DLax85

2016 was actually a very good year for the S&P 500 - 11.8%

Perhaps, you’re recalling 2015 - 1.5%

But, let’s pause there and ask the union to reveal actual assumptions and #s.

PUBLISH them on the Retirement Q&A website

The investment mix assumed - I think it’s 50% equities / 50% bonds.

Just TELL US the specific benchmarks used. And PUBLISH the actual returns for those benchmarks for those years. PUBLISH the resultant 50/50 mix returns for each year

The proper use of bonds will help mitigate the down markets, but can also stifle the returns in the up market.

I started to do some cut-and-paste but I simply don’t have the time AND when you start to research that data you will find different #s for different equity & bond benchmarks

Those need to be tweaked a bit, since even ultra-efficient funds like Vanguard’s S&P or Vanguards Bond funds slightly underperform their benchmarks due to necessary administrative & transaction costs.

I’d hope even advocates of the VB would expect...no wait, DEMAND... transparency and clarity on the actual assumptions and inputs underlying the model

With all that said, I’m still forward looking - I’ve posted many times on what future expected returns are using sources like Vanguard. For a 50/50 mix of equities and bonds, it was about between 5-6%

As you stated in another post, the companies current expectation is 6.5%

IF/When the actual return #s in the model are actually revealed, that will let pilots better understand where these “increased retirement benefits” (for some pilot cohorts) are being generated.

Sorry, but it will be the “market investment returns” and guys working longer, and “harder”.

Because we should all be able to understand, and agree, that averaging a pilots pay from “every year worked” vs our current “High 5” is a big give back for ANYONE who isn’t already maxing the $260K, or the new indexed Cap the VB plan assumes.

That “career average earnings” math simply puts pilots in the hole — but, they are being told market performance will pull them out.

SHOW ME ALL THE NUMBERS!!

In Unity and Transparency,

DLax

DLax85

Please explain your understanding of the “2% floor”

How does it work under the VB plan?

(Suggestion: assume the investment return = the hurdle rate, every year)

(The current A Plan has a very real 2% Floor....and admittedly, a very real 2% ceiling as well. It neither benefits, nor loses from annual market performance.)

You claim “it” results in a better outcome than our current plan?

I’m interested in how the “floor benefit”, by itself, does that.

Does the “floor benefit” require our agreement to an investment return cap (notionally 10%) or is that only required to fund a wholly separate “stabilization fund”?

Let’s keep poking around under the hood and see what’s really driving the “improved” engine in the VB plan.

We know a new governor has been placed on how a pilots “average earnings” will be calculated.

That’s more restrictive by plan definition. Where’s the extra horsepower coming from?

Reese

Example of "in the middle" up-grading at year 15

Hire Age with FedEx: 35
Current Age: 50
Average High 5 Salary: $188,000 (74CH/mo average)
Current Annual Salary: $260,000 (74CH/mo average)
Future Salary Increase Rate: 2.5% (same as inflation)
Assumed Retirement Age: 62
EXPECTED Return: 5%

A Plan: $130k
VB Plan: FLOOR Benefit -> $149k, POTENTIAL Benefit -> $177k

Example of "in the middle" QOL F/O for life
All numbers remain the same, except:

Average High 5 Salary: $188,000 (74CH/mo average)
Current Annual Salary: $191,000 (74CH/mo average)

A Plan: $119k
VB Plan: FLOOR Benefit -> $124k, POTENTIAL Benefit -> $146k


ASSUMING 2% min accrual rate and a 5% hurdle rate.
2.5% is a more conservative number than 3% for salary increase. 5% expected return is conservative, even for the 5-6% expected return of a 50/50 mix that DLax85 keeps mentioning.

The "Floor" benefit assumes every year is a terrible year and the 2% min accrual kicks in.

The furthest right bar shows you the "min accrual" or "floor guarantee" in brown box. The floor guarantee benefit MAY apply if on average the INVESTMENT RETURN DOES NOT EXCEED THE HURDLE RATE. The red/light green/dark green on top of the brown is what it could be if you actually had positive years that exceeded 5%.

Where is the "work harder?" That's your own choice if you want to work harder and get an even higher payout, which i'm sure there are those, because some people only care about what their W-2 says.

But the FO for life, working MIN GUARANTEE almost meets the $130k with the FLOOR/MIN ACCRUAL benefit of the VB plan retiring at age 62. The Captain working min guarantee exceeds the CURRENT A plan.

Oh, BY THE WAY, that FLOOR benefit will increase on average during your retirement as the fund/pension keeps up with inflation. If you negotiate some sort of stabilization fund, then you can keep the retirement checks from dipping during "down" years.

