Early Retirement?
 

Apropos to the recent discussion.

https://www.fool.com/retirement/2020...market-vo.aspx

I'd recommend Delta reinstate retirement for guys say 3000 ish and above on seniority list or whatever a good number would be at the 60%FAE. That would preserve the young guys (if it got that bad), fix the deadzoners argument, ensure a lower training thrash, no furloughs, etc.

For how long? Til 65? SILS would be more cost effective than a lifetime annuity. Losing 500-800 per year through normal retirements is crushing the training pipeline. Any early retirement offers would.have to be carefully managed. Balancing by fleet is an option, but that creates a seniority abrogation argument.

I'd like that plan!!! :) I'd be gone in a New York second! .....if I could hold it.

Denny

In no circumstance will there be any significant FAE to all pilots locked in for life at the recent high water marks. Million dollar 350 pilots, buddy bidding triple dippers, etc. Not for a private company anyway. Its not like we're a municipal government that can simply take it from the taxpayers.

Last time they had early retirements and furloughs. They ended up furloughing the bottom 1000 or so and brought back the early retired guys to fly at full pay while receiving full retirement pay. They were not even on our seniority list. The union condoned and endorsed this staffing solution.

How solid would a DB be? This whole crisis in my opinion just validates the value of a 401K. Yes the markets are tanking and 401s are taking a hit. But seeing how quickly the airlines can turn from wildly profitable to disaster would anyone feel secure with a “promise” of a DB? I would not.

If we had enough folks dependent on a DB the company would use it as golden handcuffs to get us to gut our PWA to save the DB. How much value would a 60+ year old Pilot put on QOL items or pay vs protecting the DB? How about a 63 year old Pilot? How much would they be willing to give away to protect the DB at all costs? I don’t blame them, I would probably think the same way if I were in that situation.

Finally how hard would it be for the company to dump the DB in times such as these? In my mind this whole Coronavirus issue highlights the shortcomings of a classic DB. Could we perhaps come up with some kind of different DB that is not subject to being liquidated? I have heard guys mention an annuity in everyone’s name but I am not sure of how much that would cost. I just have a suspicion that if we currently had a DB the company would have a lot more leverage over the Pilot group than they currently do.

Scoop

Wait, what? Can you give more details on this? (Not doubting, just never heard anything about this before)

How did that even make sense, aren't senior guys way more expensive than junior guys?

I took a early retirement in September of 2012. Three months pay and money in a Retirement Medical Account to pay for private health insurance until I turned 65. I was one month shy of 63 and got around 42K. I have stayed on my wife’s health insurance and still have about 25K left. Best thing I ever did.

Too many left small senior categories too soon to be replaced witout grounding planes or even one entire fleet, so supposedly it would have destroyed the airline by grounding panes due to no pilots until their replacements could be trained.

I am good with that. I am about 56% on the list.

Wow. I still can't believe I'd never heard about that. Crazy.

Why seniority and not based on age? Oh never mind!

It was a time when things looked bleak and pilots over 50 vested in the retirement plan could take a lump sum of 1/2 the present value of their lifetime annuity so they did before that door closed. It resulted in many pilots of certain fleets leaving simultaneously which made the company/union work out a temp plan to let them fly (in retired status) until replacements could be trained.

PRPs...not a pretty word is it H.I.?

Raising Arizona?

Yeah, I remember the "perps". It was an effort (that the union stupidly agreed to) to stave off bankruptcy by letting the retired guys come back and fly. It didn't work.

And this was after the PRP's had bailed out with their lump sums causing a run on the bank contributing to our pension becoming under funded and failing.

It was really annoying to watch them "come back to save us all". What a joke it turned out to be.

There was a real atmosphere of fear and uncertainty surrounding the bankruptcy that caused some crazy ideas to surface. Remember Leo the Ceo and Michelle Burns bailing out with their SERPs and golden parachutes? I hope we are wiser today and can avoid some of that. Ed the head taking no salary is a good sign that maybe we won't repeat some mistakes from the past. JMO.

The point of the PRP program where pilots could come back and fly was to quickly allow the company to early retire around 600 pilots. The average PRP pilot worked for 6 weeks past their scheduled retirement. A handful of check airman were able to stay for a year because of the FAA’s refusal to qualify more than 2 new LCA’s a month on the 767.

It was a limited time program that the company wanted to extend. The union then said no. In hindsight, I still think it was unnecessary and guided by fear.

The point of the PRP program where pilots could come back and fly was to quickly allow the company to early retire around 600 pilots. The average PRP pilot worked for 6 weeks past their scheduled retirement. A handful of check airman were able to stay for a year because of the FAA’s refusal to qualify more than 2 new LCA’s a month on the 767.

They asked to extend a few LCA’s beyond the 1 year point. That was it. The majority of guys who asked to extend were turned down and did not get a PRP slot.

This is incorrect. A early retirement program was negotiated to retire 500 pilots early to reduce furloughs. The company actually allowed closer to 600 to go early. The PRP program was tied to the early retirements to allow it to be completed rapidly.

Exactly. And we are just adding layers of management between us and our money. All of whom need to get paid. They will all be looking for money especially in a situation like this. No thanks.

Now... me - stock/bond market - my money
DB... me - Delta - stock/bond market - my money
annuity... me - insurance company - Delta - stock/bond market - my money

there was never an early retirement program, at least not post 9/11. There was one tied to Contract 96, and there were no PRPs associated with that one.

You are correct. In the chapter 11 process the company agreed to not terminate the plan by a specific date to allow those pilots who wanted to leave early a assurance they could wait to that date. It was not the ER program in contract 96. The quid for that assurance was the PRP program. This is the only references I can find.

