New Video-Every $ Earned & Yr Worked Matters?
12-19-2017, 03:56 AM
#1
Gets Weekends Off
Thread Starter
Joined APC: Jul 2007
Position: Gear Monkey
Posts: 3,191
New Video-Every $ Earned & Yr Worked Matters?
Every Dollar Earned and Year Worked Matters......
What a title - what does it mean?
The video seemed clear the Variable Plan formula is no longer:
2% x YOS (25 max) x High 5 FAE ($260K max)
It will clearly be:
Z% x YOS (unlimited) x ???? ($??? Max)
Anyone want to guess the value of Z...or the earnings limit?
The unlimited YOS touted in the video seems like new information to me.
I’m confused, has that already been negotiated?
Really, no limit? None???
The 25 year old new hire can earn variable plan retirement credit for 40 years?
I’m guessing the new formula won’t work at all like the current formula (which is only dependent on your High 5 FAE)
I’m guessing it will be based on your “total career average earnings” - years 1 thru unlimited.
I’m sure we can all see how the math works out there.
(....Quick, resubmit your Standing Bid now for immediate upgrade!)
If the company is basing their known contribution on my known earnings every year that seems eerily familiar to a Defined Contribution/B Plan
Higher retirement? ...For everyone?? ...Really??
If you haven’t maxed the current retirement now, you need to be prepared to work harder and longer to get it
I hope I’m wrong - I guess I’ll have to wait for the sequel to come out
What a title - what does it mean?
The video seemed clear the Variable Plan formula is no longer:
2% x YOS (25 max) x High 5 FAE ($260K max)
It will clearly be:
Z% x YOS (unlimited) x ???? ($??? Max)
Anyone want to guess the value of Z...or the earnings limit?
The unlimited YOS touted in the video seems like new information to me.
I’m confused, has that already been negotiated?
Really, no limit? None???
The 25 year old new hire can earn variable plan retirement credit for 40 years?
I’m guessing the new formula won’t work at all like the current formula (which is only dependent on your High 5 FAE)
I’m guessing it will be based on your “total career average earnings” - years 1 thru unlimited.
I’m sure we can all see how the math works out there.
(....Quick, resubmit your Standing Bid now for immediate upgrade!)
If the company is basing their known contribution on my known earnings every year that seems eerily familiar to a Defined Contribution/B Plan
Higher retirement? ...For everyone?? ...Really??
If you haven’t maxed the current retirement now, you need to be prepared to work harder and longer to get it
I hope I’m wrong - I guess I’ll have to wait for the sequel to come out
Last edited by DLax85; 12-19-2017 at 04:22 AM.
12-19-2017, 11:54 AM
#4
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Thread Starter
Joined APC: Jul 2007
Position: Gear Monkey
Posts: 3,191
Watched again - only pilot demographic they specifically refer to is the 30 year pilot who makes $400K
Hmmm
While the title says “Every $ Earned Matters”, later in the script it states the new Variable Benefit will be based on “more of your salary”
Hmmm, again
And of course in this new plan, the MEC will be “asking for a seat at the table” to ensure the new plan is “fully transparent”
Is that “fully transparent” principle being applied by our unions retirement and communications staff now?
....Pension freeze/restart effects, full market risks, other possible A plan improvement options, other possible B plan improvement options
While the union can argue none of that has been precisely negotiated yet, they must have developed “bounding models” which provide realistic insight on what approximate values of the hurdle rate, the cap rate, and the stabilization fund, will make a Variable Plan truly advantageous.
And of course, FedEx actuaries and investment analysts already run a similar analysis because they are currently responsible for the equivalent of a stabilization fund. (...that $130K DB is currently garunteed!)
I suspect the specific amount a pilot earns every year will now matter.
In future communications/modeling I suspect some rosey investment return assumptions will be utilized, even though this video implies the investment strategy will be even more conservative
Will the next video come with more to digest than just hub turn popcorn?
Hmmm
While the title says “Every $ Earned Matters”, later in the script it states the new Variable Benefit will be based on “more of your salary”
Hmmm, again
And of course in this new plan, the MEC will be “asking for a seat at the table” to ensure the new plan is “fully transparent”
Is that “fully transparent” principle being applied by our unions retirement and communications staff now?
