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Fedex Pilots proposed retirement plan

Old 11-05-2017, 10:24 PM
  #491  
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Originally Posted by Adlerdriver View Post
Uh...... we were. Made it at least 10 pages and almost a week without a peep. But thanks though, I’m sure he’ll keep away now.
Uh, look at my number of posts. I don't live on this forum like you do. This isn't twitter. And your welcome, jackwagon.
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Old 11-05-2017, 10:29 PM
  #492  
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Originally Posted by Adlerdriver View Post
So the total value of the contract is the measuring stick in your world?

Don't you think that 1.5B had just a little to do with the fact that the contract is LONGER than any contract negotiated on this property? Heck, if that's your main measure of success, we could have gotten it up to 2.5B if we made it a round 10 year contract.

Considering the negotiating power we held and the company's economic strength, for what I see that we got, that 1.5B is incredibly cheap. The fact that it took "gives" and "horse trading" to get ourselves what the company gleefully admitted was a cost neutral contract before the ink was barely dry isn't something to be proud of, IMO.

Aside from a basic COLA type raise over the life of the contract (quickly eclipsed by our pax brethren) and 1% more in the B-fund (2 more years to go for the other 1%), what EXACTLY do you see on a regular basis flying the line that makes you happy with our current contract?
I see lower travel banks on long haul international deadheads.
Our FDA bros getting hosed on hotel in lieu of.
A significant number of scheduling improvements that have yet to be put into practice 2 years after signing.
Bidding for training still hasn't happened.
A new interpretation of jury duty pay that's worse.
Age dependent bonuses
A retirement bonus that effectively incentivizes not taking sick leave and working a maximum schedule for the last 2 years.
I could go on........

So, we get sold this contract and it passes by a margin that easily falls into the apathetic, "If the MEC recommends it, it must be ok" group. Perhaps you can understand why those of us who voted "no" on the contract might feel reluctant to place our trust in this process again, concerned we'll get a repeat performance by another sales group. Never mind that simple reality that the company has ZERO incentive to do anything unless it's in their favor. Pardon me if that fact right there makes me extremely leery of anything that comes out of this process considering our history of being "out-everythinged" by the company. If I felt like I could trust the MEC to educate us, accurately show us the pros and cons with no spin or sales pitch and most importantly LET US KEEP WHAT WE HAVE if we want, then I'd feel a lot better about them "doing their job." Fool me once.....
Regardless of my spanking, nice post. +1
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Old 11-06-2017, 02:31 AM
  #493  
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Originally Posted by kronan View Post
In no particular order.

I find it fascinating that posters here have detailed information that is available to absolutely no one else. Numbers that could only come from inside our Union, and yet there ARE no firm plans yet. That was kinda the point of the most recent Union Comm. That various surveys will be undertaken if management wants to move forward. If management says no way, then it'll all be tabled until Section 6 opens in a few years.

COLAs-wonderful, expensive as heck. Might\might not keep up with inflation. Even people who think turning your IRA\401k into an annuity tend to point out that buying one with COLA protection (usually simply a fixed rate) gets you less $$...and, might be better off buying several annuities with no COLA but with deferred starting points. (eg ones that starts paying out at 65-70-75)

So going out on a limb here, the vast majority of the Pension world has gone the way of the dodo, and those were pensions Without COLAs. Adding a COLA to our A plan would increase the odds of the A plan being handed over to the PBGCC. Not today, certainly not tomorrow, but where is it written that FedEx will ALWAYS be profitable. Corporations don't have to lose $$ for decades before there's an impact on pensions. What will the shipping world even be like in 40 years?

The one thing I do know, is assuming a 2% inflation rate (historically low) the value of my 130k pension will be roughly the equivalent of todays 59k. And less than that if inflation's higher.

And YES, one of the risks of a Variable Benefit plan is a reduced pension during market drawdowns.
And this is just a faceless internet poster here, but, personally I'd be happy to accept 117k for the year or two of a typical down market in return for 143k while the Bull's running (10% swing from our current pension)

NOTE-those are made up, Kronan numbers. No idea what the recommended floor would be if we move forward

Or, you can check out Vanguards Recent blog on Dynamic Spending during retirement

https://vanguardblog.com/2017/09/07/...0217:0201:RET:
Kronan,

You keep mentioning our DB plan getting handed over to the PBGC. If the company isn't profitable, what keeps them from "handing over" this VB A plan to the PBGC?
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Old 11-06-2017, 03:30 AM
  #494  
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Originally Posted by pinseeker View Post
Kronan,

You keep mentioning our DB plan getting handed over to the PBGC. If the company isn't profitable, what keeps them from "handing over" this VB A plan to the PBGC?
Funny you should ask. Those devilish details.......
The PBGC insures DB plans. Hence those very expensive insurance premiums and funding benchmarks that the company used to justify their “line in the sand”.

