golfandfly

Again, if you'd read more carefully, I'd say I'd listen to a proposal. I never said I'd screw the new guys. From the new hires I've talked to, almost everyone said they'd be interested in a higher B fund. Again, I think they'd need to think about it more before deciding. After research, they may change their mind. What this number would have to be, I'm not sure either.

I voted no on this contract almost solely on lack of a A fund retirement increase. We had a the best negotiating environment we'll probably find, but we failed to get it done. Now we're outside section 6. Don't kid yourself, the company isn't going to improve our retirement because they like us. They'll negotiate with us if they get more in return.

So, in lieu of givebacks, how do you think we achieve this? What negotiating capital do we have?

I ran an inflation calculator to find out what the A fund may be worth in 2050. Using a 2.5 rate of inflation (a guess), $130k will be worth around $57k.

There are always variables. How long will someone live? Actual inflation? Bankruptcy?

There are certainly risks with market based plans (B Fund). Market gains/losses? Poor investment choices? In short, the best retirement plan may be unique to a specific person.

So, to be clear, I'd simply listen to any proposal that's out there. If the deal screws any group, I'd vote no (again). Also, as mentioned earlier, the company will not engage us unless it's in their best interest. So, I seriously doubt we'll see anything that isn't a bad deal for us. But, again, it doesn't hurt to listen.

StarClipper

Thanks for clarifying, I was only going based on what you wrote.
1. I'd consider allowing the company to discontinue the A fund for new hires, but they would have to offer them a competitive cash over cap B fund.
2. They'd also have to improve retirement for EVERY pilot on the seniority list."

I interpret these two statements are screw over the pilot's who are not yet on the seniority list in order to enhance your own retirement. But again you just clarify yourself.
They way I see it, the company needs the pilots and much as the pilots needs the company. If they draw a line in the sand then the pilot group need to draw their line too. If they don't the company will pick apart this so called best in the industry contract.

kwri10s

Sometimes it does hurt to listen. If we want our position to be "we are going improve the A plan," then listening to other options can incite the mob when rumors start flying around the AOC. That's a big reason we have the contract we have now. When the rumors started flying that the MEC had a full proposal they were voting on, lots and lots of guys started emailing their reps. They were well intention, but the gist was, "we need to see where we are." I had a number of guys tell me that we deserve to see what the issues are so we can decide for ourselves. "The MEC needs to let us see the proposal so we can vote on it. If we don't like it, then we will just vote NO."

The problems with all those pilots pushing for the MEC to send it to us, was that in order to send it to us they have to vote yes. Once a MEC rep has voted yes, it's hard to now be a no proponent. There is not a "just let everyone see where we are" vote. 25% of the full pilot force will not read any proposal at all. It's not that they don't care, they will listen to the roadshows and ask other pilots, but they don't take the time to read. If the MEC has voted yes to send a proposal to the masses, the roadshow will have to be positive. By being "positive" there will always be worse areas glossed over for the sake of expediency. The end result at least on the last contract, was we never allowed the MEC to draw any lines in the sand. Being out of money did not help the process in the least.

I think we need to learn from the previous screw ups. If we as individuals keep telling our reps, we want and expect an improvement to the A plan, and we do not want a tiered retirement system on the company property, then that is what they will go get. The stronger the signals we send to them, the harder they will fight. IF as individual pilots, you are resigned to the "we cannot improve the A plan" mantra. Then guess what? That's the message you are sending out to other pilots and that's the message the MEC is getting. And the company propaganda machine has won again. Of course the company can improve the A plan. To understand that, just breakout your calculator and do some time value of money calculations. Feel free to use the $4 Billion amount the company just spent to do a stock buy back program.

An A plan is a brutally simple plan. All it takes to fund an A plan is early allocation of assets and keep them allocated. But most companies don't like to have large balance sheets sitting around when they would rather use that money NOW and then fund the retirement plans later if their employees actually have the nerve to make it to retirement. Funding later costs much more money. Anyone who waited to start funding their kids 529 plan can attest to that. As an individual, we can start the process by ourselves, just say to yourself. "I'm Good Enough, I'm Smart Enough, and Doggone It, People Like Me!" Now you are ready to mentally demand for yourself an improvement to the A plan. IF you hear other pilots saying "we can't get an A fund improvement," then you be positive and assure them that we can and will improve the A plan.

We will get what we demand as a group. No more, no less.

pinseeker

Golf,

First, $130K will be $130K in 2050. How much will it buy then compared to now will be different. The point is, any plan will have to provide enough investment power to equal that $130K plus our soon to be 9% B plan just to break even.

So, the big question is how much would you need to invest over 25 years to equal a payout of $130K per year for life and what would be a reasonable life expectancy. Most investment calculators that I have used show that you would have to invest about $30K per year at a reasonable rate of return for 25 years to get that $130K for about 15 years after retirement. Now using the general rule of thumb for FedEx of taking your pay rate and multiplying it by 1000 to get your yearly income, a 15 year wide body captain would need 10% of his income to reach that $30K per year investment. Now add the 9% B plan and you get a total of 19% just to break even. But wait, now you need cash over cap because 19% of $300K is over the $53K IRS limit. Plus, someone will have to pay taxes on the cash over cap, so in reality, that captain will need about 19.5% just to break even.