....Pension freeze/restart effects, full market risks, other possible A plan improvement options, other possible B plan improvement options
While the union can argue none of that has been precisely negotiated yet, they must have developed “bounding models” which provide realistic insight on what approximate values of the hurdle rate, the cap rate, and the stabilization fund, will make a Variable Plan truly advantageous.
And of course, FedEx actuaries and investment analysts already run a similar analysis because they are currently responsible for the equivalent of a stabilization fund. (...that $130K DB is currently garunteed!)
I suspect the specific amount a pilot earns every year will now matter.
In future communications/modeling I suspect some rosey investment return assumptions will be utilized, even though this video implies the investment strategy will be even more conservative
Will the next video come with more to digest than just hub turn popcorn?
12-19-2017, 12:28 PM
#5
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Joined APC: Aug 2006
Posts: 1,820
As far as I can tell, their idea of improving retirement involves encouraging pilots to fly as much as they can until the regulated age.
With that as a concept, pilots will be tripping over themselves to fly draft, bid and protect carryover, and sell back as much vacation and sick as they can. At least the Wolfpack will make out.
Maybe that is how they guarantee a floor. Guys will work themselves so much that once they reach the regulated age, their life expectancy will be under 70.
Instead of getting better compensation for the work we do, the union seems set on helping the company squeeze out every last drop of blood they can.
With that as a concept, pilots will be tripping over themselves to fly draft, bid and protect carryover, and sell back as much vacation and sick as they can. At least the Wolfpack will make out.
Maybe that is how they guarantee a floor. Guys will work themselves so much that once they reach the regulated age, their life expectancy will be under 70.
Instead of getting better compensation for the work we do, the union seems set on helping the company squeeze out every last drop of blood they can.
12-19-2017, 12:50 PM
#6
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Joined APC: Aug 2005
Position: Retired
Posts: 980
ALL ARE THE SAME, JUST THE NAMES ARE DIFFERENT!
“Deloitte & Touche, the giant accounting firm, made a big miscalculation when it tried to switch to a cash-balance plan in 1998: The finance guys apparently forgot that a large number of the firm’s employees were older, experienced actuaries and accountants, who took a professional interest, as well as a personal one, in the plan’s novel design. They were horrified when they connected the dots and saw that their pensions would go over a cliff. They went ballistic, and the firm backtracked, allowing all who were already on the staff when the cash-balance plan was adopted to stick with the old benefit if they wished.*
IBM also underestimated the über-nerds on its staff, though it’s not hard to understand why the company was so complacent: It had cut pensions several times in the 1990s, and no one had noticed. Traditionally, it provided 1.5 percent of pay for each year of service, which resulted in a pension that replaced roughly one-third to almost one-half of a person’s salary in retirement. The calculation was simple: years of service times average pay in the final few years times.015. For example: If someone worked thirty years, and his
average pay in the final years was $50,000, the pension would be worth $22,500 a year in retirement ($50,000 x 30 x.015).
Reducing any of these factors would produce a smaller pension. In the early 1990s, IBM reduced all three. In 1991, it capped the number of years of service that got taken into account when calculating pensions, limiting it to thirty years. This meant that if people worked longer than that, their pensions wouldn’t grow. Next, it lowered the multiplier from 1.5 percent to 1.35 percent, again reducing the pensions. Finally, it reduced the salary component; instead of basing the pension on the average salary an employee earned in the final five years of service, it began to use an average based on the entire time of service, including the early years when pay was low.
These early cuts were like gateway drugs: The first one produced a mild high; the next two were more potent; then IBM moved on to the equivalent of heroin: the “pension equity plan.” The very name was deceptive, like “low-fat” and “organic.” “Equity” suggested fairness. More than that, the pension equity plan looked as though it favored older workers.
At[…]”
Excerpt From
Retirement Heist
Ellen E. Schultz
https://itunes.apple.com/us/book/ret...81793549?mt=11
This material may be protected by copyright.
