m3113n1a1

Yup. No way I'm banking on a "minimum amount" supplied by Delta 30 years from now. What if Delta doesn't even exist then? (Almost the same concept as having Delta stock in your retirement account). Is there a minimum retirement age with this type of plan? What if I retire early do I get nothing?

BobZ

It is a defined benefit plan. This is why the PBGC is involved. There will likely be vesting and survivorship discounts.

Don't get distracted by details of what is fundamentally a horrible idea.

had my standard conversation about 20 years ago with a new hire second officer about my counsel to NOT rely on the now terminated delta pilot pension plan. He took issue with my assertion the plan was a ponzi, and would collapse.

His POV was it was a great plan, as he spent 20+ years in military, and only was getting about 50% pension. I asked him what he thought he would get from delta....he figured NB A at 60%. So I asked him how old he was? '48'.....

So I broke it to him one has to have 25 years service to get that 60% value. So he would at best get 12/25ths of that 60%. And BTW, the first 5 years you aren't even vested, so you wont get anything until year 6.

And one also HAD TO work to age 60 to get the full value, so if he retired earlier than age 60, there would be another 2-3% discount on the benefit.

Out comes the pencil and he did some quick math. He looked at me and said.."Well that SUCKS!" Yeah....no worries though, its gona fail before you get a dime anyways.

m3113n1a1

I agree with you wholeheartedly. I want my money in my name under my control now.

SparkySmith

Joining the Denny Crane devil’s advocacy firm here, the $$ are contributed today, not in 30 years. The only potentially unfunded company guarantee is the difference between the present value of the assets in the fund and the minimum, or contribution value. That is, if you contribute $500k and the economy tanks such that DAL goes bankrupt and your share of the fund declines such that your holdings are only worth $400k, the company has a $100k debt to you. If the company goes away or gets relief from that obligation, then they don’t pay you. But that $400k is still yours. If the plan is terminated for whatever reason and your share is worth more than you contributed (say $550k here) you still get your $550k.

That’s my understanding of the plan as articulated by the union. As proposed, it does provide significant growth advantages for younger guys as gains grow tax-deferred. And it gives the older guys a vehicle through which DAL can add to their retirement in a tax-advantaged way if that is in a future contract.

Advocacy complete.

BobZ

Your assumption is that once the corporation is defunct, the underlying asset base is also unscathed, so as to support your reimbursement baseline contribution level.

This is a horrible idea. Your money once 'contributed' is no longer YOUR MONEY. It becomes part of a comingled blind trust. While the asset base allocations in this plan are 'generally' defined......there is no specific allocation requirements. So if the component held in individual equities is held in World Com stock...….to bad so sad.

Maybe the PBGC will once again be your savior. But I wouldn't count on it.

SparkySmith

Valid. Your share of the underlying assets is yours. The management of said assets is a risk. Balance that risk cost with the tax benefits and there’s your (personal) answer.


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BobZ

It is not yours. Your 'account' value in the trust is only an accounting representation of your pro rata share of the trust.

As those of us with a terminated DB plan are aware, in the event of liquidation of the trust you will only receive your proportional pro rata share of the remaining asset value.

This is why the PBGC is required to be paid premiums as part of these types DB plans. Theoretically if the defunct corporation cant pay your benefit 'shortfall' the PBGC will. They will pay me about 50 cents on the dollar, but your results may vary.

As to the individual calculation, the ROI on these plans are typical of whole life policies, only without the benefit of a multiplier lump sum death benefit. And typically the maximum ROI on these plans is capped at mid single digits.

Id tell anyone if you are a 1% household, and that insecure about your retirement security.....it would be far more prudent to take the excess 401 cash, pay the incremental taxes, and buy a whole life policy instead.

m3113n1a1

We all have different financial situations, so I realize we're going to have to compromise in certain areas for the greater good of the pilot group..and I'm willing to do that.

But for my personal situation I'd rather pay taxes now while they are at historical lows, rather than pay some unknown rate in the future.

higney85

I can’t find the answer to what happens if/when the $2.6M number is hit. Would that become a “DPSP-type” distribution? Are company contributions no longer credited? And being market based if the max balance is hit at age, say 62, and a recession occurs, acct balance falls?, age 65...?

Personally, onboard with finding ways to add value to retirement above the 401k. That ends up at max, and subject to investment. Not onboard with anything on company books. Willing to take an additional company contribution into something that may not exceed open market returns (4-5% vs historical S&P). Problem being, after some time even on the IRS site, there is lacking info on what happens at the max amount in company funding, distribution, max amount changes (such as 401k/IRA max amounts growing over time).

Many won’t be working long enough to hit the max, without some serious contributions on their own, but with 30+ to go its worth knowing... and answers aren’t, seemingly, available. The idea of an additional contribution from the company, with optional pilot contribution, to be a tax deferred retirement vehicle is appealing. As it stands the Roth 401K and backdoor Roth IRA, coupled with an HSA, are tax shelters for retirement. Those limits are already here, so what’s another avenue?...is this one for taxable income when retired....?interested. Just can’t find the details.

BobZ

As to the sales pitch this type of plan offers significant 'growth' advantages for younger pilots.....one must have excess 401 cash to make available to this plan in the first place.

this means earning something in the vicinity of $300K. I wonder how many younger pilots find themselves in that boat?

And I wonder how many of those pilots would then think its a good idea with $56K a year already going into a tax deferred retirement acoount with brokerage link access, to allocate the excess 401 cash to an investment account that advertises a 3-4% ROI target, with maybe a 6% cap on growth?

Any growth of the trust asset base above the capped ROI value simply offsets the cost and contributions required by the corporation to fund the plan.

Oh great. So we are going to turn our money over to the corporation to invest, and any ROI beyond what CD rates used to be is gravy for them.

Gee, what a great deal.