With the ratification of Letter 50, Letter 49 also became effective, and all PRPs, with the exception of 11 named individuals, all Lead Line Check Airmen, were terminated at the end of 2005.As of this writing, there are eight PRPs still employed. Every remaining PRP will be terminated no later than the end of the February 2006 bid period.

Delta Air Lines and its pilots' union reached a tentative agreement yesterday on a plan to avoid service disruptions that could result from a flood of early pilot retirements, a situation the struggling airline warned could put it closer to bankruptcy.

As part of the agreement, Delta promised the union it would not terminate the pilots' pension plan before Feb. 1, even if the airline files for Chapter 11 protection, the Air Line Pilots Association said

And 1200 pilots were on Furlough when the Perps cashed out and then came back and flew In their Seniority as if they were not retired. Still ended up in bankruptcy. Defend it all you want. Borderline Scabs in my opinion.

It was necessary. Without it entire categories would have shut down due to a shortage of captains and no LCAs to train new ones....they had all early retired en masse.

It was the "least bad answer" for the time but a necessary evil. ALPA did a good job limiting the scope of the program to the absolute minimum required for the company to fly the schedule, and not a whit more.

Yup. No way perps shuda held seniority and allowed to fly gs trips.

But when you have a company owned DB they have a hostage the group would do almost anything to 'save'.

They did NOT come back "in their seniority." Every one of the PRPs (or PIMPS as some guys called them "Pilots In My Place") came back to the absolute bottom of their category list, junior to the plug. But, since many of them were LCAs, they were still assigned to fly good Europe trips (to do TOEs, the entire reason they were on the property post-retirement to begin with). So it may have "seemed" that they had their pre-retirement seniority in category, but they did not.

I also remember the 777A being so incredibly short-staffed due to the massive wave of simultaneous early retirements, that some of the PRPs were able to score regular lines, even as they were at the bottom of the category lists. Again, it almost "seemed" that they came back to their old in-category seniority. They did not.

The PRP program was an unfortunate, but necessary step we took for a limited time for a specific, unique purpose. It served its purpose and went away, as it always was supposed to do. Sometimes tough decisions need to be made. That's called living in the real world.

An early retirement incentive program would only exacerbate the short term cash flow problems since I doubt anyone would accept an IOU from the company. Fool me once...

Nobody is taking an early out now. Especially if they were substantially (40% or more) in the equity market. Most retirees need that amount to sustain their nest egg.

I hope "nobody" with such large exposure to equities in their final years was actually positioned to sustain significant losses. They should have been built in to one's financial plan that close to retirement. I know everyone didn't plan smartly, but many did. And many with the massive losses of late also gained much in the last 10 years with the same exposure.

^^^^^^^^^^^Yes! This^^^^^^^^^

The company has much, much less leverage over us without the DB. They can claim the sky is falling and we will liquidate if we don’t totally acquiesce to their demands but we know it’s total BS. DAL is not going anywhere.

DAL was profiting 5B+ a year prior to this. No one knows how long it will take to get back there but we absolutely will. Potential creditors know that Delta was and will be again a money making machine that they will be happy to loan money to if Delta needs it.

As we all do, I want DAL to succeed and think the recent LOA was a win-win for DALPA and Delta, but if the company starts threatening us with “Take this or else” I would say fine it’s “or else.” Many of us have been through this rodeo before and the fact that we don’t have a DB actually empowers us in times like these.

Scoop

Anybody want to defend the “min balance” plan now?

Taking a lump sum early retirement could be the greatest financial move available. Imagine investing a huge lump sum at current market prices and catching the next decade of recovery.

I won't castigate anyone who planned an early retirement, but is now holding on til 65. That said, if you are within a year or two of retirement, your portfolio should have already contained a proper balance of equity and income holdings. Being 100% equity until retirement date, then making the shift is irresponsible at best. The last few years in the workplace should be building cash for retirement and transitioning to an income production vs growth. If your portfolio just tanked and you want to work til 65 instead of 63, go for it. Stock away a few grand while stocks are on sale. If you start lobbying for 67 because the market just tanked, get out of my seat old man.

I am not a min balance plan person. A plan however can’t be canceled unless two things have occurred. The corporation must file for reorganization in bankruptcy and the plan must be severely underfunded causing it to meet the but for test. That test means that a successful reorganization could not occur unless the plan were terminated. A small supplemental retirement plan is not likely to meet that test. That is why in many chapter 11 filings there is not a concern over termination. With the changes in retirement rules and a plan structured to avoid a run on the bank there would not be much to worry about. Delta currently has huge retirement funding obligations. I don’t hear anyone discussing those plans getting terminated.

I think you are making his point even stronger. If Delta didn't have a min balance obligation, more money is available for the remaining seniority list. Those who benefit with the hypothetical min balance "plus up" would be flying out of here with money that could be used to maintain the contract for current employees. Remember the impact of lump sum departures on the pension...

Even in retirement there is an appropriate place for equities. It really comes down to your balance and draw down plan. How conservative or risk tolerant you choose as an individual will determine the reliability of the retirement. If you are going to live for 25 years after retirement you need income and growth unless you have other sources of income. Inflation over that amount of time requires it.

By delaying retirement by 2 years you turn those years into earning years and don’t start drawing from the lower value. Postponing likely aids the recovery of retirement funds and adds more. It also reduces the number of years you need to use those funds. If you’re able to work or, why wouldn’t you? I hope they retire all the same, but putting myself in that situation, I’d work until I could no longer hold a 1st class medical.

Vanguard's 2020 target plan, retire now is about 50/50 equities and bonds. 2025, 60/40. So being near retirement with 40% equities is not haphazard.

That being said, senior guys are down 300 to 500k in a week