So, with our current pay scale at the end of the contract, a new hire will just match the current required investment of what we currently have after he is a 15 year wide body captain with a 19+% B plan. So, we all know about the value of time when it comes to investment, so the bigger question is what kind of plan would the new hire need to make up for the deficit during the first 15 years of a 25 year career, 25%, 30%? And what happens if he lives longer or the market takes a 50% tumble in the second half of his career?

So, that $130K per year for life has a tangible value. Now if we dump the A plan for new hires, how many years in the current retirement and hiring environment that we find ourselves in will it be until the guys without an A plan outnumber the guys with an A plan? How much money do you think the company will have to give those guys to screw the guys with an A plan. Don't think it will happen, just look at how quickly two different pilot groups at the same company will try to screw each other for their own benefit.

Just my $.02 which will be worth $.01 in 2050.

golfandfly

I don't agree that the reps simply sent this out so we could vote on it. I sure hope not. The best thing (in my opinion) was to vote no and keep negotiating. We still had peak in front of us with undermanned crew staffing. Once this thing went to a vote, we lost that small edge.

A big factor was that we'd run out of money. Another was the negotiating committee saying they'd got every penny possible from the company. I am not blaming the negotiating committee, I think they did their best. But, they also said the company drew a line in the sand regarding retirement. I think we should have also.

I'll be here for at least one more contract. I'll have another attempt at improving our retirement. Some won't have that opportunity. I was against the union opening retirement discussions outside section 6. But now we've spent many thousands of dollars on this project, so at this point, they might as well look at the options. I was against this effort simply due to lack of trust. We'll see how it goes.

But anyone can see that we have no leverage and the company will only listen if it's good for them. Which almost always means it's not good for us.

I am amazed at us completely giving up when the company refused to negotiate retirement. I would have liked the union to give us an update (within the rules of course) stating this fact. Maybe, just maybe, more of us would have been team players and not work extra. We were so short of crews that it might have made a difference.

I still can't believe this contract was ratified..

golfandfly

I agree you have issues when you have tiered plans. You have two groups "the haves" and "have nots". And I agree that when the have nots become the majority, they may not care too much about the other groups issues. Originally, I completely agreed with the union that we should not separate plans. Again, assuming some sort of A plan increase. Now I'm not sure we did them any favors.

You're right, $130k will be $130k. But with the usual pay raises, those guys now making $250k will make over $600k in 2050. If you're making $350 now, around 800k. It may not be $130k if the company declares bankruptcy in the next 33 years. Inflation could be much higher than expected and the $130k could be worth far less than expected. Just saying it isn't a slam dunk for the longer term.

I'm not saying which plan will be better or worse. Someone that gets lucky in the market may do far better and some could do far worse.

olly

One must be very careful in any profit sharing agreement. The company decides exactly "what" the profit is. There are a plethora of accounting methods that can legitimately and legally declare little profit as the company squirrels cash away. "we had $XXB revenues, $2B share buybacks... and write downs and special charges of XYZ, so our profit is zero- sorry employees.

BlueMoon

P { margin-bottom: 0.08in; } As a new guy this got me a bit curious, so I tried to do some math. Feel free to correct me on any errors. Public math warning....



I figure in order to replace an A-plan, I figure near 3.25 million. (That is using the 4% withdrawal of assets per year in retirement to get 130k).


In order to save 3.25 million in 25 years That equates to roughly:


$6300 a month at 4% rate of return (compounded monthly) or $75,600 a year
$4700 a month at 6%, or $56,400 a year
$3400 a month at 8% or $40,800 a year
$2450 a month at 10% or $29,400 a year


Calculations were made with this calculator.
Bankrate.com savings goal calculator -- Saving for the future


The current B-fund is about:
11,800 at second year pay guarantee
21,600 if you make $270k+ (2017 compensation limit).


So to save what we have currently I figure about:
4% RoR 75,600 + 21,600 = 97,200/yr
6% RoR 56,400 + 21,600 = 78,000/yr
8% RoR 40,800 + 21,600 = 62,400/yr
10%RoR 29,400 +21,600 = 51,000/yr


So assuming one averages 250k a year over 25 years (just a WAG, feel free to set me straight on this). A B-fund contribution of:
4% RoR 97,200/250,000 = .388 or 38.8% B-fund
6% RoR 78,000/250,000 = .312 or 31.2%
8% RoR 62,400/250,000 = .249 or 24.9%
10%RoR 51,000/250,000 = .204 or 20.4%

USMCFDX

I'm not smart enough to check you math but your examples are just to replace the A fund and do not take into account the current B fund.

Using your best RoR of 10% and the needed 20% to replace it, add in the soon to be current 9% B fund that we have. Anyone really think the company is coming to give us a 29% or better B fund?

Fdxlag2

Here is a good annuity calculator:

Annuity Calculator - CNNMoney

$2,000,000 gets a 65 year old man $10,900 a month income for life, a 60 year old $9,700.