You also have to consider that the company often gets tax breaks on money they put into tax advantaged plans. If the company is getting a 25% tax break it makes it easier to negotiate. The company would provide a smaller percentage if there is no tax advantage to them.

The following is my opinion. From what information I can gather the "optional" choice is very complicated and there is a process that has to be adhered to. My understanding is Dalpa can say it will be optional because, at this point, it hasn't been determined yet that it can't be optional.

The first step is that something has to be negotiated with regards to the proposal. Lets just assume the proposal is negotiated as is. Once this is done then both Delta and Dalpa submit this Plan to the IRS and tell the IRS what they intend to do. It is then up to the IRS to approve or reject all or part of the Plan.
Since an MBCBP is legal in and of itself, the only thing that is possibly in question would be the "optional" nature of the the Plan.

The above brings me to a question. Why would the IRS not agree to the Plan being optional? If they don't and it applies to everyone then that will lead to more money that is tax deferred (not a good thing in the IRS's eyes) than if the Plan were optional where the IRS could collect more taxes now and on future investments of that money.

Standing by for incoming!!!:)

Denny

And that's a big reason why MBCBPs is so popular with Doctors and Lawyers, because most high earning Doctors and Lawyers are Owners/Partner in their practice and receive substantial savings towards their own retirement. Our Profession is not structured that way and Delta being a a Corporation not a person doesn't need to save for retirement so the benefits aren't as great

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Good info Denny. With 16 years left, I’m starting to think this MBCBP might be better for me, if the DC contribution goes up.

No 'incoming' from me. This is very logical.

The other thing about negotiating a completely new program is that an 'Out clause' could be included. i.e. "The MBCBP shall be approved by the IRS as 'Optional', otherwise the MBCBP shall not be implemented and the current DPSP Cash language from the previous PWA shall remain unchanged and in force."

(or some similar language that the lawyers would write)

What a lot of younger pilots are bringing up is 5% return on a MBCBP and it is a valid concern. What they aren't adding in is the saving on the tax deferral nature of the Plan. I would submit that this savings should be included on top of that 5%. I have no idea what that amount would be.

Denny

Sure. I'm currently taking care of two youngins so it might be a while, but give me a few hours to make my spreadsheet more user-friendly for someone who isn't me and ya'll can throw your own numbers in.

What several of us have tried to stress is that savings is small enough that it is not remotely worth the 5% target return that is outside of your control. The only real savings is if your withdrawals are taxed in a lower income bracket.

It is tax deferral not tax avoidance. An investor's focus should always be on total return. A lot of investors have lost significant wealth focusing on tax deferral vs capital appreciation/total return. IMO the MBCBP is an inefficient use of Capital.

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And if you read my post again you will see I specifically said it was tax deferral. I made no mention of tax avoidance. The Government will get its money one way or the other. I'd just like to know what the return would be considering the tax deferral nature of the Plan. What are the actual numbers? Not your claim that it will be low. Is it 1, 2, 3 percent on top of the 5%? What is the true number?

Pretty sure anyone who retires in the next 5 to 10 years will be in that lower tax bracket. And that's a boatload of pilots...

yeah, i'm going to disagree completely.

I would humbly suggest that before using terms like “Deltoids” and casting other aspersions towards pilots that don’t see things the way out do, that you put some efforts towards reading comprehension. Denny Crane sets a great example of being balanced and respectful, even when disagreeing. All would do well to aspire to be so well regarded.

My post started with a summary of my interaction with my representatives (thank you for the reminder to do what I had just said I had done), and that the lack of details and transparency about our ask, especially with respect to the MBCBP, was a problem that bothers me. I’m not interested in a sell job. I am interested in details that I can rationally evaluate. I am less trusting of anyone that attempts to sell me something and simultaneously suggests I don’t need or couldn’t comprehend the details and that I should support my reps.

Furthermore, as a number of posters have pointed out, details about “voluntary” participation, IRS approval of a notional plan, notional rates of return (and inadequate or outright dishonest numbers to use as comparisons), and the confusion over MBCBP and minimum balance details being separate issues, even when mentioned in conjunction with one another, all raise rational and reasonable questions that ought to be more transparently explained before expecting any pilot, regardless of their proximity to retirement age, to support. My interaction with my reps (via email and in person), has not been reassuring when I ask these questions, not merely because there were many unknowns or non-answers, but because there was a presumption that I ought to support the union, with or without answers, and I just don’t think that’s how it ought to work.

Pay, because it counts toward profit sharing and pension. The percentage needs to be high enough to have the company fill the full amount when earnings can equal 0 employee dollars. 20% minimum. A 9% increase in DC is equal to a 9% increase in pay for probably 75% of the seniority list.

The liberal hate makes me pass right over your posts. As for fiscal responsibility... the "conservatives", that's an oxymoron, shout about us not being able to pay our debt and then increase it.[MOD EDIT] your politics don't belong here.

It's still trapped money with no control and a DB and we know how that plays out when times get tough. What's wrong with just paying me and allowing me to determine how to spend MY earnings?

This will be determined by plan administration and fees, not me or you or ALPA or Delta. The more reliable the return the lower the return. This is akin to an insurance product, not an investment.

Ahhhhhh, the "we know what can happen to a DB type plan" argument. Yes, the MBCBP is a DB type plan but.......it will not be lost in tough times or a bankruptcy like the old DB. My understanding is it's your money in an account in your name. You just cannot control what it is invested in.