If you negotiate and tie FedEx contributions to W-2 salaries, then as pay rates increase over time, FedEx contributions would increase over time, thereby keeping up with inflation.

Above examples give you a pretty "conservative" estimate in 2 different scenarios. Sure, I would like to be able to enter year by year, but ASSUMING(still needs negotiating) 2% min accrual rate, hurdle rate of 5%, those numbers above are CONSERVATIVE.

FlyBoyd

Reese....the work harder is this: to get the assumed numbers you have to remain a WB captain until retirement. Also, you show you work 74CH per month. The assumptions use ~83CH per month so don’t forget the 1.5 more days of work per month.

Review my post....#5 above. You’ll see how I adjusted the numbers and how my numbers barely beat our current plan even in the best case stochastic numbers...and those numbers also assume WB captain until the end. Your extra horsepower comes form your ability to work up to and past 25 YOS. Not everyone can/wants to do that.

Reese

IF you select "CAREER', then yes. But if you enter a current salary and input 2.5% as your average salary increase, that is not the case. So if you put a current salary in there, then select "CAREER," it will assume that 83CH going forward. Otherwise, you can hold it fixed by putting a salary in that equates to 74CH and selecting 2.5%.

I gave the example of a WB upgrade at 15 years, and the other a FO for life. But the point I was making, even if you did FO for life (no upgrade to WB for 5 years, then back down to FO), you still only fall short by $6k/year in benefit to the guy who gets his High 5 then downgrades. Not going to lose sleep over that $6k. You're telling me you're a QOL guy, so why are you concerned with that $6k? ; )

Regarding your 25 years statement.
Assuming you're hired at 35, currently 50, retire at 60 working 74CH/mo
Upgrade at 15 years:
A Plan: $130k
VB Plan: $136k (Floor)
FO for Life
A Plan: $114k
VB Plan: $110k (Floor)

busdriver12

I definitely see your point. When I read through retirement posts from other airlines, I see many people saying that there is no way they'd want a pension again, too easy to lose, they'd never want to go that direction again.

I wish a consideration would be for a much larger B fund, cash over cap, no loss of contributions if you go on LTD, etc. Add profit sharing. I think if that was an option for people (not forced), that many would choose to take it, and the pension would die on the vine by choice. This could be pretty uncomplicated.

Would be nice to share in some of that 1.3 billion dollar tax break the company is getting.

Nightflyer

We didn't share in the tax break, but now they want us to bend over backwards to save fuel?

DLax85

'

What would the A Plan benefit be if the CAP wasn't static at $260K?

Let's say it too, was indexed at the very modest IRS 401(a)(17) limits like the VB plan.

That would be about at 5.77% increase now (2018 limit of $275K) over the current $260K, and 2-3% a year moving forward just like the VB Plan.

Would applying the exact same indexed cap to our current A fund really be an unreasonable request during a negotiation?

5.77%. Hmmmm

Discuss.

FXDX

Hired at 35 is not "in the middle". You can easily max out the current plan, possibly without even ever upgrading past wide body FO. Those of us "in the middle" will NEVER be able to maximize the current plan because we won't get to 25 years of service unless the max age is raised again. No thanks.

DLax85

...and those in the middle, and/or those without a High 5 already complete, will never get to fully utilize the power of the YOS they've already accrued if/when the current A plan is frozen.

Under a "High 5" a pilots YOS multipliers are all worth 2% of their 5 highest paying years. In other words, they become more and more valuable over time.

Under the VB plan any YOS multiple (the annual 2% floor benefit) below the earnings cap, never becomes more valuable by itself. Only if it grows via investment returns above the negotiated Hurdle Rate.

For those who can't or don't want to work beyond 25 YOS, the VB plan is not advantageous along the way. The earned 2% floor benefit always lags the current A Fund, High 5 method.

Yes - Yes - DLax - you are sooo frickin repetitive!!

Why? Because there are so many pilots that don't seem to understand this basic concept and what we are giving up.

If we improved the current A plan, by giving 1% YOS credits for 5 more years - until 30 YOS - won't that address the complaints about guys who want to work 5 more years since the Regulated Age change?

That would change our current A plan to 55% max for guys who worked 5 years longer. This would yield a 10% increase (55/50=1.10).

Hmmm. Once again. Sounds very reasonable, since the average pilot is working almost 5 years longer...and collecting 5 years less of retirement checks. (Has the Negotiating Committee pointed this out to management when they cry "we're too poor"?)

Combine that with an indexed cap like the VB plan (an immediate 5.7% increase), and I think we start to see there are reasonable options that should be fully explored.

Let's build those models and publish them.

We just need to know the know the "expected upgrade timeline" the models are based on.

No need for long debates on investment returns and risks.

We can leave that to individual discussions, and control, of our own B fund assets.