

I was speaking of a lump sum. Really the only time to superfund a Roth IRA. You’ll get hammered on taxes but worth it if you have time.

Name User
10-03-2019, 05:04 AM
I was speaking of a lump sum. Really the only time to superfund a Roth IRA. You’ll get hammered on taxes but worth it if you have time.

Oh I see yes I agree

Happyflyer
10-06-2019, 07:14 AM
Also keep in mind with AA's plan you can also do mega backdoor Roths at least for the first 5 years or so until you start to butt up against the company contribution and IRS limits.

What are you referring to here? I assumed AA had 16%DC, Employee can save in 401k, and then backdoor Roth. What is a mega backdoor Roth?
Is the other poster Al suggesting a when a pilot separates from their prior company to "roll" their 401k, into a Roth, and just pay the tax?

Name User
10-06-2019, 09:59 AM
What are you referring to here? I assumed AA had 16%DC, Employee can save in 401k, and then backdoor Roth. What is a mega backdoor Roth?
Is the other poster Al suggesting a when a pilot separates from their prior company to "roll" their 401k, into a Roth, and just pay the tax?

Yes so you get to put $56k into your 401k. $19k is your contribution. That leaves $37k remaining. The company contributes 16% as you said. If you earn $80k your first year, that is say $13k, leaving a balance of $24k.

That $24k can, under our plan, be taken out of your paycheck as after tax contributions. Since you've already paid the tax on it, instead of keeping it in the 401k you can transfer it out into your Roth IRA. That is known as a "mega backdoor" Roth.

I wasn't familiar with what Al was talking about. I did not know you could roll pretax-401k monies into a Roth IRA and just pay the tax. If so that can be a good deal.

Assuming your income is much less the year you quit Envoy and come here (or any job), you will pay less tax on that money by doing it that year assuming you are in a lower bracket. It used to make even more sense (I made around $35k my first year at LUS, that would've been the perfect time, but I had no idea you could do that).

Of course, as income goes up and the company contributes more, the amount you can put into the mega backdoor is reduced, and maybe eliminated depending on your elective contributions.

EchoEcho
10-09-2019, 12:00 PM
Where do you find this form?

Al Czervik
10-09-2019, 12:39 PM
I wasn't familiar with what Al was talking about. I did not know you could roll pretax-401k monies into a Roth IRA and just pay the tax. If so that can be a good deal.

Certain events allow it. If the plan is terminated (like Airways) or you change jobs the monies are allowed to be rolled into a Roth IRA.

https://www.investopedia.com/articles/retirement/08/convert-401k-roth.asp

Happyflyer
10-10-2019, 09:30 AM
Certain events allow it. If the plan is terminated (like Airways) or you change jobs the monies are allowed to be rolled into a Roth IRA.

https://www.investopedia.com/articles/retirement/08/convert-401k-roth.asp

Are you a proponent of that option? Always wondered if it's better to pay that tax bill; just hard to calculate opportunity cost of investing that money used to pay the tax, and where to invest it.
I assume you'd need enough cash flow to max out 401k, and wife's 401k and fullly fund back door roth for 2 before eating that sandwich. That's 50k a year before you run out of places to put your money that doesn't require a tax.

Then heaven forbid you ever take a layoff, or medical leave and could "roll" that account much cheaper with lighter earnings.

Al Czervik
10-10-2019, 05:20 PM
Are you a proponent of that option? Always wondered if it's better to pay that tax bill; just hard to calculate opportunity cost of investing that money used to pay the tax, and where to invest it.

Our money guy ran the numbers for us on a few scenarios. Although the taxes are a BIG **** sandwich... We had enough time to make it worthwhile.

black cat
10-10-2019, 05:39 PM
Where do you find this form?

APA site...

Happyflyer
10-10-2019, 05:55 PM
I wasn't familiar with what Al was talking about. I did not know you could roll pretax-401k monies into a Roth IRA and just pay the tax. If so that can be a good deal.

I think it's coached advise that retired people with a well funded 401k just roll what they don't spend into a Roth IRA every year. Then if they want to have a lager spending year they can pull from the Roth and not increase that years taxes.
I personally think eventually it's going to cause a tax problem for the government and they'll place a cap on total balance of Roth.

Name User
10-11-2019, 01:50 AM
I think it's coached advise that retired people with a well funded 401k just roll what they don't spend into a Roth IRA every year. Then if they want to have a lager spending year they can pull from the Roth and not increase that years taxes.
I personally think eventually it's going to cause a tax problem for the government and they'll place a cap on total balance of Roth.
That is known as a Roth ladder. Several minor issues such as a min of five years to access the money you rolled. But useful especially to the earlier retired. It allows, assuming a spending plan of much less than your yearly earnings, the deferral of taxes at a high rate and payment at a lower rate.

For your tax scenario it's actually the other way around - the feds want more Roth monies because it's taxed now, if anything there are rumblings of pushing to do away with the traditional pretax plans or limiting them further.

