Check6Viper

I assumed that the Pension Plan's assets quoted in that paragraph were referring to the "Total Plan Assets" in the table above. If you subtract the Funding standard carryover Balance ($3.47B) you have Net plan assets of $22.40B.
Assets - $22.40B. Libailities $28.46B.
That would yield 79%.

Anyway, I'm not smart enough on this stuff to comment on the actuarial vs fair market values. I'm not sure how relevant the asset differences in 2020 actually are, since it's comparable to last year's values.

The one question I would like answered is why there is such a massive difference in the pension plan's liabilities between the 2019 actuarial value ($19.66B) and the 2020 market value ($28.47B). I don't understand how "smoothing" results in a difference of 50%, as the stock market's value between June 1 2019 and June 1 2020 were within 10% of each other.

DLax85

Great question, and while I do have a significant background in modeling and forecasting, my detailed accounting knowledge is not as deep. Given that, I don't think you can mix values from the "Fair Market Value" and the "Actuarial Values" because those values are calculated much differently.

Additionally, it is confusing that one method is dated June 1, 2019.....and the other is 364 days later - May 31, 2020

I too looked at the value of the S&P500 on those two dates, and noticed they were very similar. However, lets remember the asset allocation during this plan year was only 32% stocks. Thus, 68% of the assets were invested in instruments that don't reflect that index.

By diving into the details of these Annual Funding Notices, and other Fedex Form 5500s, it's clear to me that the asset allocation is rightfully becoming more conservative (35-45% Stocks / 55-65% Bonds + Other Investments).

The 50% stock/50% bond allocation used in the modeler, along with the 5% hurdle rate, are both inappropriate LOOKING FORWARD.

In Unity,
DLax

busdriver12

I think I need to drink less beer before reading these posts.

Check6Viper

Again though, ignore the assets for a second. Why is there such a discrepancy between the liabilities in 2019 and 2020?

DLax85

Check6Viper -

I just reviewed the past 10 Annual Funding Notices - Plan Years 2010 thru 2012

I can't tell you why, but this rather large discrepancy between FTAP Plan Liabilities and Market Value Plan Liabilities exist every year, except 2017.

The Market Value Plan Liabilities are significantly higher, ranging from 23.3% to 56.6% larger. 37.6% larger on average.

Thus, I don't think what we're seeing in the most most recent Annual Funding Notices is an anomaly, rather it's a function of the different accounting methods - Actuarial vs Market Value. Gonna need to find a CPA/Actuary to explain it though.

I'm confident the published FTAP percentages meet PBGC legal requirements and are legit.

In Unity,
DLax

FastBurner

These calculations are complex - agree that FTAP is what we care about.

The differences between FTAP and market values should not concern us. The FTAP is the main concern. Briefly, any future pension benefit obligation uses a discount rate (future value of 1.00 today) applied to determine funding status. With the decreasing risk free rates (government bonds) and corporate bonds (used by actuarials), the ability to garner returns sufficient to meet future obligations decreases. Only three things correct this - 1) Make more in returns (via higher stock percent or a more aggressive mix), 2) Increase contributions (which though not required, FedEx has been doing voluntarily probably due to decreased discount rate as annotated in their annual reports), and 3) lower future benefits (unable due to CBA for us, but could for other non-CBA members). The last page also shows that using a 25 year interest rate formula - we are not underfunded, but the 2 yr shows an underfunding and a required contribution. This may also account for why FedEx has been voluntarily contributing year to year.

The FTAP is what pensions are measured against. Also keep in mind, this only includes those with VESTED benefits - but the Future "liabilities" would include those that will accrue benefits. Think of those of us that have been hired in last 5 years - they (me) are not included in FTAP because we have not met the minimum requirements. However, after year 5, I would have a "future" amount allocated - this would be part of the Pension Benefit Obligation.

The Actuaries smooth the FTAP to disassociate the market value of a stock/bond in today's prices (due to volatility). Which makes sense, because companies aren't able to contribute (if value declines) day to day to meet funding requirement ratios, or allow a company to decrease contributions (if value increases). The smoothing process accounts for some average price.

The market value is a liquidation of positions as of that date.

Hope that helps - somewhat... The big picture is that based on law, SEC reporting, and Dept of Labor documents (5500), FedEX has a fully-funded defined benefit.

DLax85

i wholeheartedly agree - and was the reason I started this thread to begin with

The narrative that our current A plan is underfunded, at risk, and that we MUST change to a Variable Benefit Plan is simply not true

When our union representatives allude to this narrative they lose credibility

Research Broadly, Think Critically, Demand Transparency

In Unity,
DLax

FXLAX

Are you referring to the bankruptcy scenario where the pension is taken over by the PBGC? I don’t remember them saying it was underfunded. Can you point me to a quote of when/where they said that?

Noworkallplay

What are you talking about? As FXLAX said show us when that was stated in any of the material. Once again you are stating lies and deceitful rhetoric. You are doing this simply to shoot down any plan that you personally don’t want instead of talking facts. Shameful

DLax85

FXLAX & NoWorkAllPlay

Please note when this thread was started - Dec 22, 2017. Please read the first post.

Not sure how long you’ve been at FedEx, but if you don’t have knowledge that our union representatives made claims that our pension was potentially underfunded, and thereby possibly at risk, then you haven’t been tuned into this issue and one of the main arguments at its genesis.

You didn’t attend the hub turn meetings where union reps explicitly stated this.

As to not presenting facts - I’ll let the general population decide if my long, boring, data filled posts from verifiable sources outside of our MEC are factual.....with my analysis & opinion provided too, of course

Research Broadly, Think Critically, Demand Transparency

In Unity,
DLax

p.s. If you too think our A fund Is adequately funded, and not at risk, that’s great!! We are in violent agreement. That also means the Variable Benefit Plan does not solve a problem that doesn’t exist.