the difference being they also benefitted from all those things, it’s not like they did that out of altruism for us. And most those things minus PS were negotiated during a contract as improvements not something that was necessarily “paid for”.

A min balance would likely not benefit anyone who retires more than 7-10 years from now, which is 2/3-3/4 our list. It would also disproportionately benefit those with only a couple years or less to go. Conversely it would take away the ability for pilots to invest and get decent returns and lock in a VERY low rate of return, taking actual retirement money away from others.

 

The same people that write our checks.

 

Yes, because if guys soon to be retired were going to get $2B worth of an investment in the next 5 years, the company would have never given it to the other pilot groups in any other form like compensation, medical or QOL That's just not how negotiating a contract works and to believe otherwise is a pretty thinly veiled gaslight.

 

wow. You are something else.

 

Well then how about the government just pays every senior 100k a year in social security benefits? It's the government paying for it anyway, not younger tax payers, right???

 

I'm not the one making the claim that "I'm not asking junior guys to pay for my retirement." You are. And, by definition, any targeted gain with that substantial of a sum is paid for by not giving monetary gains anywhere else.

 

Ehhhh, this is only partially true, and fails to tell the whole convoluted story.

Yes, pension funds are invested in the market. However, the assumptions used to calculate fund liabilities are extremely restricted. You can have the ace of aces investing your fund, but if interest rates are very low, as they have been, your forward looking liability is based on 30+ years (or whatever actuarial model they're using) of essentially zero interest. THAT number, minus what's essentially in your current day fund, is what drives contributions. Compounding liabilities year after year with near zero assumed return is a crushing load that no market gains can recover.

Think of it like this: The pension is your mortgage. You have a good rate, you have a good job, and you make your payments on time. One day, through no fault of your own, you lose your job. The bank says "you lost your ability to pay, so we're calling your mortgage". You say "well, wait, I'm a smart person, I have money in the bank, I can make my payments while I look for another job". Bank says "we don't care. You don't have a job NOW, which is what we're basing our decision on. Besides, the economy is bad, even if you hadn't lost your job, we're expecting you will, so even if we don't call your loan, we're jacking your payments up 400%, which you could't pay anyway, so we're calling in your loan".

"Ah ha!" you think to yourself, "I'd never get myself into this predicament, because I'd be paying my loan off early". Nope, IRS forbids you to do so, because they consider that a tax dodge.

ERISA is designed to protect pensions, but it does so in the most convoluted way possible (I know, big surprise, right?). It does this by preventing wild-ass assumptions on fund performance, which is fine, but only to an extent. The problem is, when the economy goes south, the first thing that happens is the value of the fund decreases because the value of the assets generally decrease. But those things recover, even if it takes time, and only a certain number of beneficiaries are taking funds at any one time. But along with the decrease in the fund value, interest rates usually also go down, which jacks that forward looking liability number WAY up. Put -2 and -2 together, and you can winding up with a pension fund that is grossly underfunded...on paper. This number actually bares little relation to the actual ability of the fund to pay.

The truth is that fund value recovers with the economy, as do interest rates, at least usually. But ERISA requires that funding to be made NOW. And if the economy is bad, well, chances are your business doesn't have a spare billy to toss in the pension fund because the math sucks today.

A couple of other Baby Ruths in the pool at the club:

The IRS actually prohibits over funding of pensions. Pension contributions have tax advantages, and the IRS does't want pension overfunding used as a tax dodge. So one potential avenue to prevent this kind of thing from happening is actually prohibited by essentially the same entity that is charged with protecting pensions.

There is a fundamental disconnect with long term interest rates and the economy. This number, baring some peaks and valleys, has been pretty stable over the years. People are losing their minds over interest rates right now, and they really haven't approached even the low side of historically normal. Some of you are really into waving red flags, so here's one for you....an economy that needs near zero interest rates to operate is not fundamentally healthy. This has been going on for the last 15 or so years, since the crash of '08. I get that paying more than 3% for a mortgage or the note on my new Miata stinks, but yea, not healthy.

So you ask yourself "well, what if the opposite happens?". Good question, and we're seeing this play out now. A lot of pension funds have had forced contributions to them over the past decade, based on a stupid high liability generated by zero interest rates. Fund values have been generally going up, but without the boat anchor of low interest, the new calculations get...very weird. A pension that is nominally funded, say between 90-100% of what the previous liabilities calculated, suddenly find themselves very overfunded.

Things happen at this point...the plan sponsor could voluntarily terminate the fund. I strongly suspect this will be done wherever possible where it is not otherwise restricted. This is usually done by paying out to the beneficiaries the current dollar value of their benefit. Adding in some admin costs, that number is usually 105-110% funded. They get to keep the rest.

 

That's your opinion Chief.

 

Is this how you see it going? "Okay, now that we've agreed on all the sections, we'd like you to set aside a few Bil for pensions for guys who are about to retire."

 

JB, honest question.

Do you honestly believe the company will ever just pony up billions by “making the pie bigger?” Or do you think it more likely they will never agree to that without reducing other areas of the contract?

Even if it’s somewhere between the two, is that not taking from the masses to fund a major liability to a few? NH uniforms, hotels, PS commuting, etc are budget dust by comparison, so that doesn’t factor in.