Fedex Pilots proposed retirement plan
08-16-2017, 04:54 PM
#191
Gets Weekends Off
Joined APC: Aug 2015
Posts: 180
Originally Posted by Adlerdriver
I hope those in attendance can squash this. Report please.
It's truly unbelievable to me that time and our money is being spent on this. The line is the sand drawn by the company was in part due to the now somewhat draconian funding requirements put on any company that still operates a classic pension. The US gov doesn't want to end up getting saddled with that bill as it has in the past and I can understand why.
FedEx doesn't want that bill either and they sure as hell don't want it to increase.... hence the line in the sand. I'm not going to attempt to argue that they could have paid to increase.... we all know they could have. They just didn't want to. That ship has sailed. The company got their essentially cost neutral contract they readily admitted was going to be funded by savings realized via the same contract and other cost cutting measures.
If we do nothing, the A-fund remains... funded, out of ALPA's control (and potential to eff it up), 100% the responsibility of the company who cannot out lawyer the US government or wriggle out from under their responsibilities.
There is ONE AND ONLY ONE, single possible reason why the company would even entertain the idea of "improving" our retirement beyond the pittance resulting from CBA 2015. That is to craft the situation so that they are no longer subject to the current pension funding rules and can reduce the current, non-negotiable, line item they currently have no choice but to pay. The perfect storm of conditions that would have to result in order for them to legally avoid this is simply not a realistic possibility based on the current situation. So, it can only happen if we agree to do it to ourselves.
The end result may result in some sort of actual monetary benefit over and above our current A-plan. It will be the equivalent of cents on the dollar when compared to what the company will manage to save themselves (so why wouldn't they agree). It's highly likely that this improvement will be subject to market forces and will have the potential to be diminished, possibly below the current level of a maxed out A-fund (i.e. risk, that doesn't exist now).
But the biggest thing to consider isn't what the checks look like a year or two after we do this. Once this A-fund has been lifted out of the safety of the kiddie pool monitored by the strapping lifeguard known as the US government, all bets are off. The company will give us what looks like a worthy life preserver and push out into the open ocean with a pat on our head. Now will we now be subject to the potential storms of the market, industry and bad management of our company. In addition, the company will now have the option to attack and weaken what they just crafted with each and every contract negotiation cycle. They will play the long game and anyone who thinks whatever temporary improvements might be gained will last is a fool. We will be out maneuvered in the end and our life preserver will be in shreds.
If this happens, the amazing thing will be, that we agreed to do it to ourselves.
It's truly unbelievable to me that time and our money is being spent on this. The line is the sand drawn by the company was in part due to the now somewhat draconian funding requirements put on any company that still operates a classic pension. The US gov doesn't want to end up getting saddled with that bill as it has in the past and I can understand why.
FedEx doesn't want that bill either and they sure as hell don't want it to increase.... hence the line in the sand. I'm not going to attempt to argue that they could have paid to increase.... we all know they could have. They just didn't want to. That ship has sailed. The company got their essentially cost neutral contract they readily admitted was going to be funded by savings realized via the same contract and other cost cutting measures.
If we do nothing, the A-fund remains... funded, out of ALPA's control (and potential to eff it up), 100% the responsibility of the company who cannot out lawyer the US government or wriggle out from under their responsibilities.
There is ONE AND ONLY ONE, single possible reason why the company would even entertain the idea of "improving" our retirement beyond the pittance resulting from CBA 2015. That is to craft the situation so that they are no longer subject to the current pension funding rules and can reduce the current, non-negotiable, line item they currently have no choice but to pay. The perfect storm of conditions that would have to result in order for them to legally avoid this is simply not a realistic possibility based on the current situation. So, it can only happen if we agree to do it to ourselves.
The end result may result in some sort of actual monetary benefit over and above our current A-plan. It will be the equivalent of cents on the dollar when compared to what the company will manage to save themselves (so why wouldn't they agree). It's highly likely that this improvement will be subject to market forces and will have the potential to be diminished, possibly below the current level of a maxed out A-fund (i.e. risk, that doesn't exist now).
But the biggest thing to consider isn't what the checks look like a year or two after we do this. Once this A-fund has been lifted out of the safety of the kiddie pool monitored by the strapping lifeguard known as the US government, all bets are off. The company will give us what looks like a worthy life preserver and push out into the open ocean with a pat on our head. Now will we now be subject to the potential storms of the market, industry and bad management of our company. In addition, the company will now have the option to attack and weaken what they just crafted with each and every contract negotiation cycle. They will play the long game and anyone who thinks whatever temporary improvements might be gained will last is a fool. We will be out maneuvered in the end and our life preserver will be in shreds.
