DLax85

FXLAX - Thanks for playing. Everything you read on this board, you can believe or not believe. Matter of fact, I guess that's true in life. Precisely why, I spend some of my time doing independent research. I've been at Fedex 14 years, I can't really tell how long you've been around. Looks like you joined APC in Nov, 2017. My guess, our hub turn mtg experiences aren't perfectly aligned. Maybe ask other Fedex pilots if this was a storyline told in the past. But most importantly, lets all be cognizant if we hear it again in the future. Keep flying safely!

In Unity,
DLax

pinseeker

No, the purpose of bankruptcy is not to shed the pension of the workers. If that were presented to a bankruptcy court as a reason for declaring bankruptcy, the court would most likely throw the case out.

Pensions are not just dumped on the PBGC. The funding requirements and penalty payments that the union keeps touting as a reason to switch to the VB plan actually make it less likely that our DB plan would be taken over by the PBGC as a result of bankruptcy.

FastBurner

Absolutely not. Post 2006 Pension Protection Act Requires 100% funding. American Airlines frozen pension from 2011 is not at PBGC and no one will receive a smaller amount primarily due to the 2006 Act. That is the whole point though, the union has many times offered that in a bankruptcy scenario, we would receive less than promised with an automatic transfer to PBGC. That part is not true. Fedex can declare tomorrow and the pension fund is not only solvent, but would become a standard termination. Meaning, PBGC does nothing, fund remains in force, as everyone retires, they get exactly what they are owed.

That also means all members that are under 5 years (not vested) as of the termination, would get nothing. The primary difference in liability discrepancy is that ERISA funding only requires “vested” funding. We are 100%. Fedex has voluntarily added money for past three years to maintain that funding as vesting participants are added.

Hope that helps.

Nightflyer

Wait, so the union is LYING? I'm shocked, SHOCKED, I tell you.

And they have the nerve to wonder why we don't trust them!!!

FXLAX

The reason to seek bankruptcy protection is to shed liabilities (which can include pensions) to become solvent again. So I have a few questions for you guys, if you will indulge. Are you saying there is no scenario where the pension could not be taken over by the PBGC? Are you saying that the worst thing that could happen with our funding at 100% is that the pension is frozen? If so, doesn’t that lower the payment because of the freeze for those without the max FAE or YOS? If the pension can be taken over by the PBGC by a BK judge’s order, wouldn’t the company’s funding obligation end? And if so, doesn’t that require lower payments since there would be no more funding going forward?

pinseeker

It depends on the type of bankruptcy that is being filed for. Also, bankruptcy doesn't always shed liabilities, it can also restructure those liabilities to make it easier for the company to handle them. And some bankruptcies determine the order in which investors/creditors get paid in case of total failure.

I suggest you do your own research rather than relying on anonymous posters to give you information.

As of right now, our DB plan is fully funded.

Currently, FedEx is not in danger of bankruptcy in the near future.

TransWorld

There are only two types of Bankruptcy. Chapter 11 to reorganize and Chapter 7 to go out of business.

Within Chapter 11 there are all sorts of options. Restructure payments, eliminate debt, convert debt to stock, change pensions, change union contracts (pay rates and terms & conditions), get rid of all current stock, and all sorts of other options.

Chapter 7 is divvy up the assets between the creditors. Maybe pay 70 cents on the dollar. Turn off the lights. Say Goodnight Gracie (as George Burns used to say to his wife on the vaudeville stage when she became too long winded.)

FXLAX

My line of questioning is to elicit information from the two of you so as to determine the fidelity of what you write, not to rely on it.

What I’m trying to to determine is if you think there any scenario in which a company can file bankruptcy in order to shed liabilities, including pensions. I’m not saying that FedEx is currently underfunding the pension or whether it’s currently in danger of filing for bankruptcy protection.

The claim some here are making is that the union said the pension is underfunded. I don’t think they have said that. The other claim is that the pension, as currently funded, could not be taken over by the PBGC, or if it’s frozen, either scenario, that the payout would not be lowered, at least for a certain percentage of the vested pilots.

In other words, in order to say that the union is lying is to show that what they say cannot happen, lower pension payments in a bankruptcy regardless of current funding. And even then, I don’t think they are putting a value on the likelihood that that will happen in the next 25 years, only that it is a possible threat. And I also feel they are trying to make a cumulative case in which they outline the different types of threats. And they seem to do it for both sides of the coin so as to let each pilot put their own value judgement on these possible threats as a whole.

FastBurner

Here you go, some union discussion regarding underfunding.

