I'm curious about an argument FOR the current "Term" plan. Hypothetically, if the GVUL is the plan we always had, and the new plan being offered is the Term plan with it's higher imputed income/no side investment options/can't take it with you at retirement, what would be the argument for switching TO the term plan?

I'm curious because I can't think of a single reason.

 

100% agree.

The only "real world" example I see for remaining in the term plan is inertia--i.e., you "do nothing," you stay in the term plan. That's a pretty lousy reason (and, in your reverse hypothetical, that mindset would keep you in the GVUL, anyway), but I'll bet dollars to doughnuts that we have a substantial number of pilots do exactly that.

I guess there's also the trivial case where one has only the basic ($50K) amount of insurance, then GVUL doesn't apply....

 

So what are the cons of switching to the GVUL, not talking about the investment side?

 

None that I can see. Same benefit, lower tax bill. What's not to love?

 

ask the next question, who makes
money? Does MetLife make more money with whole life for 15000 pilots or term. 1-2% fees for investments adds up. Not saying it’s not an OK option for pilots.

 

I haven’t seen if the group plan will allow those that carry extra coverage to move that over to the group plan without a health examination. The normal term plan allowed a raise in coverage every year without an exam. Any chance the new group plan will do away with this or not carry over your current coverage levels?

 

Why does that matter at all? Delta is paying all the premiums no matter what. No one is forced to use the investment option at all. You can either:

Use the term life for ~$1.1 million death benefit, pay taxes on a high imputed income.

or

Use the GVUL for the exact same ~$1.1 million death benefit, pay taxes on a much lower imputed income.

 

It's one of those cases where the calculus is much different since Delta is paying the insurance cost either way. Would one run out a buy a whole life vs term life $1.1M policy in general? Since it is part of the PWA, unless your inclined to just decline the insurance (which apparently approx 500 pilots do currently to avoid the imputed income) it seems to make sense to take the GVUL for the lower imputed income reason alone. On the podcast the ALPA reps commented that if every single pilot switches over it amounts to a savings of $30M to the pilot group as a whole.

 

I think we make money, via lower imputed income taxes. I think the crux of the difference is that the current Term insurance is handled differently tax-wise than the GVUL. Tax laws are different between the two types of life insurance plans, and the GVUL *appears* to be more advantageous taxwise for our application.

And, Metlife makes some scratch on the 2.25% fee on deposits from those who choose to do so.

Someone more bored than me should run a spreadsheet of what it looks like to "invest" the saved imputed income tax dollars into the GVUL investment vehicle. Basically, zero out the change in imputed tax, put the extra into investments (taking the 2.25% hit on it), effectively paying in the same amount of dollars as the current Term plan. It'll only amount to a few hundred (maybe thousand when older) dollars invested a year, but I'm be curious what the final theoretical number would be.

 

I’m planning to run that illustration when I get some time. For easy math let’s say my current imputed is $1150/yr in income. Let’s make math easy and say marginal tax rate is 30%. Current plan is costing $350/yr in taxes. The GVUL imputed drops that to $350/yr and a tax bill of $105. So a $245 difference a year in my cost for the same coverage (subject to go up in each 5year age band). Now, if I put $245/yr into a 4% investment, minus a 2.25% fee… at a guaranteed 4%, for 27 years, and adjust the imputed amount to be the difference… what would that be? What about the investment options, after fees? Gotta run the math.

I don’t see any pilot hurt by going GVUL. The investment side becomes do you want to “be your own bank”, build a cash value to keep paying the premiums when you retire, or just save in taxes for the rest of your career. Enrolling makes complete sense, the rest needs some time with a spreadsheet and everyone’s numbers and outcome will be different.