Bring back pensions
02-24-2023 | 11:56 AM
#81
Gets Weekends Off
Joined: Apr 2008
Posts: 2,206
Likes: 0
From: DAL FO
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.
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.
+1 for working in a caddy shack/sandlot fusion
02-24-2023 | 12:10 PM
#82
Gets Weekends Off
Joined: May 2015
Posts: 7,292
Likes: 0
From: A350 Both
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.
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.
But again, congratulations on your big win.
02-24-2023 | 12:11 PM
#83
Racketeer
Joined: Mar 2015
Posts: 13,341
Likes: 829
From: N60.4858 W149.9327
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.
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.
https://www.kychamber.com/sites/defa...25%20Edits.pdf
02-24-2023 | 01:16 PM
#84
Gets Weekends Off
Joined: Nov 2016
Posts: 2,558
Likes: 0
Well no, because they have effectively already succeeded in getting rid of us. I just find it sad that some of you that even acknowledge that the company OWES us for what they took are so quick to say, too bad, **** you and get out of my seat. Because there is no doubt that is what you are saying. As to the 'billions' aspect of it, neither you nor I know how much it would cost the company to restore any portion of the amount to bring us back to what was taken. dALPA failed in even getting ANY of it until a year from now. Another '**** you' to us. All I hear on here is that it is coming out of your hide. Well that is complete BS, as it has already been taken out of mine.
But again, congratulations on your big win.
But again, congratulations on your big win.
02-24-2023 | 02:15 PM
#85
Gets Weekends Off
Joined: Mar 2008
Posts: 4,106
Likes: 102
Well explained. My post was fundamental and emphasizes the promissory nature of a pension. The .gov will and has made alterations to funding requirements when needed. This is preferable to assuming the liability even at a reduced rate. (PBGC) Our own (DAL non-con and former NWA) capped pensions being the obvious example. I still have no desire for a pension. You only need to look at CalPERS or any other public employee pension fund to see how difficult it is to maintain over time. And public pensions are able to borrow and tax to increase funding. Corporate pension funds don't fair as well when the funding corporation faces losses or insolvency.
https://www.kychamber.com/sites/defa...25%20Edits.pdf
https://www.kychamber.com/sites/defa...25%20Edits.pdf
02-24-2023 | 02:16 PM
#86
On Reserve
Joined: Oct 2013
Posts: 48
Likes: 0
From: B-209
Well no, because they have effectively already succeeded in getting rid of us. I just find it sad that some of you that even acknowledge that the company OWES us for what they took are so quick to say, too bad, **** you and get out of my seat. Because there is no doubt that is what you are saying. As to the 'billions' aspect of it, neither you nor I know how much it would cost the company to restore any portion of the amount to bring us back to what was taken. dALPA failed in even getting ANY of it until a year from now. Another '**** you' to us. All I hear on here is that it is coming out of your hide. Well that is complete BS, as it has already been taken out of mine.
But again, congratulations on your big win.
But again, congratulations on your big win.
02-24-2023 | 02:45 PM
#87
Gets Weekends Off
Joined: May 2015
Posts: 7,292
Likes: 0
From: A350 Both
I love the idea that the pilot union of 15000 should negotiate a large benefit for a small minority who feel they have been cheated even if the negotiation then yields worse results elsewhere. I too feel aggrieved. But in my case, it is by the group of pilots who enjoyed a HUGE windfall at my expense when they lobbied and got passed the age 65 at the airlines. They had little empathy for those pilots who had to stay another 5 years at lower paid and worse QOL while they enjoyed being at the top of the heap for an additional 5 years. But alas, that is the way the cookie crumbles. Now after the company took my pension (while DALPA winked and let eased the process), I have worked hard to maximize the DC fund I have. I want NO negotiating capital going to restore the pensions for anyone who somehow thinks they earned it...or for anyone else. Ask for a leather jacket, you are more likely to get my support.
And do you not have the same opportunity to stay to 65 as well? And I wasn't at the top of the heap either.
02-24-2023 | 02:55 PM
#88
Gets Weekends Off
Joined: Apr 2018
Posts: 4,145
Likes: 565
He doesn't care about the money anymore because be says he has enough to retire already. What he wants deep down is the younger pilots who have it so good right now to get on their knees and thank him for his sacrifices.
02-24-2023 | 02:59 PM
#89
Line Holder
Joined: Aug 2012
Posts: 308
Likes: 0
From: ATL 330 A
Oh come on. When profit sharing was negotiated, it was viewed as “chump insurance.” No one was thinking twice about the plight of new hires in 2023.
02-24-2023 | 03:55 PM
#90
Gets Weekends Off
Joined: Sep 2015
Posts: 5,571
Likes: 232
From: UNA
and what would have made you content WRT retirement?? Serious question
Thread
Thread Starter
Forum
Replies
Last Post
November Seven
Flight Schools and Training
37
04-10-2018 07:19 AM
