Originally Posted by tennisguru (Post 2673015)

The tax thing is an interesting math issue. Let's say someone has 20k per year in DPSP cash (I have no idea what's realistic, but the concept behind the numbers will still work).

If this was implemented next month I would save well over 50K in taxes. I'm being conservative on that number.

Our current option is to take the cash, with the tax hit. Let's say after fed/state taxes, dues, etc you end up with 55% of that, or 11k. If you invest that 11k every year starting with $0 over 20 years @ 10% rate of return you'll have 630k in that account.

Option 2 would be this 5% VEBA/whatever you want to call it, the benefit being that you would get to put the full 20k in each year. That amount after 20 years would be 660k.

This is NOT a VEBA do not characterize it as such. So you are basically at the same number with a lot safer investment in the long run. That's what I get from your numbers.

The math on those is very close, but of course the variable is what can you do with your own money. If you can average 11% instead of 10% that puts you at over 700k, 12% is just shy of 800k. Conversely if you can only do 8% you're only looking at 500k.

You are definitely in the wrong business if you can average 12% over that many years. I'd be ecstatic if I could average 10% for that amount of time.

The one thing I don't know is how this union plan would be taxed on withdrawals after retirement. Is it ordinary income or long term capital gains? That would make a big variable that would need to be accounted for.

Well, upon retirement, your balance in the plan would be rolled over to an IRA and then you'd follow the IRA rules for withdrawal would apply. As far as how it's taxed, you will run into the same problems in whatever investment vehicles you have.

Either way I can see how the 5% "set it and forget it" plan appeals to some people. If they could push that yearly gain closer to 7% it'd really start to look much more attractive of an option for a larger number of pilots. A 7% ROR on the enhanced retirement option would push your 20 year account balance over 800k, which matches the 12% ROR if you took the DPSP cash tax hit.

Originally Posted by JamesBond (Post 2673021)

Mega Back door ROTHs are not for everybody either. I looked at my tax situation and that horse has left the barn. I am at my highest rate of taxation right now so it makes zero sense for me to do that.

Originally Posted by Trip7 (Post 2673024)

I agree whole-heartedly. Likewise, this plan is 5% plan is not for everyone. Worst case it should be optional

Originally Posted by LeineLodge (Post 2673132)

Except apparently they are talking about using DPSP cash, ie self funding. At least that’s what Denny’s recap seemed to indicate

Originally Posted by Tailhookah (Post 2673182)

Is the 5% guaranteed?

Originally Posted by Falcon20 (Post 2673228)

So I haven’t had the opportunity to attend the roadshow but I plan on attending the one in Atlanta next week based off Denny’s endorsement.

I’m all about the 20% DC so the company fully funds the 401K to IRS limits. However, I’m confused on why people say that any excess going into a modern DB is self funded. Those are company funds that have been redirected. Are you saying that it should be 20% DC and 5% to the DB and you still get DPSP cash as the only way it’s company funded? The issue I see with that is those not making $275k may want the funds for DB to be sent to DC.

I just think that some portion of the pilot group will be ****ed because it was changed or not changed or not “perfect” for them.

Originally Posted by Crown (Post 2673215)

Thanks Denny for filling us in on this. Glad someone actually attended the road show.

It doesn't change my mind. Increase my pay and DC and let me, the individual, deal with the consequences of higher taxes or whatever. I believe, in the long run, I will be a better manager of my finances. Some guys won't be and that sucks. But that's on them.