Minimum Balance Plan
11-15-2022 | 12:07 PM
#221
Gets Weekends Off
Joined: Dec 2007
Posts: 6,144
Likes: 204
It's for overages, when we get 20%DC the company fully funds the 401k. All you need to do is nothing and there's no spill to manage. Take your post tax money and do what you want with it. Nobody is locking up anything unless you choose to. Next year that's $66,000 for everyone making $330,000. If you contribute to an IRA and roll to a roth that's another $6500. If your 50+ add $1000 to the IRA and $7500 to the 401k. The current setup shelters up to $81000. If you go over just reallocate. Move your bonds into stocks and the MBCBP become you conservative low risk portion of the total portfolio. The MBCBP is already negotiated the only thing holding it up is optionality. With our current set up there's tons of ways to avoid overages and a minimal amount will probably make your conservative investment portion of your diversified portfolio perform better. Don't fear the boogey/straw man of jailed funds, they are guaranteed returns.
11-15-2022 | 12:13 PM
#222
Gets Weekends Off
Joined: Dec 2007
Posts: 6,144
Likes: 204
MBCBPs may not be off interest to you, and that’s fine. They are extremely popular with other high-earners like doctors, lawyers, small business owners, etc., or folks who have interest in deferring more income taxes than they might without such plans. Optionality is the key that everyone, including DALPA, has acknowledged is essential.
11-15-2022 | 12:26 PM
#223
seeing the country...
Joined: Oct 2006
Posts: 4,003
Likes: 34
From: 73N A
Do you know why it's popular with those groups? Because it's a SMALL group of folks pooling their money together and they have a heck of a lot more control over what the plan is invested in, and I guarantee it's not aimed to get a 5% return. On the other hand, forcing spillover from 14,000+ pilots to pool together and then aiming for a 5% return and telling us it's a good deal to save on taxes is an insult to the collective intelligence of Delta Pilots.
11-15-2022 | 12:32 PM
#224
Gets Weekends Off
Joined: Sep 2014
Posts: 5,128
Likes: 91
11-15-2022 | 12:54 PM
#225
Gets Weekends Off
Joined: Apr 2018
Posts: 4,095
Likes: 458
I just checked with my doctor friend who has this type of plan as an extra tool to allocate retirement. Their plan guarantees.. 5% - oh, and remember, if it doesn't generate 5%, he would have to contribute additional dollars to get the return to 5%. Hasn't happened yet, but it could. I believe our plan would have the same issue.
11-15-2022 | 01:19 PM
#227
Gets Weekends Off
Joined: Apr 2018
Posts: 4,095
Likes: 458
I've seen it in a few comms from ALPA. This is from negotiator's notepad 22-01:
"Among those issues was the concept that our pilots could direct ALPA to include or exclude them from the new MBCBP (“optionality”) on an individual basis. A PLR was submitted last year asking this very question, and when the IRS finally responded in December, they declined to provide guidance, essentially stating they required further information prior to issuing any ruling."
I guess that's not really a no, but it's not approval either.
"Among those issues was the concept that our pilots could direct ALPA to include or exclude them from the new MBCBP (“optionality”) on an individual basis. A PLR was submitted last year asking this very question, and when the IRS finally responded in December, they declined to provide guidance, essentially stating they required further information prior to issuing any ruling."
I guess that's not really a no, but it's not approval either.
11-15-2022 | 01:53 PM
#229
Gets Weekends Off
Joined: Sep 2014
Posts: 5,128
Likes: 91
Correct. My panties are unwadded as long as participation is not mandatory. As DALPA has stated, were it deemed to require participation, that would require MEMRAT.
I think the cutoff to generate spillage into the imagined MBCBP is around 330k of earnings? So if someone generates 350k in a year (not hard to do, but probably also above the median), that person would have less than $3,500 spill into this vehicle. That would be instead of taking about 2,500 in after-tax money.
I think Trip told us you can just pick up a greenie or two to solve any contractual shortcomings - at that amount you just need an easy 2-day ;-).
But alas, only those who want money in MBCBP will have it there - mark my words!
I think the cutoff to generate spillage into the imagined MBCBP is around 330k of earnings? So if someone generates 350k in a year (not hard to do, but probably also above the median), that person would have less than $3,500 spill into this vehicle. That would be instead of taking about 2,500 in after-tax money.
I think Trip told us you can just pick up a greenie or two to solve any contractual shortcomings - at that amount you just need an easy 2-day ;-).
But alas, only those who want money in MBCBP will have it there - mark my words!
11-15-2022 | 02:00 PM
#230
On Reserve
Joined: May 2012
Posts: 12
Likes: 0
Yes, this.
I’m not a one issue voter, but if the MBCBP is not optional I’m not for it. I’d still rather pay the income tax on the excess and do what I wish. I can back door it for now into Roth IRAs for spouse and myself. Put it in my kids 529 plans. Or buy high dividend paying investments in a normal brokerage. Or even buy real estate, pay off debt, etc. The point is, why lock ourselves into something that in the end is very mediocre.
I’m not a one issue voter, but if the MBCBP is not optional I’m not for it. I’d still rather pay the income tax on the excess and do what I wish. I can back door it for now into Roth IRAs for spouse and myself. Put it in my kids 529 plans. Or buy high dividend paying investments in a normal brokerage. Or even buy real estate, pay off debt, etc. The point is, why lock ourselves into something that in the end is very mediocre.
Because it is negotiated as part of our Retirement. It is not extra pay. So all of that retirement should be qualified as retirement. Don’t like it? Push for higher pay rates and less retirement.
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