DLax85

So “after negotiation” is complete??

Hmmm...

And which #s do you think will be one of the most important?

The new funds assumed rate of return

That won’t be negotiated (like the hurdle rate will), it will be assumed

Based on what?

You will be given blended, smoothed, historical rates of return that seem almost too good to be true.

Dig deep - ask the portfolio allocation (50% equities/50% bonds at Best)

Then verify/cross check Chiron’s assumptions/projections with those of Vanguards or Schwabbs (...KB likes both of them)

I think you’ll find Vanguard’s to currently be 4.8-5.0% for such a balanced fund

With a negotiated “hurdle rate” in the 5-5.5% range, the “upside” from this Variable Benefit Plan just doesn’t impress me

Many seem to focus on the increased PBGC costs as the main reason the current Defined Benefit A Plan has become so expensive

It’s also because the A fund rates of return were far lower the past 10 years in an era of ultra low govt interest rates

This forced much larger contributions by the company

Under the VB plan their contributions will be FIXED.

Meeting or Beating the hurdle rate won’t be their problem

FoxHunter

You have to read this book to start to understand.
Retirement Heist
https://www.amazon.com/Retirement-He.../dp/1591843332

kwri10s

I don't question their smarts, but I do question their decision making capability. KB is a big advocate of owning multiple timeshares. Not particularly relevant to retirement planning, but it gives me a good idea of how that person makes a decision on areas I am more familiar with. I can then extrapolate forward to a more complicated decision (retirement).

I also know personally, that my FDX healthcare expense rose 500% with the latest contract. When I asked KB personally about why I was never informed about that huge change and why they never used that number when they briefed us about the possible healthcare increases? He said there were only a few people affected by the big increases, so it would be unfair to the briefers to highlight really big numbers. They wanted to only highlight the best numbers that affected the majority of the people. So if that's how they did it last time, do you really think that with something this complicated, they are going to brief all the possible bad outcomes? Or maybe just the best case scenarios that affect the majority.

Fly FDX

About halfway through this book now... Good recommendation, should be read by all who work, plan and save for a comfortable retirement... Corporations should not be trusted to act in our best interests. Greed and profits are sometimes more important than our pensions and well-being...

Book is available for free download from your library for those “saving” for retirement!

DLax85

Bumping this thread, and the recommendation to read this book

While it focuses on the reasons and dubious methods companies used to transform their retirement programs, you will quickly see similarities in what is being proposed to FedEx pilots

Allowing FedEx to freeze the current plan, and remove the excess capital funding - then restart with a new plan, funded at just 100%, will be an absolute gift to the company

....especially with the most recent, well above average, gains in the stock market

The company will definitely be “selling high”

And by starting over, we’d be starting by “buying high” as well.

It’s the perfect storm - bad on many levels

...And we are proposing this ourselves???

Check 6

And don't forget the new Corp tax rates. The CO will be flush with cash...Will we ever see any of this?

NotMrNiceGuy

Admittedly, I don’t know the ins and outs of the variable plan. I know the current stability of the present A plan is highly revered. Given that the proposed plan is indeed “variable”, I understand the caution (especially during market downturns). At this point, it seems the primary factor that determines a crew member outlook towards the proposal is stability vs. unknown returns.

Right now, we have a guaranteed $130K (assuming MAX). From the Q&A, the Union would seek a “floor benefit” or “stabilization reserve”.

“A floor benefit allows the benefit to decline with market declines, but not below a pre-determined benefit level.”

“ A stabilization reserve uses investment returns above a pre-determined amount, as well as additional employer contributions, to build a reserve that shores up benefits that would otherwise decline.”

The Union is looking at developing a package that implements these options. If a deal is worked out that presents a new plan with a Baseline of $170K, but now uses the more fiscally efficient Variable plan as opposed to the more expensive $130K PBGC Plan, what are some of the hesitations moving forward with the proposal? Is the present A Plan somehow more reliable (guaranteed)? What stops the Variable Plan from being guaranteed if a stabilization reserve is put into place?

I’m genuinely interested and want to learn about the process. Background before FedEx is civilian (read, no pension) and have one year on property.

FlyHIGHgoFAST

Having 1 year on property and being open to this new plan, may I suggest going back to read the Q&A 3, specifically as it applies to folks with less than 5 years on property. Also, a question was posed about the floor. The answers are vague and not addressing the questions. Everything you mentioned above is contingent upon the union negotiating a "floor" and everything is a big IF. If they negotiate the floor, IF they have a fully funded account to supply pension benefits during the next down turn, if if if....Do yourself a favor and go read about variable pensions on your own and not from someone who is trying to sell it to you. Specifically, read about the pros and cons of them. The risk is too high when times get tough and being new on property will be paying for this for your entire career so few guys can get short term gains with the current retirement plus this variable nonsense at your expense.

DLax85

I’d argue there about 7-8 good threads on this board discussing the many risks with this plan, along with other options we can pursue to improve our total retirement package.

Read thru those. Some will guide you to external sources.

Research broadly. Think critically.

Your (our) retirement depends on it.

pinseeker

From the Q&A, "The benefit accrual is being designed to target the existing $130,000 baseline that the current plan offers, subject to individual decisions related to the time of his or her retirement date. With this in mind, the accumulation of benefits will not vary significantly from the current plan, but will adjust based on market conditions that may allow a benefit to grow against inflation; something the current plan does not offer."

So where did you get the idea that the benefit would be increased. The benefit only increases if the market outperforms that target rate or if you work until the regulated age regardless of YOS.

The VB plan is more fiscally efficient for the company because we assume all of the risk. The plan can't be under funded because there is no set benefit, only a set contribution.

The PBGC payments will be the same as they are now because our plan is fully funded. The risk to the company accuse if they under fund the DB plan and have to pay penalty payments to the PBGC.