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Minimum Cash Value plan and the IRS

Old 04-05-2019, 02:50 PM
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Originally Posted by caddis View Post
I am not an expert by any means but I don’t think they correlate as equals. Last year I had a talk with my financial planner about sheltering more money from taxes. We had discussions about some ideas but there aren’t a lot for hourly employees like us. One of the things he mentioned was a cash balance plan. The company he works for has been setting them up for doctor and lawyer practices as a way to shield more money from taxes now. There were definitely some good benefits

It if it truly is an optional plan that you can put your excess DC company contributions in. I am tentatively for it. The devil is in the details.

What income are you expecting to shelter in the cash balance plan? Excess 401 money is not likely to be a significant dollar amount for most pilots I would think. if its an optional plan, I guess each pilot can make their choice.
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Old 04-05-2019, 03:23 PM
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Originally Posted by caddis View Post
I am not an expert by any means but I don’t think they correlate as equals. Last year I had a talk with my financial planner about sheltering more money from taxes. We had discussions about some ideas but there aren’t a lot for hourly employees like us. One of the things he mentioned was a cash balance plan. The company he works for has been setting them up for doctor and lawyer practices as a way to shield more money from taxes now. There were definitely some good benefits

It if it truly is an optional plan that you can put your excess DC company contributions in. I am tentatively for it. The devil is in the details.
If you’re purely looking to shield taxes from money stuffed under a mattress the MBCP is a good vehicle. If you’re looking to grow your money and wealth efficiently IMO the MBCP is a poor vehicle. Glad to see the union is pursuing it as optional only
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Old 04-05-2019, 03:35 PM
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Originally Posted by BobZ View Post
What income are you expecting to shelter in the cash balance plan? Excess 401 money is not likely to be a significant dollar amount for most pilots I would think. if its an optional plan, I guess each pilot can make their choice.
Current 415c limits allow for 56k of contributions, provided those contributions are based on no more than 280k of earnings. Our contract provides for DPSP Cash beyond both of those limits. Raising the company contribution percentage and contributing personal money via 401K could create the opportunity to shelter some money. Please just make it optional rather than a mandatory confiscation of DPSP Cash into MBCBP.
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Old 04-05-2019, 03:38 PM
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Originally Posted by Trip7 View Post
If you’re purely looking to shield taxes from money stuffed under a mattress the MBCP is a good vehicle. If you’re looking to grow your money and wealth efficiently IMO the MBCP is a poor vehicle. Glad to see the union is pursuing it as optional only
Exactly. Its why I asked the whole life insurance question.
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Old 04-05-2019, 03:41 PM
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Originally Posted by SparkySmith View Post

What’s the downside here from a retirement standpoint?
Substandard returns.
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Old 04-05-2019, 03:52 PM
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Originally Posted by Hossharris View Post
Substandard returns.
yup. Some smart guy once told my you can go broke (or to jail) focusing on how to avoid taxes....instead of how to make money.
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Old 04-05-2019, 07:29 PM
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Originally Posted by BobZ View Post
just curious.....do those who think this is a good idea also believe in whole life insurance as a retirement investment plan?
I dont think what the union proposed is a good idea, I do like that it could be “optional”. But, I do believe in the infinity banking system.

One is tax deferred, the other is tax free as far your insurance doesn’t go into Modified Endowment Contract and you don’t let it lapse. The government imposed limits in the late 1980s, because people were sheltering money in them. You can’t pass a line, if you do, it becomes taxable.

Mutual insurance companies have been around before the wall street.
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Old 04-06-2019, 04:39 AM
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I'm confused by the additional plan being optional. Could have sworn the R&I committee said in a road show that IRS regulations would force excess DSPS money into the new plan instead of being paid in cash. Anyone else remember that being said? It wasn't on a slide, but a response to a question.
Optional would be nice, but I was under the impression it wasn't possible.
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Old 04-06-2019, 05:06 AM
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Originally Posted by exitrow View Post
I'm confused by the additional plan being optional. Could have sworn the R&I committee said in a road show that IRS regulations would force excess DSPS money into the new plan instead of being paid in cash. Anyone else remember that being said? It wasn't on a slide, but a response to a question.

Optional would be nice, but I was under the impression it wasn't possible.


Thought I read that in their study materials of a year ago. I’ll look for it.


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Old 04-06-2019, 10:46 AM
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Originally Posted by exitrow View Post
I'm confused by the additional plan being optional. Could have sworn the R&I committee said in a road show that IRS regulations would force excess DSPS money into the new plan instead of being paid in cash. Anyone else remember that being said? It wasn't on a slide, but a response to a question.

Optional would be nice, but I was under the impression it wasn't possible.


As far as I know the plan would be mandatory until the IRS says it’s not (like the VEBA). My guess is that this upset enough people that they put the word “optional” in the opener. Nobody knows what the plan will be until the company agrees and it’s set up with the IRS. Beware of buy-in on negotiating an “optional” plan that becomes mandatory in the end.
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