embplt32

New the this VB plan, I have been doing some reading. I have spent the better part of my life studying finance on my own and one of the two tenets I live by are this:

1) Anything with annuity in the title or any title with an effort to hide the word annuity is to be avoided. Annuities make a lot of money for people, usually the person who sells it.

ie. The VB plan is also called the variable annuity pension plan, I wonder why it's not called what it is, a cow is a cow not a spotted four legged animal.

2) The more complicated an instrument seems, the more likely you have to work really hard to figure out where you are going to get ripped off. Any guaranteed returns need to be questioned.

I suggest you read this "white paper" as it contains some interesting information about how your actual benefit can decline with market decline during the years that count most, retirement years.

I would rather have fluctuations during my working years and stable during my retirement years. Our pension plan provides that peace of mind, coupled with the ability to grow money in retirement.

Attachment 3408

http://findleydavies.com/Variable_Be...e%20_Paper.pdf

I haven't made up my mind, I am not trying to make up yours, but due diligence on everybody's part is needed.

DLax85

Thanks for reposting this link

The sub-title remains very informative...

THE FUTURE OF RETIREMENT PLANS: VARIABLE BENEFIT PLANS

A NEXT GENERATION RETIREMENT PLAN, MINUS EMPLOYER RISK FACTORS

pwdrhound

Everyone should get educated and have 100% understanding as to all the plans discussed. I am very skeptical of this sudden rush to get this done outside of section 6. What is this sudden rush? The jet is not on fire!!! Something stinks here.....


Here is some more reading everyone MUST consider:

The current education program on VAPP/VDP/VDB does not clearly highlight the fact that in order to proceed with this new plan, our union has to NEGOTIATE TWO VERY IMPORTANT VALUES. The first is the starting funding amount for the new plan(currently FedEx places a $6B-$8B liability valuation on our retirement). The second is the Company's annual contribution to the plan as a percentage of total pilot payroll (whether this payment is annually or contains a COLA adjustment is yet to be disclosed).

Both of these numbers are critical with regard to the success or failure of the proposed plans(VAPP) intended benefit of increasing our A-plan payouts over time, and its viability.

With this understanding, each of us should consider what our agreeing to proceed with investigating this concept actually means. If given the go-ahead, does it give implied consent to negotiate these values without prior pilot input as to what the minimum accepted values are? Or, are we going to get presentations and power-points that express the sentiment that "this is the best we could do"? Remember, we are evaluating whether or not to change our current DB plan to this new concept; if we are starting out behind the power curve, with an underfunded dollar amount and a minimal contribution; what can our realistic expectations of success be? There will be no going back!

Our Union can calculate precisely the following calculations and assumptions, they know the expected Y.O.S.( years of service), to age 60, for each of the 4,702 pilots currently on the property, they also know or can project reasonably, every pilots F.A.E.(final average earnings) to a maximum of $260,000. What the reasonable value as a percentage of payroll for the Company's contribution is anyone's guess, I am not sure what factors would need to be addressed to come up with that number; therefore I have not presented an estimate.

THESE NUMBERS ARE ASSUMPTIONS! FEEL FREE TO ADJUST THEM AS YOU SEE FIT. THEY ARE PRESENTED TO GIVE A CONSERVATIVE ESTIMATE OF THE STARTING FUNDING LEVEL.

ASSUMPTIONS USED:
4702 current pilots
The Average Y.O.S. for each group was used to dampen the overall calculation
The percentage of retirement is 2% X Avg.Y.O.S.
$260,000 is our negotiated F.A.E. maximum
The percentage of pilots is a statistical estimate;
16 year life expectancy(retiring at 60); age 76 for average male, from U.S. Statistics

Y.O.S. / Y.O.S AVG. /% of RET./ 260K F.A.E/ %of PILOTS (#)/ 16 Yr exp./ = VALUE

05-10 07.5 15% X 260,000 X 15% (705) X 16 = 439.92M
10-15 12.5 25% X 260,000 X 15% (705) X 16 = 733.20M
15-20 17.5 35% X 260,000 X 30% (1410) X 16 = 2,054.42M
20-25 22.5 45% X 260,000 X 40% (1881) X 16 = 3,521.23M

The total value comes to $6,748.77M or $6.75B. However this number only represents 100% of the CURRENT LIABILITY with the DJIA at the all time approx. high of 23,500 points, therefore a reasonable 20% margin/buffer (to account for market correction) would raise that number to $8.10B as the minimum funding starting point (this dollar amount represents what FedEx currently uses as their liability)