Name User
10-11-2019, 01:52 AM
Are you a proponent of that option? Always wondered if it's better to pay that tax bill; just hard to calculate opportunity cost of investing that money used to pay the tax, and where to invest it.
I assume you'd need enough cash flow to max out 401k, and wife's 401k and fullly fund back door roth for 2 before eating that sandwich. That's 50k a year before you run out of places to put your money that doesn't require a tax.

Then heaven forbid you ever take a layoff, or medical leave and could "roll" that account much cheaper with lighter earnings.
That was my plan. If I got furloughed I would take a large pay hit and then convert at that time. If I don't get furloughed, even better, and I'll come out ahead that way too even if I have to pay taxes on my 401k and SS income.

Al Czervik
10-11-2019, 02:52 AM
I personally think eventually it's going to cause a tax problem for the government and they'll place a cap on total balance of Roth.

Without question.

FlexNinja
01-06-2020, 11:26 AM
Related questions for those in the know about 401k contributions from the company.

Say, a pilot maxes out the 55k after tax and can no longer recieve payments into their 401k. What (if anything) does the company do with their contribution? Does it come to the pilot on a pay check as normal after tax pay?

I read a similar topic over at the Delta forum and evidently, they just get the 16% of their pay on their check if they load up their 401 early in the year.

Pilotman520
01-06-2020, 11:45 AM
Yes it gets added to your check as ordinary income.

full of luv
01-07-2020, 06:01 AM
I think it's coached advise that retired people with a well funded 401k just roll what they don't spend into a Roth IRA every year. Then if they want to have a lager spending year they can pull from the Roth and not increase that years taxes.
I personally think eventually it's going to cause a tax problem for the government and they'll place a cap on total balance of Roth.

The Dems have already loaded the muzzle with the "wealth" tax. It will start someday with millionaires and quickly go down to anyone with over $100K in any form of savings. The gov will tax you annually based on the value of your Roth/401K's/savings/house/cars etc......

Surprise
01-07-2020, 06:31 AM
The Dems have already loaded the muzzle with the "wealth" tax. It will start someday with millionaires and quickly go down to anyone with over $100K in any form of savings. The gov will tax you annually based on the value of your Roth/401K's/savings/house/cars etc......

I have no doubt that some would love that, but that may not hold up in court.

Name User
01-07-2020, 05:57 PM
The Dems have already loaded the muzzle with the "wealth" tax. It will start someday with millionaires and quickly go down to anyone with over $100K in any form of savings. The gov will tax you annually based on the value of your Roth/401K's/savings/house/cars etc......

So about that...

Trump proposes massive one-time tax on the rich

By Phil Hirschkorn/CNN

November 9, 1999
Web posted at: 6:24 p.m. EST (2324 GMT)

NEW YORK (CNN) -- Billionaire businessman Donald Trump has a plan to pay off the national debt, grant a middle class a tax cut, and keep Social Security afloat: tax rich people like himself.

Trump, a prospective candidate for the Reform Party presidential nomination, is proposing a one-time "net worth tax" on individuals and trusts worth $10 million or more.

MESSAGE BOARD
Framing The Issues

By Trump's calculations, his proposed 14.25 percent levy on such net worth would raise $5.7 trillion and wipe out the debt in one full swoop.

The U.S. national debt decreased by $9.7 billion in September but remains at $5.66 trillion, according to the latest U.S. Treasury figures.

The net worth tax is the cornerstone of Trump's economic plan released Tuesday morning.

"No one has put forward a plan to make this country entirely debt free as we enter the next millenium," Trump said in a written statement.

"The plan I am proposing today does not involve smoke and mirrors, phony numbers, financial gimmicks, or the usual economic chicanery you usually find in Disneyland-on-the-Potomac," Trump said.

Trump would exempt the value of an individual's principal home from the net worth total.

"By my calculations, 1 percent of Americans, who control 90 percent of the wealth in this country, would be affected by my plan," Trump said.

"The other 99 percent of the people would get deep reductions in their federal income taxes," he said.

Eliminating the national debt would save the federal government $200 billion a year in interest payments, Trump said. He proposes to earmark half the savings for middle class tax cuts, and the other half for Social Security.

Trump said depositing $100 billion annually in the Social Security trust fund would generate $3 trillion "over the next 30-years, when the trust fund is scheduled to go broke" and instead keep the fund "solvent through the next century."

The tax also would lead to the repeal the current federal inheritance tax "which really hurts farmers and small businessman and women more than anything else," Trump said.

Trump, whose own net worth is an estimated $5 billion, says the wealthy would not suffer if his economic plan were enacted.

"Personally this plan would cost me hundreds of millions of dollars, but in all honesty, it's worth it," Trump said.

Trump predicts his debt elimination combined with his tax cuts would trigger a 35 to 40 percent boost in economic activity, with more business start-ups, more jobs, and more prosperity.

"It is a win-win for the American people, an idea no conventional politician would have the guts to put forward," Trump said.

Last month, Trump formed a committee to explore seeking the presidential nomination of the Reform Party, which will automatically be on the ballot in 21 states next year.

Amazing what a 15 year difference does to one's thoughts. Reading through that makes Warren's plan look like soft pitch...Trump proposed a 14% tax on anything over $10m. Also amusing he was so anti-debt.