“Deloitte & Touche, the giant accounting firm, made a big miscalculation when it tried to switch to a cash-balance plan in 1998: The finance guys apparently forgot that a large number of the firm’s employees were older, experienced actuaries and accountants, who took a professional interest, as well as a personal one, in the plan’s novel design. They were horrified when they connected the dots and saw that their pensions would go over a cliff. They went ballistic, and the firm backtracked, allowing all who were already on the staff when the cash-balance plan was adopted to stick with the old benefit if they wished.*
IBM also underestimated the über-nerds on its staff, though it’s not hard to understand why the company was so complacent: It had cut pensions several times in the 1990s, and no one had noticed. Traditionally, it provided 1.5 percent of pay for each year of service, which resulted in a pension that replaced roughly one-third to almost one-half of a person’s salary in retirement. The calculation was simple: years of service times average pay in the final few years times.015. For example: If someone worked thirty years, and his
average pay in the final years was $50,000, the pension would be worth $22,500 a year in retirement ($50,000 x 30 x.015).
Reducing any of these factors would produce a smaller pension. In the early 1990s, IBM reduced all three. In 1991, it capped the number of years of service that got taken into account when calculating pensions, limiting it to thirty years. This meant that if people worked longer than that, their pensions wouldn’t grow. Next, it lowered the multiplier from 1.5 percent to 1.35 percent, again reducing the pensions. Finally, it reduced the salary component; instead of basing the pension on the average salary an employee earned in the final five years of service, it began to use an average based on the entire time of service, including the early years when pay was low.
These early cuts were like gateway drugs: The first one produced a mild high; the next two were more potent; then IBM moved on to the equivalent of heroin: the “pension equity plan.” The very name was deceptive, like “low-fat” and “organic.” “Equity” suggested fairness. More than that, the pension equity plan looked as though it favored older workers.
At[…]”
Excerpt From
Retirement Heist
Ellen E. Schultz
https://itunes.apple.com/us/book/ret...81793549?mt=11
This material may be protected by copyright.
12-19-2017, 05:46 PM
#8
Gets Weekends Off
Joined APC: Mar 2017
Posts: 100
Originally Posted by FoxHunter
ALL ARE THE SAME, JUST THE NAMES ARE DIFFERENT!
“Deloitte & Touche, the giant accounting firm, made a big miscalculation when it tried to switch to a cash-balance plan in 1998: The finance guys apparently forgot that a large number of the firm’s employees were older, experienced actuaries and accountants, who took a professional interest, as well as a personal one, in the plan’s novel design. They were horrified when they connected the dots and saw that their pensions would go over a cliff. They went ballistic, and the firm backtracked, allowing all who were already on the staff when the cash-balance plan was adopted to stick with the old benefit if they wished.*
IBM also underestimated the über-nerds on its staff, though it’s not hard to understand why the company was so complacent: It had cut pensions several times in the 1990s, and no one had noticed. Traditionally, it provided 1.5 percent of pay for each year of service, which resulted in a pension that replaced roughly one-third to almost one-half of a person’s salary in retirement. The calculation was simple: years of service times average pay in the final few years times.015. For example: If someone worked thirty years, and his
average pay in the final years was $50,000, the pension would be worth $22,500 a year in retirement ($50,000 x 30 x.015).
Reducing any of these factors would produce a smaller pension. In the early 1990s, IBM reduced all three. In 1991, it capped the number of years of service that got taken into account when calculating pensions, limiting it to thirty years. This meant that if people worked longer than that, their pensions wouldn’t grow. Next, it lowered the multiplier from 1.5 percent to 1.35 percent, again reducing the pensions. Finally, it reduced the salary component; instead of basing the pension on the average salary an employee earned in the final five years of service, it began to use an average based on the entire time of service, including the early years when pay was low.
These early cuts were like gateway drugs: The first one produced a mild high; the next two were more potent; then IBM moved on to the equivalent of heroin: the “pension equity plan.” The very name was deceptive, like “low-fat” and “organic.” “Equity” suggested fairness. More than that, the pension equity plan looked as though it favored older workers.
At[…]”
Excerpt From
Retirement Heist
Ellen E. Schultz
https://itunes.apple.com/us/book/ret...81793549?mt=11
This material may be protected by copyright.