If this happens, the amazing thing will be, that we agreed to do it to ourselves.
08-16-2017, 07:03 PM
#192
Gets Weekends Off
Joined APC: Aug 2006
Position: leaning to the left
Posts: 4,184
Assuming you retire at age 60:
With our current A plan, for every year you defer taking your benefits, your defined benefit increases 8-9%. Waiting until age 61 to receive your $130K pension would give you $141K. If you wait until age 62, $153K, etc.
I'm assuming that is based on some actuarial table. Less time to collect should reward you with a higher benefit, right?
Now, I'm not advocating staying...But, why is it that if you choose to continue working past age 60, your benefits don't increase by that same amount? With many pilots now choosing to stay past 60, that would seem to be quite a windfall for the company.
With our current A plan, for every year you defer taking your benefits, your defined benefit increases 8-9%. Waiting until age 61 to receive your $130K pension would give you $141K. If you wait until age 62, $153K, etc.
I'm assuming that is based on some actuarial table. Less time to collect should reward you with a higher benefit, right?
Now, I'm not advocating staying...But, why is it that if you choose to continue working past age 60, your benefits don't increase by that same amount? With many pilots now choosing to stay past 60, that would seem to be quite a windfall for the company.
08-17-2017, 12:06 AM
#193
Gets Weekends Off
Joined APC: Aug 2006
Posts: 575
It was and is a huge windfall to the company. Really helped them to shore up the funding in the A plan especially since this occurred during the big down turn in the market.
If you figure someone works until 65 now and has 25 years at 60 already that is 5x$130k=$650K the fund did not have to payout per pilot! Plus any interest that was earned on it. That is no small amount. What did we get for that? A big zero! Once again we did it to ourselves.
I guess the then 53 and over did get their VEBA account which was to help with healthcare until medicare took affect. Now it is just a nice windfall $25K+ for them.
If you figure someone works until 65 now and has 25 years at 60 already that is 5x$130k=$650K the fund did not have to payout per pilot! Plus any interest that was earned on it. That is no small amount. What did we get for that? A big zero! Once again we did it to ourselves.
I guess the then 53 and over did get their VEBA account which was to help with healthcare until medicare took affect. Now it is just a nice windfall $25K+ for them.
08-17-2017, 05:19 AM
#194
done, gone skiing
Joined APC: May 2005
Position: Rocking chair
Posts: 1,601
I'm not sure what the common theme of this discussion other than, "leave everything alone and don't let ALPA mess with my retirement". Look, the A plan is DIEING, when we voted in the last contract we agreed with the company to let it wither on the vine and accept a puny improvement in the B plan as compensation.
Unless the caps for the A plan were increased with (at a minimum, the rate of inflation or our pay increases, which ever were less) this benefit, the fixed, company (incurs the risk part) is and was going to become less and less of our future retirees total income. With a flat value A plan pay out, at a low 2% inflation, a dollar 20 years from now will be worth 33% less, 40 years 55% less. At 5% inflation, 20y =62% and 40y =85% less value than todays money. There is no question of whether we individually take on more risk, its happening. The only question is what the vehicles will look like that we support.
I think its a valid proposition that we get the company to continue to incur part of the risk. How its done and whether the benefits out weigh the increased risk, is TBD.
This is just sticking your head in the sand
Unless the caps for the A plan were increased with (at a minimum, the rate of inflation or our pay increases, which ever were less) this benefit, the fixed, company (incurs the risk part) is and was going to become less and less of our future retirees total income. With a flat value A plan pay out, at a low 2% inflation, a dollar 20 years from now will be worth 33% less, 40 years 55% less. At 5% inflation, 20y =62% and 40y =85% less value than todays money. There is no question of whether we individually take on more risk, its happening. The only question is what the vehicles will look like that we support.
I think its a valid proposition that we get the company to continue to incur part of the risk. How its done and whether the benefits out weigh the increased risk, is TBD.
Originally Posted by Adlerdriver
I hope those in attendance can squash this. Report please.
It's truly unbelievable to me that time and our money is being spent on this. The line is the sand drawn by the company was in part due to the now somewhat draconian funding requirements put on any company that still operates a classic pension.
It's truly unbelievable to me that time and our money is being spent on this. The line is the sand drawn by the company was in part due to the now somewhat draconian funding requirements put on any company that still operates a classic pension.