Before the discussion goes down the road of discrediting these numbers, let's not lose sight of the underlying message:
REGARDLESS OF WHAT THE COMPLETELY PRECISE AND ACCURATE NUMBERS ARE, OUR UNION MUST PROVIDE US WITH THIS DATA SO THAT YOU CAN MAKE AN INFORMED DECISION, AND THEN UTILIZE YOUR EXPECTATIONS AS THE "BARE MINIMUM ACCEPTABLE" WHEN CONTEMPLATING FUTURE NEGOTIATIONS!
"THE BEST WE COULD DO" IS NOT ACCEPTABLE WITH REGARD TO YOUR PENSION!

TonyC

I caught the last hour of last night's hub turn meeting. I'm curious to know if anybody else did, and what their impression is.

I did not hear a good reason to abandon our current Defined Benefit Plan.

I heard that the PBGC would treat a Variable Benefit Plan as a defined benefit plan, but I did not hear how they could guarantee an eternally positive stock market. They say the word risk, but they talk like they don't believe there is any risk, unless they're trying to convince us why The Company would be interested in this -- to reduce THEIR risk. Does the risk magically disappear when it becomes ours?

I was most troubled by the response to, "We want to hear details." It would take too long, we can't just dump that all on you now, we'll be educating you over the next several months, and then conducting phone polls to determine if you're educated enough, and then maybe educating you more.


Why don't you let us see the presentation you gave The Company?

Umm, ugh, stammer, uhh, ...


"Trust me ... "

Yes, that's a quote.






.

pinseeker

That's the same answer I got from my block rep when I e-mailed questions to my LEC. My block rep was the only one who answered, so I guess he was speaking for the whole LEC.

PeterGriffin

This is starting to sound more and more like another, "we need to pass it to see what's in it" scenario...

Sunny1

I'm really scratching my head - I keep reading these things from the union about educating us, but everything I see seems to me anyways to be very general, and have no real specifics like numbers and costs, and how this will benefit the pilot group in such a way that it's worth it to us to give up what we have. I want to see real numbers. Why can't we see the presentation given to the company? I hear the word 'Transparency' used quite a bit, so please be transparent and show us what exactly was presented.

'It would take too long' to give us the details ... Really??? Are we under some timeline or deadline that this has to be done by? Why the sense of urgency? That in itself is alarming to me that there appears to be a rush to get this done.

'Trust me' - Sure, I'd like to trust the members who are working on this, and that they are working on something that could be a great thing. However, I'd kind of like to 'Verify' that to be the case.

I can't say 'Yes' or 'No' to this because I have no idea what the details are. I will say this much though - I have a bad feeling about this whole thing!

Thanks for the update Tony. I was curious what was said at the meeting.

DLax85

Not sure I follow all your math here, but you are just focusing on the starting amount. (Which is a great question!!)

But, what is the planned “hurdle rate”?

This number is HIGHLY CRITICAL!

Any earned benefit only increases when the funds total return is greater than the hurdle rate

And of course decreases when the total return is less

Don’t just look at the equities market because that only makes up about 40% of the current portfolio

Think “balanced fund” with much more muted returns in good years, and hopefully more muted losses in bad years.

However, please realize that any positive return which is less than the hurdle rate will still result in a decrease in benefits

I keep hearing the word COLA (Cost of Living Adjustment) thrown around.

This isn’t some Annual guaranteed upward (or zero) adjustment like social security or a military or state govt pension.

Inflation can occur (2-3%?) and the fund can still fail to meet the hurdle rate. The benefit would drop.

Let’s lose the word COLA and come up with another term that reflects the true risk we will be assuming.

The devil is always in the details!!

DLax85

The union claims to now know how FedEx currently computes our retirement funding. They’ve paid experts to study, model and replicate it.

Did anyone ask any of three simple questions:

What’s the current avg age when a FedEx pilot retires?

What’s the average years of service upon retirement?

What’s the average age of death of a FedEx pilot?

(The company, and presumably even the union, has had this data for years)

Of course, I’d much rather see an actual distribution/histogram of this data then just a simple mean

These are just factual numbers. Not proprietary values somehow needed for negotiations

DLax85

...with that said, why are we asked our current weight when we update VIPS with our FAA Physical dates??

Who utilizes that data?