“Deloitte & Touche, the giant accounting firm, made a big miscalculation when it tried to switch to a cash-balance plan in 1998: The finance guys apparently forgot that a large number of the firm’s employees were older, experienced actuaries and accountants, who took a professional interest, as well as a personal one, in the plan’s novel design. They were horrified when they connected the dots and saw that their pensions would go over a cliff. They went ballistic, and the firm backtracked, allowing all who were already on the staff when the cash-balance plan was adopted to stick with the old benefit if they wished.*
IBM also underestimated the über-nerds on its staff, though it’s not hard to understand why the company was so complacent: It had cut pensions several times in the 1990s, and no one had noticed. Traditionally, it provided 1.5 percent of pay for each year of service, which resulted in a pension that replaced roughly one-third to almost one-half of a person’s salary in retirement. The calculation was simple: years of service times average pay in the final few years times.015. For example: If someone worked thirty years, and his
average pay in the final years was $50,000, the pension would be worth $22,500 a year in retirement ($50,000 x 30 x.015).
Reducing any of these factors would produce a smaller pension. In the early 1990s, IBM reduced all three. In 1991, it capped the number of years of service that got taken into account when calculating pensions, limiting it to thirty years. This meant that if people worked longer than that, their pensions wouldn’t grow. Next, it lowered the multiplier from 1.5 percent to 1.35 percent, again reducing the pensions. Finally, it reduced the salary component; instead of basing the pension on the average salary an employee earned in the final five years of service, it began to use an average based on the entire time of service, including the early years when pay was low.
These early cuts were like gateway drugs: The first one produced a mild high; the next two were more potent; then IBM moved on to the equivalent of heroin: the “pension equity plan.” The very name was deceptive, like “low-fat” and “organic.” “Equity” suggested fairness. More than that, the pension equity plan looked as though it favored older workers.
At[…]”
Excerpt From
Retirement Heist
Ellen E. Schultz
https://itunes.apple.com/us/book/ret...81793549?mt=11
This material may be protected by copyright.
If the MEC has their way, I wonder how Volume II of this book will read in the future? Maybe something like:
“In 20xx, FedEx Express, the giant express shipping company, made out like bandits when their pilot group, as represented by the Airline Pilots Association, voluntarily froze their company provided pension benefit. This benefit provided the average pilot $130,000 a year for life after a 25 year career. In exchange for their pension, the pilots accepted a new retirement system called a "Variable Benefit Pension". A pension, in that it also provides a yearly benefit for life to the retiree, this new pension plan placed all investment risk on the pilot themselves while FedEx benefited from known, steady contribution requirements every year with no additional responsibility for plan performance. FedEx is expected to save billions of dollars over time, as they no longer bear any responsibility to provide a guaranteed benefit. This move on the part of the FedEx pilot employee group may go down as one of the worst financial decisions made by a labor group in modern history.
12-19-2017, 06:59 PM
#9
Gets Weekends Off
Thread Starter
Joined APC: Jul 2007
Position: Gear Monkey
Posts: 3,191
Originally Posted by mempurpleflyer
If the MEC has their way, I wonder how Volume II of this book will read in the future? Maybe something like:
“In 20xx, FedEx Express, the giant express shipping company, made out like bandits when their pilot group, as represented by the Airline Pilots Association, voluntarily froze their company provided pension benefit. This benefit provided the average pilot $130,000 a year for life after a 25 year career. In exchange for their pension, the pilots accepted a new retirement system called a "Variable Benefit Pension". A pension, in that it also provides a yearly benefit for life to the retiree, this new pension plan placed all investment risk on the pilot themselves while FedEx benefited from known, steady contribution requirements every year with no additional responsibility for plan performance. FedEx is expected to save billions of dollars over time, as they no longer bear any responsibility to provide a guaranteed benefit. This move on the part of the FedEx pilot employee group may go down as one of the worst financial decisions made by a labor group in modern history.