There is nothing wrong with that. Only now you are dictating how I (and many others close to retirement) are paid their money. Maybe they want something different. This is why the optional part is so critical. Then everyone can choose what's best for themselves.

Denny

I'm not dictating anything, I am advocating for my money to be mine and yours to be yours. I don't think trading a tax advantage scheme for you for a year or two is a fair trade to lock my money up for decades. The "optional" is not optional and never has been. We are hoping to design as brand new plan that has specific features we desire, along with differed tax liability. This new, never before created or approved plan relies on government approval, color me skeptical.

Well it's good you are advocating what's mine is mine and what yours is yours. That's a given and irrelevant. What is relevant is how we receive what is ours. Your opinion is different than mine. Not right or wrong just different. If, as you say, the plan is not optional (which I'd argue it has yet to be determined) then you are dictating how I receive my money just as much as I'm dictating it to you. You do not have the high ground here......we are on level footing with differing opinions.

You are also making this personal by saying it's for me for a year or two. The tax deferral is not just for a couple of years, it's for the life of the plan and affects everyone, not just me.

Denny

"The lady doth protest too much, methinks" Let's be honest. You've admittedly benefited from the reserve system and profit sharing negotiated and paid for by the very pilots you're afraid will receive a windfall at your expense. Let's hear the facts and stop spreading fear that you're getting hosed. Let's hear the facts and then vote.

OK Mr Helper. What would you do since you’re so smart on this issue??? Really. What would you do or can all you do is criticize. Show me a viable alternative.

If you can beat a paltry 5% long term, even in slump years you’d surly not be flying airplanes. You’d be a billionaire.

Sorry. It’s true. [MOD EDIT]. Can you spell that out for me?

Yes. According to the DTW rep I’ve engaged it’s in our name. Control over investment is not controlled. But if there’s a better plan I’ve not seen a single post recommending it, in fact the posts are all deconstructive towards the MBCBP or just want the extra money outright which isn’t going to happen.

What are you talking about? The s&p historical return is about 10% per year on average long term.

That poster has lost all credibility with that statement.

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I'll buy the equal footing argument, but the truth is your next few years of tax advantages will lock away my money for a much longer period of time at a rate of return that is far inferior to any investment I can make with it. With a spouse, age 50, HSA and a backdoor roth, anyone over 50 can put away $84,600 into tax sheltered accounts this year. That's every year of your last 15 if you work until 65 and it has increased each year. I'm not willing to accept optional as TBD.

And yet when I’ve brought that up in the past in regards to how that 10% average affects 9% more in a DC over the course of 20/30 years, I’m poo pooed out the door by the younger generation.

That average is also why I want to know what percentage should be added to that 5% because of the tax deferral implication. Is it 3% for a total of 8%?

Denny

Soooo, are you gonna vote down a contract that meets your standard except for this?

Denny

It depends on an individual's tax situation. The value of your tax deferral is determined by your tax bracket


For most people I'd say the difference is 1% or less

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By tax situation I assume you mean what tax bracket they are in. I would be interested to know what impact it has on the 24% bracket and above.

Denny

Obviously I can't make that judgement now but it's high on my dislikes. Would you single issue no vote if retirement DC is increased but no other provisions for tax savings or plus up were part of the deal? Not really a fair question, is it?

I don't know, but I wish I could get a good Notepad about the tax benefits from the union. I suspect that we won't - all we'll see is "Consult a tax professional for more information".

That's all that can be asked, to keep an open mind. As you, I want to see the whole enchilada before I vote on anything. In that sense it's a fair question to see where one stands.

If you, or anyone for that matter, ever layover in Seattle please PM if you want to meet for a beer or whatever. If I'm home I'm I would be more than happy to do so! :)

Denny

You do realize that it’s a “targeted” 5% return, not guaranteed, right? If the market tanks then your MBCBP tanks too. There’s nothing fancy about the investments in the MBCBP. It’s a container for tax deferred money that is nominally yours and someone else controls.

ummmmmm.........what?!??? You can’t be serious. I thought this was somewhat of a serious discussion.

I rarely get to SEA but I appreciate the offer. While we disagree on this issue I think we have common ground on the majority of the contract and its need to be a big win for the pilots to end the bankruptcy hangover. I'd like to reciprocate the offer but you have to be willing to drink your beer in a shanty (and no I didn't mean shandy) MSP has a bar every 20 feet this time of year.

https://www.exploreminnesota.com/sit.../11302/800x532

Based on what we know, if you are more than 10 years away from retirement, unless you expect your marginal tax rate to be significantly lower (like 12% vs 22%). You are better off taking your money and putting in in a brokerage account. The union hasn’t proposed anything that has benefits that outweigh the expenses.

That's not correct. If the plan is set up with a 5% return, it pays 5%. If the actual market return is higher, the excess earning go into a reserve fund. The next time the market return is less than 5%, the reserve fund is used to fill out the 5%. If there's a string of bad luck and the reserve fund runs out, the company is required to use operating cash to fill it out. Since this process happens every year, the program is always fully funded.

Like I said, closer to an insurance product or annuity. Ask any independent CFP (who doesn't work for a firm selling their own products) what they think of annuities for someone with a large capital balance or a time horizon of 10+ years.

I should have been more specific. We are saying the same thing.

He is holding the MBCBP out as this vehicle which gets a guaranteed 5%. It’s not that at all. They target 5% as a growth rate. And in order to get that they will either withhold growth above 5% to use in the future, or take credit for that previous growth in terms of average rate.

If the market tanks, having your money in the MBCBP gains you nothing.