In answer to your question - Yes, the company could enter a form of bankruptcy but not just due to pension payments. Post 2006 - we are now 100% funded, the company has stated they have ample funds. The company could enter bankruptcy due to worldwide recession for many years, high debt load (buying 100 777s outright and no cash left), fill in the blank. The Pension assets are in a trust, untouchable by creditors, and have 103% more cash to pay all obligations. Keep in mind, all those "unvested" participants (under 5 years) get nothing.

1) Union Statement:
Podcast 3And that variable amount depends upon the funding level within the defined benefit plan, and that funding level varies year to year based on congressional mandates and current interest rates in the market. If you look at our current retirement mailing that we get every year that tells us how our retirement plan is doing, there are a couple different numbers on there if you look at it. And the difference between those two numbers has to do with the IRS requirements for funding versus the Pension Benefit Guaranty requirements for funding. One of them will show you 100% funded right now. The other one shows 80% funded. And that difference is very important to us because the Pension Benefit Guaranty variable rates apply to that 80%, which means FedEx still owes a lot of money, both in terms of fully funding the retirement and in terms of those variable rates for the Pension Benefit Guaranty Corporation. If the Company were to go bankrupt, that's when the Pension Benefit Guaranty Corporation would take over the retirement plan and then the Pension Benefit Guaranty limits would apply, which are far lower than our $130,000 a year maximum now.
2020 Annual Report page 77 at investors.fedex.com:
For 2021, we do not anticipate making voluntary contributions to our U.S. Pension Plans. As noted in our discussion of critical accounting estimates, we do not anticipate contributions to our U.S. Pension Plans will be required for the foreseeable future based on our funded status and the fact we have a credit balance related to our cumulative excess voluntary pension contributions over those required that exceeds $3 billion. The credit balance is subtracted from plan assets to determine the minimum funding requirements. Therefore, we could eliminate all required contributions to our principal U.S. Pension Plans for several years if we were to choose to waive part of that credit balance in any given year. Our U.S. Pension Plans have ample funds to meet expected benefit payments.

My Statement:
Discount rates (as averaged over 25 years) and mortality tables affect dollars required. PBGC premiums are based off unfunded "vested" benefits. The company explains all this in the annual reports. The union can't state any more clearly than the above that if the company declared bankruptcy tomorrow, the PBGC would "take over" with a distressed termination and pay significantly lower amounts. Also, PSPP is a defined benefit, with the SAME PBGC funding premiums - so saying the company would alleviate having to pay premiums would be false.

2) Union Statement
Podcast 4
When you talk about all things risk, bankruptcy risks are one of those things that you need to discuss. And so, the risk of the termination of the plan or the plan being frozen during bankruptcy risk is something that is quite real. And they happen during acute or prolonged downturns in the market where the company may not have the ability through either lines of credit or excessive cash or income to fulfill those obligations to the plan. So this could lead to bankruptcy and the company may not survive unless the plan is terminated. Now, that's an extreme case. FedEx has been a good steward of our plan. However, without congressional action, the plan would currently be underfunded.

My Statement: False. SEC documents, DOL/ERISA Documents state otherwise.

But here is what REALLY happens post 2006 PPA - American Airlines DID enter Bankruptcy in 2011 and froze their pension. The pension had 100% funding - meaning PBGC does NOT take over per se. It became a Standard Termination (one of 3 options for PBGC). The assets will fund ALL the promised defined benefit to vested participants without a deduction.

3) Union Statement:
Podcast 6So one other benefit here has to do with the bankruptcy protection. FedEx announced in its recent quarterly earnings report that they are not going to fund the pension this upcoming fiscal year. They wouldn't have that option in the current plan design. In fact, they have to fund this plan design year over year based off of the pilots’ earnings. So what that does is if FedEx started getting into trouble financially and we were approaching, say, a termination or distressed termination in the current plan, FedEx can turn off their contributions there, whereas this plan continues to be funded. And because it's constantly matching its assets and liabilities, you're going into a bankruptcy potentially with a fully funded or nearly fully funded PSPP, unlike the current pension plan, which could be vastly underfunded at that point.
My Statement:
They aren't funding because they don't NEED to as stated MANY times in the Annual/Quarterly Reports (they have voluntarily put $ in as well). The point is driven home that not only is the union saying the current pension is underfunded, they are saying the PSPP would always be funded.

There are many more examples - I picked three to provide a sample of their exact words per your request.

Hope this answers the questions.

Cheers

Nightflyer

So the union is using scare tactics to justify their pancake plan.