How's our A Fund Doing? 10 year History
 

Much talk about our current A fund being too expensive and the risks of future default.

Let's take a look back at the numbers published by Fedex in the "Annual Funding Notice for Fedex Corp Employee's Pension Plan."

To keep it simple, let's cut to the chase and focus on the "Funding Target Attainment Percentage" (FTAP)

Federal Law requires the Plan Administrator to tell us how well the plan is funded using FTAP.

FTAP = Net Plan Assets / Plan Liabilities (expressed as a percentage)

In general, the higher the percentage, the better funded the plan.

All percentages as of June 1, 20XX

2008 - 83.19%

2009 - 90.38%

2010 - 80.00%

2011 - 82.72%

2012 - 99.09%

2013 - 95.16%

2014 - 101.22%

2015 - 105.35%

2016 - 100.63%

2017 - Not Yet Published


Note: Prior to 2008, a slightly different accounting metric was utilized and reported - the Funded Current Liability Percentage (FCLP)

2006 - 73.63%

2007 - 83.32%


Trends since 2009:

Regulated Age Change = Pilots retiring later + longevity constant = lower # of payments in retirement

High Stock Market gains.

(Note: The decline of 20% by mid-2008 was in tandem with other stock markets across the globe. On September 29, 2008, the DJIA had a record-breaking drop of 777.68 with a close at 10,365.45.

The DJIA hit a market low of 6,443.27 on March 6, 2009, having lost over 54% of its value since the October 9, 2007 high)

Bumpty, Bump, Bump.

Research Broadly - Think Critically!

Demand that your elected representatives share the specific data, research all options, and be actively genuine regarding all aspects of what’s being proposed.

Bumpty, Bump, Bump.

(Yeah, we were all busy over the holidays)

Scroll down to read original post.

Research Broadly - Think Critically!

In Unity,

DLax

Isn't it interesting that the "A" plan was funded in the 80% range until 2012, five years after the regulated age changed and added 5 more years until mandatory retirement. Seems like that was a bit of a windfall for the company.

Yes - and why hasn’t our union pointed this out to both the company and the membership?

It doesn’t fit the narrative that only a big change can save us.

Economic conditions & airlines industry negotiating positions have changed from 2005/2006....to 2008/2009....to 2012/2013...to 2015...to 2017 and today.

Let’s recognize the financial health of our current A fund, the company and the industry.

The company can afford to make improvements to our current A plan

Any leadership, and crew force, which assumes otherwise is disconcerting

Bumpty...Bump...Bump

$1.00 in 2008 had the same buying power as $1.17 in 2018. So, it appears to me my A plan has lost 17% of it’s value.

The thread, and the financial disclosures it's based upon, address the financial funding status of our A plan.

Your statement is merely a statement of inflation.

These are two different issues.

Indexing our current A plan earnings limit to some measure of inflation would be an improvement and one way to fix the "inflation" issue.

However, the argument that we must change to a "variable plan" and take on the investment risk, along with losing our "High 5" based retirement mode, is NOT supported by a factual argument that the current A fund is underfunded.

Once 2017 results are included, I think we will find the A fund is even healthier.

Research Broadly, Think Critically

In Unity,

DLax

The ANNUAL FUNDING NOTICE for FedEx Corporation Employee's Pension Plan is published each Sept

The last report was published in Sept 2017, showing the A Funds Target Attainment Percentage of Jun 1, 2016

It appears pilots will need to wait until Sep 2018 to publicly see the results thru "mid-year" 2017.

However in May, each pilot should received their annual, FedEx Corp Employees' Pension Plan Report of Traditional Pension Benefit Accrued Benefit

This is where you will see your "High 5" calculation

Under the proposed Variable Benefit plan, you can kiss this methodology GOODBYE!

Your accrued benefit will be a function of your "career earnings".

Yes - ALL Years Count - Even your LOW ONES!

This change alone is a major disadvantage of the proposed VB plan.

