Translation, por favor.

 

Specifically, what "law" are you refering to?

Are you equating the "regulated age" in Federal Law with the "retirement age" in our contract?

Thanks for clarifying.

 

As in the future. He's saying that when the government mandates that we cannot retire at age 60...We will have to abide by it.

Whatever...

 

DLax 85, I believe the "Fair Treatment for Experienced Pilots Act ", signed Dec 13, 2007 can be amended with just a few words to negatively impact anyone who would like to retire prior to "retirement age". If not there, then there are plenty of other areas (ERISA, Qualified Pensions law, or FAA directives) where creative lobbyists and corporate attorneys can make this happen.

 

Not being able to "attach" this, I cut and paste...sorry for the eye chart!


Comparison of Pilot Pension Options at Fedex

For the sake of this argument, the computations are based on a life expectancy of 75 years, and a conservative 5% rate of return. I do not have access to the estimates used by the actuaries working on the pension determinations at Fedex. For sake of simplification, I have used a high 5 average of $200,000, 25 years of service, and a 2% multiplier. That would yield an annual pension benefit of 100,000. Actual multipliers and high 5 averages vary greatly between individuals. It should be noted that the Pilot Benefit Book has a much more detailed explanation of the three methods used to determine how the pension benefit is actually calculated. Though my annual pension benefit numbers are simplified, this analysis shows the present value of annuity principles that will apply to all calculated pension benefits, no matter your high 5 average or your multiplier. What’s important to note is the benefit we’d receive with a reduced penalty for going early vice a three percent per year penalty calculated from age 65.

Option 1: Current Situation
If you were to retire at age 60 today, you’d live for 15 more years and the present value of your pension annuity would be:
100,000 x 10.3797 = 1,037,970
If you were to retire at age 55 today, you’d live for 20 more years, you’d receive a 3% per year reduction (100K – 15K = 85K), and the present value of your pension annuity would be:
85,000 x 12.4622 = 1,059,287

Option 2: Law changes tomorrow and slides everything 5 years to the right (retirement age is now defined as 65 and early retirement eligibility is now postponed until age 60).
If you hit age 65 tomorrow, retire immediately, you’d live 10 more years and the present value of your pension annuity would be:
100,000 x 7.7217 = 772,170
If you retire at age 60 tomorrow (the new early retirement), you’d live 15 more years and the present value of your pension annuity would be reduced by 15% (100K – 15K = 85K):
85,000 x 10.3797 = 882,274.5

Option 3: Negotiated change to redefine retirement age to 65, with early retirement still available all the way back to 55, but only a 1% per year penalty for going early.
You hit age 65 the day after the change and retire, you live 10 more years and the present value of your pension annuity would be:
100,000 x 7.7217 = 772,170
You hit age 60 the day after the change and retire early, but now the early retirement reduction is only 5%, you’d live 15 more years and the present value of your pension annuity would be:
95,000 x 10.3797 = 986,072
You hit age 55 the day after the change and retire early, but your total reduced benefit is 10%, you’d live 20 more years and the present value of your pension would be:
90,000 x 12.4622 = 1,121,598

What’s interesting to look at is the 60 year old comparison. The present value of the pension annuity drops from 1,037,970 to 882,274.5 if the law changes tomorrow, everything slides to the right, and the early retirement reduction remains at 3% per year. If we negotiate a different reduction rate (1% per year), the 60 year old’s pension annuity only drops to 986,072, when the max retirement age is redefined to 65.

All of this is based on the premise that a rational person will consider the present value of an annuity equal to annual payments for the duration of the annuity. It’s also interesting to note that the total present value of the early retirement annuity is larger than in any case of working to obtain a 100% payment. Yet not many pilots decide to retire early. Nobody said we pilots are rational.

Feel free to bounce these numbers off the R and I committee. I’ve flown with both Scott S and Mike B. They are both sharp guys and we are lucky to have them.

 

Numbersguy: Plenty of folks retire prior to age 65. The regulated age has changed, they (Congress) can't mandate when a company and its employees decide what an appropriate retirement age is. All they have said is that pilots can work to 65.

FJ

 

numbersDUDE, Can you point to ANY job or industry that the gov't has regulated a minimum retirement age? (civil service and military are obviously not relelvant).

 

FJ, during my 8 years and without exact numbers, I'm pretty sure I can count the number of pilots at fedex that have gone prior to the maximum retirement age on both hands. Just hasn't happened that often and we haven't seen it much since the age rule change.

History question: how did age 60 become "retirement age" in ALPA contracts?
Answer: it was the maximum age, established federally in the late 1950s.

Another history question: how did age 55 and "3% per year" become parts of our contract, as they relate to early retirement?

MD11FR8Dog, No I don't know of any...The thing that differs most among other industries' pensions with early retirement options is penalty.

But our industry is still left with this unique disparity that I believe will be resolved soon: either contractually negotiated or legislatively corrected. Companies have real incentive to move this early retirement age forward, as they have to pay more in pension benefits when guys go early. That makes them have to fund the pension fund at higher levels currently.

So this is where, I believe, we have opportunity right now. We negotiate the penalty for going early.

If we don't act soon, all it takes is one "omni omni" by a judge (possibly in an arbitration case at Alaska Airlines) stating that all pension language remains the same, just move the numbers 5 years later and now legal precedent is set. Then it will be an uphill battle keeping our status quo and will cost equivalent dollars at the negotiating table for us. If anyone wants the option of retiring prior to 60, or you want go prior to 65 without taking a 3% per year hit, the time to negotiate this is now. I believe 2 years from now will be too late.

 

Could be tough for the company to arbitrarily change it when normal retirement age for the rest of the company is 60, and they are thinking of going lower with a formula that combines age and years of service (i.e. normal retirement is when age and years of service together add up to 80)

Just my $0.02 worth, but I'm with the "change the age over my dead body!" crowd.

 

Lets see, I retired from the military at 42. I think our age 60 retirement will be safe from Congress.

FJ