08-17-2017, 05:52 AM
#195
Gets Weekends Off
Joined APC: Mar 2012
Position: Two Wheeler FrontSeat
Posts: 1,162
Originally Posted by dckozak
I'm not sure what the common theme of this discussion other than, "leave everything alone and don't let ALPA mess with my retirement". Look, the A plan is DIEING, when we voted in the last contract we agreed with the company to let it wither on the vine and accept a puny improvement in the B plan as compensation.
Unless the caps for the A plan were increased with (at a minimum, the rate of inflation or our pay increases, which ever were less) this benefit, the fixed, company (incurs the risk part) is and was going to become less and less of our future retirees total income. With a flat value A plan pay out, at a low 2% inflation, a dollar 20 years from now will be worth 33% less, 40 years 55% less. At 5% inflation, 20y =62% and 40y =85% less value than todays money. There is no question of whether we individually take on more risk, its happening. The only question is what the vehicles will look like that we support.
I think its a valid proposition that we get the company to continue to incur part of the risk. How its done and whether the benefits out weigh the increased risk, is TBD.
This is just sticking your head in the sand
Unless the caps for the A plan were increased with (at a minimum, the rate of inflation or our pay increases, which ever were less) this benefit, the fixed, company (incurs the risk part) is and was going to become less and less of our future retirees total income. With a flat value A plan pay out, at a low 2% inflation, a dollar 20 years from now will be worth 33% less, 40 years 55% less. At 5% inflation, 20y =62% and 40y =85% less value than todays money. There is no question of whether we individually take on more risk, its happening. The only question is what the vehicles will look like that we support.
I think its a valid proposition that we get the company to continue to incur part of the risk. How its done and whether the benefits out weigh the increased risk, is TBD.
This is just sticking your head in the sand
Absolutely BS, 30yrs from now, 130k we still be 130k. The buying power will be determined by the economy, this is no reason to give up what you already have for some unknown with greater risk. Stop poisoning this new hires brain
08-17-2017, 05:58 AM
#196
Gets Weekends Off
Joined APC: Jul 2007
Position: MD-11
Posts: 395
The other side of your argument: The difference between inflationary risk (your argument) and market risk (my argument) is not insignificant. We already have a substantial B fund that is subject to both market risk and inflationary risk. The A fund does not currently subject a large part of our retirement to market risk. Some of us appreciate that a lot.
Think global economic downturn, war in either Asia or Europe, or another adulteration of the market via some "creative" banking products traded by high speed computers. You lose half or more of the value of your B fund for some period of time, perhaps when you retire, or need that expensive healthcare that your insurance carrier won't fully fund. It should would be nice to have a guaranteed A fund pay out.
Think global economic downturn, war in either Asia or Europe, or another adulteration of the market via some "creative" banking products traded by high speed computers. You lose half or more of the value of your B fund for some period of time, perhaps when you retire, or need that expensive healthcare that your insurance carrier won't fully fund. It should would be nice to have a guaranteed A fund pay out.
08-17-2017, 06:01 AM
#197
Gets Weekends Off
Joined APC: Jul 2007
Position: 767 Captain
Posts: 3,988
Originally Posted by dckozak
This is just sticking your head in the sand
It's simply a matter of trust. They company never had mine and ALPA lost it after CBA 2015. Maybe they can try to earn it back in 2021-ish with the next contract. I'm just not willing to give them the opportunity with something as important and complex as our pilot's retirement plan - especially since the company has no incentive to do anything (other than find a way out).
All I can say is a guaranteed 40% of something is better than 100% of nothing. After my first failed airline retirement experience, I've got my retirement planned out with our A-plan completely out of the picture. If it's there in whatever form and future dollar value it presents, that's gravy.
08-17-2017, 06:20 AM
#198
Gets Weekends Off
Joined APC: Aug 2006
Posts: 1,820
Originally Posted by dckozak
I'm not sure what the common theme of this discussion other than, "leave everything alone and don't let ALPA mess with my retirement". Look, the A plan is DIEING, when we voted in the last contract we agreed with the company to let it wither on the vine and accept a puny improvement in the B plan as compensation.
Unless the caps for the A plan were increased with (at a minimum, the rate of inflation or our pay increases, which ever were less) this benefit, the fixed, company (incurs the risk part) is and was going to become less and less of our future retirees total income. With a flat value A plan pay out, at a low 2% inflation, a dollar 20 years from now will be worth 33% less, 40 years 55% less. At 5% inflation, 20y =62% and 40y =85% less value than todays money. There is no question of whether we individually take on more risk, its happening. The only question is what the vehicles will look like that we support.