The VB plan won’t get “handed” over to the PBGC because they don’t insure those. That’s the reason why the company has got to be salivating over what might come of this.
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Old 11-06-2017, 05:00 AM
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Originally Posted by Adlerdriver View Post
Funny you should ask. Those devilish details.......
The PBGC insures DB plans. Hence those very expensive insurance premiums and funding benchmarks that the company used to justify their “line in the sand”.

The VB plan won’t get “handed” over to the PBGC because they don’t insure those. That’s the reason why the company has got to be salivating over what might come of this.
Are you sure that the PBGC doesn't insure them? Everything I have read says that the PBGC does protect these plans. The only benefit of a VB plan over a DB plan with the PBGC is that the VB plan can't be underfunded and therefore isn't subject to PBGC penalty payments.
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Old 11-06-2017, 05:54 AM
  #496  
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VB plan IS insured by PBGC...what makes them "cheaper" is the variability of the Pension.
eg--when stock market drops 20% (or more) Pension payout is reduced. Which reduces the stress on the Pension funds available. Which reduces the impact on funding required by ERISA.

Which makes the Pension more likely to survive. Because frequently, when the stock market goes into the tank corporation revenue is also impacted...and the funding requirements can have a dramatic impact on corporate spending, at a time when they are least affordable due to the diminished revenue stream

Last edited by kronan; 11-06-2017 at 06:09 AM.
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Old 11-06-2017, 06:15 AM
  #497  
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Originally Posted by kronan View Post
VB plan IS insured by PBGC...what makes them "cheaper" is the variability of the Pension.
eg--when stock market drops 20% (or more) Pension payout is reduced. Which reduces the stress on the Pension funds available. Which reduces the impact on funding required by ERISA.

Which makes the Pension more likely to survive. Because frequently, when the stock market goes into the tank corporation revenue is also impacted...and the funding requirements can have a dramatic impact on corporate spending, at a time when they are least affordable due to the diminished revenue stream
So what kept the company from "handing" our plan over the the PBGC in 2008 when the market dropped 34%?
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Old 11-06-2017, 06:23 AM
  #498  
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Default Excellent Information. Please Read.

Totally agree!

Why are we negotiating our pension away?

Why are we negotiating prior to 2021?

What leverage will we have in 2021?

What are the pilots getting in return for alleviating the Company of this Liability?

Why are we assuming the Risks?

Think about it.........


Originally Posted by pwdrhound View Post
There is a lot of misunderstanding among many of our guys with regards to our retirement plan and what exactly we currently have. It's shocking that the union has expanded zero effort at getting some basic information to the crew force to clear up some of the confusion and educate those that simply do not fully understand our retirement benefits and options. In order to evaluate other options that the union wants to cram down our throats, everyone absolutely positively has to have a crystal clear understanding what is at stake before making an educated decision. As past has shown, the one sided Alpa sales job will soon begin so please educate yourselves fully and ask questions....

Here is a simple start....


RETIREMENT 101

A defined benefit plan, most often known as a pension, is a retirement account for which your employer ponies up all the money and promises you a set payout when you retire. A defined contribution plan, like a 401(k) or 403(b), requires you to put in your own money; in our case, our B-Plan, the Company currently contributes 8% in your name.

Your current defined benefit will be $130k per year if you are a $260k/25year pilot at retirement. However, should you elect Survivor Benefit Insurance (SBI) that $130k will be reduced by the cost of the insurance for whichever option you elect. Generally, the cost is predicated on the desired benefit value for your survivor; i.e. 50/75/100% and/or the age differential between you and your elected survivor (there are other factors which could influence your annual payout depending on your election choice)

CURRENT IRS LIMITS
Contributions to a defined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. Actuarial assumptions and computations are required to figure these contributions.
In general, the annual benefit for a participant under a defined benefit plan cannot exceed the lesser of:
1. 100% of the participant's average compensation for his or her highest 3 consecutive calendar years, or
2. $210,000 for 2015 and 2016 ($215,000 for 2017)
The dollar amounts are subject to cost-of-living adjustments in future years.

THEREFORE, THE COMMON MISCONCEPTION THAT OUR A-PLAN CANNOT BE INCREASED DUE TO IRS RESTRICTIONS IS PATENTLY FALSE!

Maximum Dollar Limits
Maximum annual benefit payable by a defined benefit pension plan (Our A-plan)
2017 - $215,000
2016 - $210,000
Annual limit for combined employer - employee contributions to a defined contribution plan (Our B-plan)
2017 - $54,000
2016 - $53,000
Annual contribution limit to an Individual Retirement Account for individuals
2017 - $5,500
2016 - $5,500
Retirement Plan Contribution and Benefit Limits | Pension Rights ..