It will decrease a pilots accrued benefit, and will decrease the rate a pilot can increase his accrued benefit as he upgrades

The affect is being masked, by the union saying the current A fund limit cannot be raised at all, without changing to a VB plan

And that market rates of return, will increase your benefit greater than the accrued benefit.

If the later is true, why doesn't the company keep the investment risk and reap those extra returns?

Prior to buying Tigers the FedEx Pension Plan paid 1.5% per year of service and it had a COLA. The percentage was changed to 2% and the COLA was removed. There was no cap on pension earnings until the first contract in 1998. The $260,000 set in 98 has never been adjusted. Jan. 1, 1998 $260,000 equals $169,510.26 on Jan 1, 2018
https://www.bls.gov/data/inflation_calculator.htm

Thanks for the data. It’s always good to know our history

What was the B fund percentage under Flying Tigers?

What was the B fund in the first contract in 1998?

-8%. So, really we’re doing much better it might appear at first glance. :D

It was 6%................................................ .....................

But we also gave up profit sharing in the first contract

A better evaluation of the decline in value is what is the worth of 260k 98$$ today,
and an Inflation Calculator would put that at 397.4k.

Or consider IRS Pension Limitations. Our Pension payout is 130k, and at one time there were Qualified\Non-Qualified Components.

Most Recent IRS Qualified Pension Payout was 220k (or the equivalent of 440k FAE)

https://www.irs.gov/newsroom/irs-ann...18500-for-2018

I don’t recall the B fund rate at Tigers, May have been 6%. It was called the INVEST PLAN but contributions were halted with the arrival of Steve Wolf in 1986. Thanksgiving weekend resulted in the collapse of the effort of the demanded pay cuts. Tiger 747 Captains earned around $170,000 a year. After the cuts I recall the max pay was $103,000. In my case I earned $111,000 in 1984 as a 747 F/O. In 1987 after the paycuts I earned $62,000 as a 727 Captain. The 727 Captain hourly rate was the same as a 747 F/O, but the 727 paid no credit hours, just hard time for most of the flying. The 727 operated under a LOA. The only upside was pensions were based on the old pay rates. Then the luck was we were bought by Federal Express, now known as FedEx Express.

That is correct! I was shocked to read to see no increase in the last contract. In 1998 the $260,000 resulted in the IRS max qualified benefit. Time has seriously eroded that benefit. No doubt PC still has a big grin on his face.

FedEx pilots are fools if they negotiate away their defined pension.

In exchange for accepting the VA plan, they'll ask for something the company took back in the last contract (like lay flat seat provision) and market it as a complete win. Or they'll just low ball the VA plan and present the worst case scenario first ... it's the FDX ALPA way.

As I see it, to even consider the VA plan, I would need to see industry leading language and increases in all sections of the contract; compensation, B-fund, profit sharing, vacation, jumpseat, reserve, etc.etc.

Pension risk has value and that value is worth more than the POTENTIAL to earn more in retirement. FedEx owns the bill associated with that risk. We shouldn't assume that risk unless it is overwhelmingly in our favor to do so which means the company is never going to accept my offer. But they'll accept ALPA's low ball offer and we will forever be known in the industry as the suckers we are.

I share your sentiment

VA plan IS a Pension, it's just Defined Differently.
But it is Still a Defined Benefit Plan

For Something that a few on the Internet define as a GiveAway to The Company...Company sure doesn't seem to be in any hurry to Accept this So Called Gift to the Man

While the new plan that the union is pitching is a pension plan, it is not a defined pension, it is a Variable Pension.

I agree with you.

This needs to be the opening to any negotiations!

For Something that a few on the Internet define as a GiveAway to The Company...Company sure doesn't seem to be in any hurry to Accept this So Called Gift to the Man[/QUOTE]


That's because they are playing chess, not checkers.

Huh? Why?

Save average pilot hired at age 35 here works 30 years (almost everyone going to 65 so let's not beat around the bush on that) - he leaves with a maximum of $130,000 benefit.

