Actually, they changed it from a DB to a different DB! Keeping it within the "Purple Promise".

 

Much of which would be eaten up by taxes.

"Deferred" compensation is ideal because you don't pay taxes on it while you are making the big bucks, you wait until you are only drawing on that pension to pay the taxes, which presumably (unless you still had other income from other ventures) would be much less after you retire.

Defined Benefit plans put the risk of future earnings on the company instead of the individual. They are very valuable, so long as the company remains solvent and keeps its promise to pay.

The problem isn't with the DB type plan, the problem is with companies that refuse to keep their word and politicians (and citizens) who allow them to do so.

Try asking a government employee with a DB plan to give it up in exchange for a 401K. They will look at you like you have 13 heads. That is because they "know" that the government will "always" be there to keep their promise of that defined benefit pension.

Imagine the federal government reneging on their promise to pay military retirements. Don't think you'd get nearly as many people to serve their country for 20 years if they thought there was a chance they wouldn't receive the pension they were promised.

Pension plans are an excellent retirement vehicle, as long as the entity that promises to pay keeps that promise.

 

Not to mention that 30% pay raise would be a huge drain on the A Plan as all the guys retiring in five years just realized an unforecast 30 %increase in A fund payouts.

I have seen some major changes to the military A Fund in the last 20 years and expect a lot more in the future. If there are any A Funds left in the next 25 years I expect it will be us, brown and Uncle Sam. If I were 30 years old and worked at FEDEX I don't think I would be counting on my FEDEX A FUND 35 years from now though.

 

And probably earning themselves another union in the process.

 

Of the bankrupt carriers which model would you hope for? Waiting till they are under duress dosen't seem like the best idea to me.

 

Re-read what I wrote, I said look at the good and bad moves all the carriers made. I'd didn't say go down the exact same path as any of them, but to not learn/take away anything more than the broader point that the plans were terminated or frozen would be a mistake imo. This isn't scientific or anything, but among the people I know that want to terminate/freeze/transition the A plan have mostly reactionary reasons for wanting to do so. It tends to be either a broad knee-jerk reaction to what happened at other carriers, or due to the deleterious effects of some carriers unions trading jobs, work-rules and compensation in misguided attempts to save A funds that failed to varying degrees. That's a generalization based on my experience and not directed at you or anyone in particular here.

Until I did some research into what exactly an A fund is vs. a B fund and took some time to think a bit, I felt similarly. Basically with both plans you take on risk and make assumptions, it's just that the assumptions in the A fund are easier to influence if not control, imo. A B fund is your money to do with as you wish which is warm and fuzzy to us type-A pilot types. But for it to be what we want, the market has to do certain things throughout our career and our retirement. The A fund doesn't care what the market does in the narrow sense(you and I), the market is the company's problem. We can't control either, but it's a lot easier as a union/pilot group to monitor and potentially influence one companies actions vs. the market which none of us have any influence over. There are also opportunities for government influence over the regulations that govern A funds. Can't really affect much on B funds except the tax deductions and the laws that govern the mutual fund industry.

So yeah I think we can learn from the other carriers move and improve our oversight of the A fund and maximize the benefit to us. Either through keeping the fund, or freezing/transitioning it when it is at maximum value to us as a group. Going to the company with our hat in hand now when the plan isn't in any trouble whatsoever, gives them the leverage because it shows our fear and we won't walk out of there with a good deal just more fodder for the boards. When it comes to $$$, I rarely have found myself on the side of any company. So when the company tells me I don't want an A fund, my first thought is to figure why I do want an A fund. We can work a long time and put away a lot of money to build up our hypothetical 1mil dollar B fund, but it still depends heavily on the market. 8.3 years of retirement with a 120k A fund is the same 1mil and with average longevity getting longer the company is likely on the hook for way more than 1mil for most people which along with the regs are why they want it to go bye-bye. Why should we make it easier for them and take another .80 on the dollar deal?

 

And who said anything about going to the company hat in hand begging them to trash our A Fund?

If I were king of the world the next contract would have a provision in it to stay with current A Plan or go with some sort of modified Defined Contribution plan. It would be the pilots choice. It would also be in the companies interest to make sure the DC plan was fairly equal to the A Plan so more pilots would start to chose it. As a geezer I would probably stick to the A plan, however if I had 20 or 30 years to go I would probably go for the security of having an account with my name on it.

I used to have the statistics on % of Non Governemnt US workers with pension plans in 1980, 1990 and 2000. I'll look for it.

 

Nugget69 did.

 

Where were you two when he said it?

 

Those exact words? Nobody, however imo that is how it would end up if we collectively decided to go in and attempt to negotiate such a deal without our current plan being in any sort of imminent danger. Optional retirement plan choices? Gee that won't drive any sort of wedge between the pilot group over which plan to enhance most and why during each contract cycle. And I'm sure that we can count on both the company and whomever is in charge of the MEC at the time, not to use this to their advantage.