“In 20xx, FedEx Express, the giant express shipping company, made out like bandits when their pilot group, as represented by the Airline Pilots Association, voluntarily froze their company provided pension benefit. This benefit provided the average pilot $130,000 a year for life after a 25 year career. In exchange for their pension, the pilots accepted a new retirement system called a "Variable Benefit Pension". A pension, in that it also provides a yearly benefit for life to the retiree, this new pension plan placed all investment risk on the pilot themselves while FedEx benefited from known, steady contribution requirements every year with no additional responsibility for plan performance. FedEx is expected to save billions of dollars over time, as they no longer bear any responsibility to provide a guaranteed benefit. This move on the part of the FedEx pilot employee group may go down as one of the worst financial decisions made by a labor group in modern history.
Let’s check the current funding status of our current DB Plan on Jan 1, 2018
I think it will be quite fat given the stock market performance in 2017.
What happens to any excess funding when a DB Plan is frozen? (...read the book to find out)
Moving from “renter” to “home buyer” can be a smart move given it’s a “buyers market” and home prices have room to go higher
But purchasing a home in a “sellers market” can end up being quite expensive.
Freezing & Restarting Benefit plans can have many nuanced risks that don’t have anything to do with the benefit formula
Timing is a critical component when taking on investment responsibility & risk
(....read the book!)
12-19-2017, 07:16 PM
#10
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Joined APC: May 2006
Posts: 2,889
I've stayed out of most of the angst-fest on the retirement discussion, hoping to wait and see some ideas in print before making a yes/no decision.
The "pilots will kill themselves to max out every paycheck" idea was mentioned by our HKG block rep in a discussion. He said one idea is a cap on total number of hours that are pensionable. Where will that line be? Probably north of BLG, but south of what the group determines as "reasonable".
Second--this program if it goes will benefit the younger pilot group tremendously. They will remove the inflation reducing 260k limit and be able to ride the cost of living slope upwards instead of losing 2-3% a year like we are doing now. They will also see their 25+ year career (for any hired under 40....) get some additional benefit. The youngest pilots here seem to have the most to gain albeit with some market risk.
In my 50s, I'm a "tweener". I won't make a fortune off even a very lucrative new plan, nor will I lose out tremendously if it is a dud because of my already acquired A plan benefit. My career here was going to be 22 years, but now could go to 27 with the 65 retirement. Two extra years of improved benefits probably won't be enough to make me want to extend my retirement 1 day past my "1 flight of bad catering" exit point. But there are others at both ends of the spectrum that could potentially gain a lot of benefit from a different plan.
Here's what I haven't heard anyone discuss. If the world economy fell into an abyss, and thus the variable benefit plan was pressured--what do you think would happen to our current A plan if we did nothing? Would 3-5 down years simply be ignored by the bean counters, or would they then seek to reduce or terminate the plan due to financial duress? Everyone points to the fact the new plan has some risk. The reality is our current plan does as well. With our stock almost tripling since 2008, its all rainbows and unicorns right now. But if the Great Recession hadn't ebbed, and it FedEx had furloughed, what do you think would have happened if the company had told a judge "we can save some jobs if we can just freeze/reduce/eliminate this pesky A plan burden?..."
Personally, I don't want to risk my A plan benefit UNLESS the reward is high enough to offset that risk. I have a number in mind--each of us probably does. I'll wait to see if any plan developed meets those expectations. If it doesn't...thanks...no...I'll pass. If it does, and I am looking at a serious boost in benefits for my retirement years, I'll certainly consider taking on the extra risk. But ignoring the fact our plan's real benefit is shrinking is foolhardy. The 2006 Pension reform act was build to discourage future defined benefit plans, not to protect pensioners. I'm glad the MEC is looking at options. The company is STILL on the hook to fund the benefit under the new plan, but the amount they have to contribute is fixed and not variable. The plan will still be managed (as it is now) by a group of third party professionals. The difference is we have the the chance to capture some of the upside in the market instead of being capped at a static number. The deciding factor IMHO will come down to three factors. First--the amount of upside per pilot we can expect if we accept a change. Second--the amount of stabilization fund (and sourcing for same) that will ensure we never go below what we can already expect with our (inflation shrunk) A plan. And finally--will the company even consider such an option. Right now, everyone is concerned about how much the company will make by allowing the variable plan into place. What I think some of you miss is every year that goes by, the 260k value is reduced 3-4%, so the company's "real" liability is dropping in cost to them every year. If they just sit tight--we continue to take a haircut every year. They may just decide to let our pension sit and wither.