Section 415 of the Internal Revenue Code (Code) provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made following adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.
Effective January 1, 2017, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $210,000 to $215,000. For a participant who separated from service before January 1, 2017, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2016, by 1.0112.
The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2017 from $53,000 to $54,000...
…The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2017 are as follows:
The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $18,000.
The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $265,000 to $270,000…


ANNUITIES
The 2017 cost of an annuity to replace $130,000 in retirement income is currently $1.3M at age 45 and $2.3M at age 60. This means you must deposit that amount, at that age, with the insurance company of your choice and receive payments at age 65; these amounts do not take into account any survivor benefits!

FEDEX DOES NOT!!!! BUY AN ANNUITY FOR YOU WHEN YOU RETIRE.
IF THEY DID THEY WOULD NOT BE ABLE TO RECAPTURE THE MONEY SPENT FOR THE ANNUITY SHOULD YOU DECEASE BEFORE THE PAID PREMIUM WAS EXHAUSTED.
EXAMPLE: If the company purchased an $130k annuity at a cost of $2.3M for you at age 60 and you expired after only one year, they would have unnecessarily spent $2.17M (assuming no SBI designee, $2.3M-$130k=$2.17M). Therefore, as it stands now FedEx recovers/returns to the general fund, all the remaining monies set aside/designated for you, should you expire prematurely! What does this mean? If a pilot were to decease before exhausting the earmarked funds that the Company has set aside for you, that excess money $2.17M in the example, is put back into the general fund and used to offset future retirement plan funding requirements. Don't worry, if you happen to live to one hundred FedEx would still pay your benefit, it's just that you would have exceeded their actuarial estimate of longevity; you cannot exhaust your benefit in that sense.

INCREASED B-PLAN
The average $260k/25year Pilot has saved approximately $800k-$1.25M in their 401k If your argument is that a higher B-plan contribution in lieu of an A-plan is more secure in your hands, then you would need to accumulate an additional $2.3M in contributions and interest, above and beyond the current 8% B-plan, over the same 25-year period, to equal the $130k benefit you currently have with the existing A-plan. Additionally, you would bear all the risk and fees associated with managing that money, and there would be no PBGC fallback if a catastrophic financial crisis occurred.


October 28, 2015
WASHINGTON - The Pension Benefit Guaranty Corporation announced today that the annual maximum guaranteed benefit for a 65-year-old retiree in a single-employer plan remains at $60,136. FedEx is a single-employer plan.

TO BE ABSOLUTELY CLEAR, FEDEX WOULD HAVE TO CONTRIBUTE AN ADDITIONAL AMOUNT OF CASH TO YOU, THE PILOT, THAT WOULD EQUATE TO YOU HAVING $2.3M MORE IN YOUR B-PLAN THAN YOU CURRENTLY CAN EXPECT TODAY, DURING THAT SAME 25 YEAR PERIOD. ADDITIONALLY, YOU MAKE ALL OF THE INVESTMENT DECISIONS AND ASSUME ALL THE RISKS AND COSTS ASSOCIATED WITH INVESTING IN THE STOCK MARKET! THAT $2.3M DOLLAR AMOUNT IS PREDICATED ON 2017 ANNUITY COSTS, WHAT YOUR ACTUAL COST WILL BE IN 5/10/15/20/25 YEARS WILL PREDICTABLY BE HIGHER AND REQUIRE AN EVEN LARGER CASH CONTRIBUTION FROM THE COMPANY! IT ALSO MEANS THAT THERE WOULD BE NO POSSIBILITY OF FEDEX RECOUPING ANY OF THAT MONEY SHOULD YOU DIE!

****AND THAT WOULD STILL ONLY GET YOU $130,000, EXACTLY WHAT YOU HAVE CURRENTLY! IF YOU WANTED A GREATER RETIREMENT BENEFIT YOU WOULD HAVE TO HAVE THAT MUCH MORE MONEY!****

COMPANY RETIREMENT LIABILITY
Now let's examine the much espoused and bandied about, but clearly misunderstood, $6B-$8B Pilot Retirement Liability that FedEx claims to be burgeoning under, which makes it so impossible for them to increase our A-plan.