I think its a valid proposition that we get the company to continue to incur part of the risk. How its done and whether the benefits out weigh the increased risk, is TBD.
This is just sticking your head in the sand
Unless the caps for the A plan were increased with (at a minimum, the rate of inflation or our pay increases, which ever were less) this benefit, the fixed, company (incurs the risk part) is and was going to become less and less of our future retirees total income. With a flat value A plan pay out, at a low 2% inflation, a dollar 20 years from now will be worth 33% less, 40 years 55% less. At 5% inflation, 20y =62% and 40y =85% less value than todays money. There is no question of whether we individually take on more risk, its happening. The only question is what the vehicles will look like that we support.
I think its a valid proposition that we get the company to continue to incur part of the risk. How its done and whether the benefits out weigh the increased risk, is TBD.
This is just sticking your head in the sand
The only way that this can meet current DB laws is if the rate of return is no less than 5%. At that 5% rate of return, the company would have to contribute $45K per year per pilot just to match our current plan and then we take all of the risk. The company would still have to pay the PBGC the same amount as they do today because our plan is fully funded.
The question is, how much does the company currently contribute to the DB plan each year per pilot? The only numbers we have seen are what the company contributed to the retirement plan for everyone in the company. Remember, we aren't the only ones in the current retirement plan. Some employees had there plan frozen, but there are still financial commitments for the company to fund the plan as those employees collect their retirements. Also, management falls in the same retirement plan.
Most retirement experts will tell you that you should plan on no more than a 6-7% rate of return over the life of your investments to plan for retirement. If we have to base the funding on no less than 5%, then are you really willing to take on 100% of the risk to get a possible 1-2% extra in return.
All of this is still predicated on the current guarantee of $130K per year. If you want to raise the funding to get a minimum of $160K per year, you need to raise the contribution by about $15K per year. And on top of it all, we have no control over how the money is invested.
We assume all of the risk and pay someone else to invest our money and hope that they do a good job. If they don't that 5% ROR by the time you retire, you lose money. By the way, brokers no longer are required to make investments or recommendations that are best for us, they can now make investments and recommendations that are best for their bottom line and not tell you.
08-17-2017, 07:14 AM
#199
Gets Weekends Off
Joined APC: Aug 2006
Posts: 575
Adlerdriver, That is exactly what the company wants us to believe, there by giving us pennies on the dollar of any buyout to a full B fund.
If I remember right they only offered an 18-19%B fund if we dropped the A Plan. Good thing someone can do math because the company cannot. Would take almost 38% to replace our current B fund and A plan, plus cash over cap and tax replacement.
DKozak, I do not remember the part of we are OK with the A fund dying on the vine. Ok we did not get a bump this time, maybe we can on the next contract or get a bump in the B Fund again. By the way, ask yourself, how much do you have in your B fund or anticipate having in it when you retire? That is a pretty good inflationary hedge plus the A fund $130K a year
If I remember right they only offered an 18-19%B fund if we dropped the A Plan. Good thing someone can do math because the company cannot. Would take almost 38% to replace our current B fund and A plan, plus cash over cap and tax replacement.
DKozak, I do not remember the part of we are OK with the A fund dying on the vine. Ok we did not get a bump this time, maybe we can on the next contract or get a bump in the B Fund again. By the way, ask yourself, how much do you have in your B fund or anticipate having in it when you retire? That is a pretty good inflationary hedge plus the A fund $130K a year
08-17-2017, 06:24 PM
#200
done, gone skiing
Joined APC: May 2005
Position: Rocking chair
Posts: 1,601
Originally Posted by PicklePausePull
The A fund does not currently subject a large part of our retirement to market risk.
Think global economic downturn, war in either Asia or Europe, or another adulteration of the market via some "creative" banking products traded by high speed computers. You lose half or more of the value of your B fund for some period of time, perhaps when you retire, or need that expensive healthcare that your insurance carrier won't fully fund. It should would be nice to have a guaranteed A fund pay out.
Think global economic downturn, war in either Asia or Europe, or another adulteration of the market via some "creative" banking products traded by high speed computers. You lose half or more of the value of your B fund for some period of time, perhaps when you retire, or need that expensive healthcare that your insurance carrier won't fully fund. It should would be nice to have a guaranteed A fund pay out.
I like the A plan, I think the risk of inflation vs the lack of risk of actual reduced payouts are worth having. The best advantage of the A plan is the lifetime payout, guaranteed income till death is the biggest positive of the this portion of of retirement.
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