Same average pilot makes WB in 3 years, NB Captain in 8 years and WB captain in 13 years (this tracks exactly with someone hired in 2005 which was about the worst time to get hired for upgrades of current pilots on property). His benefit under the modeled VBP would be something like:

YEAR 1-3 average pay $140,000 - benefit $8400
YEAR 4-8 average pay $190,000 - benefit $19,000
YEAR 9-13 average pay $220,000 - benefit $22,000
YEAR 14-30 average pay IRS 401a17 limits indexed up annually - estimate benefit $107,000

Total benefit based on floor only $156,000 - it would actually be higher if you accounted for average stock returns in those years. Of course that's for someone hired around 2005. If you were hired after that the benefit is far greater. Now if you sat around on NBFO pay forever you could be negatively affected. Heck, most of the widebody FOs I know today are making close to $260,000 in pensionable earnings.

Correct my assumptions if I'm wrong.

That's because they are playing chess, not checkers.[/QUOTE]

Interesting...any other examples where The Company is doing pilots a favor and Not Reducing The Companies cost?

The Company sure seems focused on improving efficiency, reducing costs, and outsourcing where available.
The recent change in telephone access to our auditors is one example.

Guess you’re thinking The Company is saving up these savings for CBA 202X

I didn’t realize that the union had already made the offer to the company. I thought they were only doing research. Did you just share something with everyone?

How many years after retiring at 65 would ths new benefit last at $156K per year? I heard that this whole proposal is based on an average life expectancy that Fedex won’t disclose.

What happens if the red section in your theoretical above gets changed to:

YEAR 14-20 average pay IRS 401a17 limits indexed up annually - estimate benefit $107,000
YEAR 20-30 out on medical disability

Tuck -

Please provide the pay you are assuming for each year 14 thru 30 in your calculations above...or at least confirm you are assuming the average pay over those 17 years is $314,705.88

My statement regarding using a “High 5” model to compute a pilots earned benefit vs a “career average earnings” model is certainly mathematically correct

Now, if you limit one plan to 25 YOS, while allowing the other to go to 30 AND you limit one plan to $260K, while allowing another to be indexed to a higher IRS limit - then those two changes may offset the decrease in earned benefit

It’s easy to show Plan VB is greater than Plan A, when you assume there is NO WAY we could possibly improve Plan A.

None. Zip. Nada.

Our union leadership is telling us the ONLY way to get an increase cap and increased YOS will be to abandon the “High 5” method (along with all of the QOL benefits and medical protections which it allows) and transferring investment risk from the company to the pilots

It’s this premise, I reject.

Changing maximum YOS or indexing the cap to IRS limits are changes that can be negotiated to the current Defined Benefit A Plan

The High 5 method does not need to be abandoned. It’s a very powerful and flexible part of our current A plan

Improvements can be made to the current A plan....AND our B plan

Because ultimately, it’s our TOTAL retirement we’re debating

Now with all that said, the purpose of THIS particular thread wasn’t to rehash those portions of the debate

Rather, it was to provide actual factual data on the health of our A fund

To use that factual data to assess the company’s ability to pay

The company cries “we’re too poor...we can’t possibly make any improvements” (...All while pilots are working 4-5 years longer AND their payouts in retirement are 4-5 years less...Hmm?)

Then our leadership proclaims “We must change!”

(We must abandon High 5, we must work longer for the same earned accrued benefit, and we must accept the investment risk)

Does the financial data provided by the company (presented in my first post in this thread) support thses statements in 2016?

What will the 2017 data show?

Given market returns last year, what about 2018?

I’m going to predict the next 2 years will also showing FTAP funding levels over 100%

In Unity,

DLax

Tuck,

First of all, what happens to upgrade progression when your retirement is now calculated on career earnings vs. the current high 5 model? I would think that the historic upgrade model would be thrown out the window due to the fact that more pilots would try to upgrade sooner to try to increase their average salary and increase their retirement.