If the company won't allow improvements to the A plan, then to me a "cash over the cap" B plan improvement will be the only way to protect the future. Once you start talking about "cash over the cap", then the academic argument becomes "why not just give me higher pay and let ME invest it NOW as I see fit..." Many of us hit the 415 (c) limits now, and there is always pressure in DC to lower same. A bigger B plan is really just flat pay raise to many of our pilots, and the tax bite will be a major concern.
The "pilots will kill themselves to max out every paycheck" idea was mentioned by our HKG block rep in a discussion. He said one idea is a cap on total number of hours that are pensionable. Where will that line be? Probably north of BLG, but south of what the group determines as "reasonable".
Second--this program if it goes will benefit the younger pilot group tremendously. They will remove the inflation reducing 260k limit and be able to ride the cost of living slope upwards instead of losing 2-3% a year like we are doing now. They will also see their 25+ year career (for any hired under 40....) get some additional benefit. The youngest pilots here seem to have the most to gain albeit with some market risk.
In my 50s, I'm a "tweener". I won't make a fortune off even a very lucrative new plan, nor will I lose out tremendously if it is a dud because of my already acquired A plan benefit. My career here was going to be 22 years, but now could go to 27 with the 65 retirement. Two extra years of improved benefits probably won't be enough to make me want to extend my retirement 1 day past my "1 flight of bad catering" exit point. But there are others at both ends of the spectrum that could potentially gain a lot of benefit from a different plan.
Here's what I haven't heard anyone discuss. If the world economy fell into an abyss, and thus the variable benefit plan was pressured--what do you think would happen to our current A plan if we did nothing? Would 3-5 down years simply be ignored by the bean counters, or would they then seek to reduce or terminate the plan due to financial duress? Everyone points to the fact the new plan has some risk. The reality is our current plan does as well. With our stock almost tripling since 2008, its all rainbows and unicorns right now. But if the Great Recession hadn't ebbed, and it FedEx had furloughed, what do you think would have happened if the company had told a judge "we can save some jobs if we can just freeze/reduce/eliminate this pesky A plan burden?..."
Personally, I don't want to risk my A plan benefit UNLESS the reward is high enough to offset that risk. I have a number in mind--each of us probably does. I'll wait to see if any plan developed meets those expectations. If it doesn't...thanks...no...I'll pass. If it does, and I am looking at a serious boost in benefits for my retirement years, I'll certainly consider taking on the extra risk. But ignoring the fact our plan's real benefit is shrinking is foolhardy. The 2006 Pension reform act was build to discourage future defined benefit plans, not to protect pensioners. I'm glad the MEC is looking at options. The company is STILL on the hook to fund the benefit under the new plan, but the amount they have to contribute is fixed and not variable. The plan will still be managed (as it is now) by a group of third party professionals. The difference is we have the the chance to capture some of the upside in the market instead of being capped at a static number. The deciding factor IMHO will come down to three factors. First--the amount of upside per pilot we can expect if we accept a change. Second--the amount of stabilization fund (and sourcing for same) that will ensure we never go below what we can already expect with our (inflation shrunk) A plan. And finally--will the company even consider such an option. Right now, everyone is concerned about how much the company will make by allowing the variable plan into place. What I think some of you miss is every year that goes by, the 260k value is reduced 3-4%, so the company's "real" liability is dropping in cost to them every year. If they just sit tight--we continue to take a haircut every year. They may just decide to let our pension sit and wither.
If the company won't allow improvements to the A plan, then to me a "cash over the cap" B plan improvement will be the only way to protect the future. Once you start talking about "cash over the cap", then the academic argument becomes "why not just give me higher pay and let ME invest it NOW as I see fit..." Many of us hit the 415 (c) limits now, and there is always pressure in DC to lower same. A bigger B plan is really just flat pay raise to many of our pilots, and the tax bite will be a major concern.
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