First, the $6B-$8B number is an actuarial assumption. Which is, that EVERY pilot is going to earn and receive the maximum retirement benefit possible, based upon their longevity, for 20 years of retirement. This liability begins on a pilots 5 year vesting date(it may be from day one of employment, but that data is not available as it is proprietary) Additionally, we must assume that FedEx makes some actuarial adjustments for pilots who elect survivor benefits, retire early; or those who decease prior to retirement and therefore receive no retirement benefit.(remember, FedEx's obligation should you decease “prior to entering retirement” is limited to only the life insurance benefit that you elect annually, even if you had reached retirement age at your time of death)
What it absolutely does not mean is that this is the actual cost to FedEx annually for Pilot Retirements! Again, $6B-$8B in obligation/liability, but not actual value disbursed to retirees; that number is in the $100M-$160M range per annum, based on best estimates! (1000-1600 retirees and/or survivors each receiving $100k a year)

VARIABLE ANNUITY PENSION PLANS (VAPP) - AKA, the Fedex Alpa pet project
"...One alternative to consider is changing the pension plan so that future accruals are paid in the form of variable annuities. Much like changing to a defined contribution (DC) plan, changing to a variable annuity plan shifts the plan's investment risk for future benefit accruals to the participants. Variable annuity plans have the following advantages over DC plans:
• Participants will still receive benefits for the rest of their lives (they will not outlive their benefit).
• Professional investment management and longevity pooling are expected to lead to larger monthly benefits.
In a variable annuity plan design, the investment risk for future benefit accruals is moved from the plan sponsor to the participants by changing benefits to match the actual investment returns of the trust. In good times, participants share directly in the gains and the pension benefits will increase to at least partially offset inflation. In bad times, participants share directly in the losses and the pension benefits will decrease to match investment returns. However, participants are still provided with lifelong income. Variable annuity retirement benefits are generally larger than the DC retirement benefits provided by the same contribution due to professional investment management and the pooling of longevity experience. Variable annuity plan participants receive lifelong monthly pension benefits that increase their overall financial security. While DC plan participants can purchase annuities at retirement, guaranteeing lifelong income, very few do so, which puts them at risk of outliving their assets. Many of us have focused on the "guaranteed benefits" of DB plans for a long time. It may be time to change our focus to "lifelong" benefits, where the exact dollar amount is not guaranteed, but participants are assured that they will not outlive their benefits and some inflation protection may be provided instead.
What Is a Variable Annuity Plan?
In general, a variable annuity plan is a defined benefit pension plan where benefits change based on the return of the plan's assets. Although they have been around for a long time, variable annuity plans are not common.
Perhaps this design has been less appealing in the past because it does not guarantee that participants' monthly pension benefits will not decrease.
In a variable annuity plan design, the plan establishes a conservative assumed investment return (AIR), or hurdle rate. If the plan's investment returns equal the hurdle rate, the plan functions exactly like a traditional DB plan. However, if the plan's investments earn more or less than the hurdle rate in a plan year, all benefits earned in prior years are adjusted up or down by the difference between the actual investment return and the hurdle rate...” (Quote's taken from Milliman White Paper)

OUR CURRENT A-PLAN/DEFINED BENEFIT PLAN ALREADY GUARANTEES US A LIFELONG BENEFIT WITHOUT ANY RISK OF IT DECREASING.

WHILE THERE IS NO POTENTIAL FOR GAINS, REALIZE THAT ANY UPSIDE IN A VAPP IS DIVIDED BETWEEN ALL ACTIVE RETIREES AT THAT TIME AND ONLY FOR THE AMOUNT IN EXCESS OF THE (AIR)/HURDLE RATE.
EXAMPLE: If we assume 1500 Retirees, then for every $1,000,000 in gains above the (AIR) you would receive an additional $667. This amount could be higher for some and lower for others if the distribution is not an even split among participants, i.e. Those pilots whose baseline retirement was $130k would receive marginally more than a $100k baseline pilot, who would receive more than a $80k baseline pilot, etc. This ratio would be established within the plan rules, it is also unclear whether these distributions would occur monthly, quarterly, semi-annually or annually.
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Old 11-06-2017, 06:40 AM
  #499  
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Our A plan Should have been indexed to the IRS qualified limit in 2006...but it wasn't.

Want to say current IRS qualified limit is 210k, which would equate to a 420k earnings cap.

But it wasn't.
And from a Business perspective, I'd hope we can all agree that a change from a 260 cap to a 420 cap is a pretty big swing. One that FedEx has the money to pay, but certainly no desire to pay.

And, from a Seniority perspective. Changing the cap that much would create a huge incentive for every Senior Pilot to go to 65 in order to benefit, only Governments make pension changes Retroactive.

CD's been pretty excited about what he's been hearing about the VB potential to improve our A plan. I'm looking forward to finally getting a peak behind the curtain.
I don't think it'll be a 100% fix, but even a 75% fix is way better than the 0% fix the company seems set on.
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Old 11-06-2017, 06:42 AM
  #500  
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Originally Posted by pinseeker View Post
So what kept the company from "handing" our plan over the the PBGC in 2008 when the market dropped 34%?
Was the company still making money in 2008?

It's not JUST a market correction that results in a handover.
And it's not JUST a temporary drop in Corporate Revenue that results in a handover.

It's a combination of BOTH
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