Another assumption in the VB plan is that the company is going to agree to increase their contributions every year, IE. it is more expensive, in order to eliminate their risk. I have asked the union several times how much more would it cost to raise our A plan vs the increase in the cost of the VB plan. So far the answers have been it's proprietary information, and the calculation is harder to make than you think. Hmm, they can't say that raising the A plan to say a high 5 of $340K would be 30% more expensive than the same benefit under the VB plan? I think that the costs aren't significantly different, or they would be including that it the sales campaign.

Also, what would the asset mix be in the VB plan. The company would still control the investments. And how about how a floor benefit effects the plan. The NC has stated that the floor may be less than $130K, that would have to be negotiated.

The problem with the comparisons that the union has been putting out between the A plan and the VB plan is that they are assuming that the A plan contributions are fixed and that the VB plan contributions are greater than the current A plan and will increase infinitely.

By the way, where are the models that we can use to plug in our own numbers? Those were almost ready back in March. I guess it takes time to adjust the models to make sure the numbers come out the way you want when you can't control all of the inputs!

Interesting...any other examples where The Company is doing pilots a favor and Not Reducing The Companies cost?

The Company sure seems focused on improving efficiency, reducing costs, and outsourcing where available.
The recent change in telephone access to our auditors is one example.

Guess you’re thinking The Company is saving up these savings for CBA 202X[/QUOTE]



Behind Corporate doors they are high-fivin' and can't believe their good luck.....

“Never interrupt your enemy when he is making a mistake.”
― Napoléon Bonaparte

“The whole secret lies in confusing the enemy, so that he cannot fathom our real intent.”
― Sun Tzu, The Art of War


Chess, not checkers...

A lot longer than your $130k/year will....and in addition you can tie it to the stock market returns in retirement (just like your B plan will do) if desired

Really?:confused:

The $130K is for life. If you tie the VB plan to the market after you retire, your $156K may go up, but it can also go down. It could even go below the $130K.

Right- the floor goes away after you’re 65. Not ideal.

You control your B plan level of risk - completely, just you.

Dial it up - heavy equities. Dial it down - heavy cash & bonds.

Pass it on to your heirs

You won’t be able to tie your VB benefits to the “stock market”

You will be able to tie (expose) them to the VB plans investment returns

These won’t (and shouldn’t) be just equities. They will be about a 50% equities / 50% bonds mix

Benefit plans can’t just focus on growth (in the way a young pilot may load up on equities). They must make payments to beneficiaries, and therefore typically match their bond and dividend paying stocks to those liabilities.

And remember, VB benefit plans go “up” or “down” compared to the negotiated “hurdle rate”

The retirement plan can actually make a positive return, but one less than the hurdle rate, and then your retirement benefit would decrease.

Behind Corporate doors they are high-fivin' and can't believe their good luck.....

“Never interrupt your enemy when he is making a mistake.”
― Napoléon Bonaparte

“The whole secret lies in confusing the enemy, so that he cannot fathom our real intent.”
― Sun Tzu, The Art of War


Chess, not checkers...[/QUOTE]

Yep-8+ months after this concept was presented to the Company...crickets.

It's absolutely astonishing how "quickly" the Company is moving to take advantage of this Mistake.

It's almost like watching a Soccer Game when the Goalie's not on the field.
Or a Hockey Team that pulls the Goalie in the 1st Period....

Yep-8+ months after this concept was presented to the Company...crickets.

It's absolutely astonishing how "quickly" the Company is moving to take advantage of this Mistake.

It's almost like watching a Soccer Game when the Goalie's not on the field.
Or a Hockey Team that pulls the Goalie in the 1st Period....[/QUOTE]

What do you mean 8+ months. Wasn’t this suppose to be a research project by the union? Now you’re saying it was presented to the company?

Yes, it was.

You have to actually read the crap the union sends to your email.

StarClipper: IF you really were a FedEx pilot there is no way you could not have known that.