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View Full Version : MBCBP IRS Resource


Richard Head
01-28-2020, 07:10 AM
All-
I know that our union has provided us with ample smoke to help break down how our MBCBP would work. I have been reading about these plans in an effort to keep an open mind and educate myself. The IRS document below provides a GREAT explanation starting on page 9 of how a real life example would work for a 35 year old participant.

They do a better job here than any ALPA email Iíve read yet on the topic!

https://www.irs.gov/pub/irs-tege/epchd1104.pdf


Gunfighter
01-28-2020, 08:54 AM
All-
I know that our union has provided us with ample smoke to help break down how our MBCBP would work. I have been reading about these plans in an effort to keep an open mind and educate myself. The IRS document below provides a GREAT explanation starting on page 9 of how a real life example would work for a 35 year old participant.

They do a better job here than any ALPA email Iíve read yet on the topic!

https://www.irs.gov/pub/irs-tege/epchd1104.pdf

Thanks for posting. I lost interest on p.4 with "hypothetical accounts" and PBGC, but kept reading.

The example used end of year contributions vs per pay period contributions. Under that example, we are losing an average of 6 months earnings on every annual contribution. I don't know if the DALPA plan used EOY or pay period credits to each Hypothetical Account.

There was some language in the section on uniformity requirements that would seem to eliminate any Plus Up or Min Balance provision, as it would not be a consistent allocation for all participants.

The Cooper V IBM example seems to make a further case against a Plus Up or Min Balance.

Thanks for taking time to look this up and post a link.

Big E 757
01-28-2020, 10:03 AM
Thanks for posting. I lost interest on p.4 with "hypothetical accounts" and PBGC, but kept reading.

The example used end of year contributions vs per pay period contributions. Under that example, we are losing an average of 6 months earnings on every annual contribution. I don't know if the DALPA plan used EOY or pay period credits to each Hypothetical Account.

There was some language in the section on uniformity requirements that would seem to eliminate any Plus Up or Min Balance provision, as it would not be a consistent allocation for all participants.

The Cooper V IBM example seems to make a further case against a Plus Up or Min Balance.

Thanks for taking time to look this up and post a link.

The money that will fund the MCB plan will be the DC contributions once we hit the 415(c) limit. Right now, those that do hit the limit, donít until September to November. With a 25% DC contribution, it would happen earlier for the top guys, but most wonít be hitting the limit until the fall anyway. I only see a couple of months of lost earnings on the first few contributions for most of us.


bugman61
01-28-2020, 10:29 AM
Interest credits given under a cash balance plan are not related to the actual investment yield of the planís assets. The employer assumes the risk of any trust fund earnings shortfall or losses that are in excess of the actuarially determined amount required to fund the plan.

Looks like we will either get a very conservative rate or the risk of underfunding wonít be as ďminorĒ as has been claimed.

Also some other tidbits from the safe harbor requirements:

All employees for the plan year must receive the same percentage of plan year compensation or the same dollar amount.

Use a set dollar contribution for each uniform unit of service performed by the employee.

No employee contributions are allowed in the Cash Balance Plan.


Some of this could probably be changed, but it certainly weighs heavily on the side of the plans all being mandatory.

Gunfighter
01-28-2020, 10:42 AM
The money that will fund the MCB plan will be the DC contributions once we hit the 415(c) limit. Right now, those that do hit the limit, donít until September to November. With a 25% DC contribution, it would happen earlier for the top guys, but most wonít be hitting the limit until the fall anyway. I only see a couple of months of lost earnings on the first few contributions for most of us.

Some of us hit our DC limits in Feb, because of 401a after tax contributions. You are right though the majority of the funding happens at the end of the year. Also, just because the example had an end of year credit doesn't necessarily mean that is how all plans are structured.

Gunfighter
01-28-2020, 10:44 AM
Did you read the document?

I had to create another account because my last one was banned. Anyways, the document from the IRS basically dictates that we canít just choose if and when we contribute. That was the point. Based off of the examples in said document I donít see how one group of us would warrant a change in the federal tax code.

Yeah, but DALPA says it's optional, so I'm sure the IRS will snap into line.

RonRicco
01-28-2020, 10:45 AM
Did you read the document?

I had to create another account because my last one was banned. Anyways, the document from the IRS basically dictates that we canít just choose if and when we contribute. That was the point. Based off of the examples in said document I donít see how one group of us would warrant a change in the federal tax code.

Why was you account banned?

Big E 757
01-28-2020, 10:47 AM
Did you read the document?

I had to create another account because my last one was banned. Anyways, the document from the IRS basically dictates that we can’t just choose if and when we contribute. That was the point. Based off of the examples in said document I don’t see how one group of us would warrant a change in the federal tax code.


I see what you’re saying. I did breeze through it. I was under the assumption that the MCB plans purpose was to capture DC overages and protect them from taxes, but the document seems to say different, right? That the contributions have to be the same size all year. My eyes or brain fogged up. Why are you getting yourself banned? Or how, is a better question

bugman61
01-28-2020, 11:02 AM
I see what youíre saying. I did breeze through it. I was under the assumption that the MCB plans purpose was to capture DC overages and protect them from taxes, but the document seems to say different, right? That the contributions have to be the same size all year. My eyes or brain fogged up. Why are you getting yourself banned? Or how, is a better question



ALPAís intent has been to capture DC overages and protect them from taxes.

Many of us donít want that due to the mega back door Roth, or other reasons why we donít want more income sheltered from taxes. Especially when itís placed in an expensive and inefficient vehicle.

The document has a few different funding mechanisms but they are all uniform and mandatory which is not what ALPA has proposed.