Accrued Benefit: High 5 Method vs VB Method
#1
Accrued Benefit: High 5 Method vs VB Method
This week, every pilot should have received your annual "FEDEX Corporation Employees Pension Plan, Report of Traditional Pension Benefit, Accrued Benefit" in the mail.
It will show your current accrued benefit under our current A Plan "High 5" method through May 31, 2017.
(Note: there's a 1 year lag in reporting. Fedex fiscal year for accounting purposes runs from Jun 1 - May 31; however, your pensionable earnings are based on the calendar year Jan 1 - Dec 31. And timing, is important for many reasons.)
It will show your "Highest 5" annual earnings from date of hire thru calendar year 2016
(Note: 2017 pensionable earnings and years of service, not included yet)
To cross-check your pensionable earnings for each year listed and to calculate your 2017 pensionable earnings, reference your Dec 31, 2017 pay statement:
Pensionable Earnings = Total Gross Pay - (Non-Taxable Per Diem + Taxable Per Diem)
For anyone who has yet to reach their "High 5", take a careful look at how your "accrued benefit" has increased over your tenure at Fedex.
Hopefully, you saved previous your previous annual statements.
Take a careful look at Year 6, when your very low pay from Year 1 was dropped from the "High 5" calculation, and your accrued benefit jumped significantly.
Also, look at each year you upgraded to the next higher paying seat. See how your "High 5" probably jumped significantly again, as the lowest paying year from your last seat "fell out" of the "High 5" calculation.
Of course, it increases every year (up to the $260K overall average) each year you make more money, but the "rate" it increases is the greatest the first 5 years you upgrade to a higher paying seat.
Under the proposed Variable Benefit system, we would be "giving up" this important feature of our "High 5" plan.
Not only would benefits accrue more slowly (i.e. your lowest paying years will ALWAYS count), but each year would be capped.
Under the current "High 5" system, only the "average annual earnings" is capped at the current $260K. Years above $260K can be counted in calculating the "High 5" average.
While there are many worrisome aspects of the proposed Variable Benefit Plan, giving up our current "High 5" method of calculating accrued benefits for a "Career Average Earnings" method is one of the most troublesome for many reasons.
It WILL absolutely lower the rate we accrue guaranteed retirement benefits. And it will ensure the guaranteed accrued benefit never reaches any newly negotiated cap (...unless, you begin the new plan with pensionable earnings greater than the cap).
Unfortunately, the majority of the pilots I've spoken with don't seem to understand how the new VB accrual rate will work.
Eliminating the "High 5" method is a major concession in the proposed VB plan.
Even under a VB type plan, calculating the "accrued floor benefit" could be done using a "High 5" method.
I highly encourage all pilots to dig deeper into the specifics of the proposed VB plan. Fully understand the differences, and the assumptions which have been made in the "modeler".
Let's all continue to research independently, think critically and ask questions about other options we could negotiate.
In Unity and Transparency,
DLax
It will show your current accrued benefit under our current A Plan "High 5" method through May 31, 2017.
(Note: there's a 1 year lag in reporting. Fedex fiscal year for accounting purposes runs from Jun 1 - May 31; however, your pensionable earnings are based on the calendar year Jan 1 - Dec 31. And timing, is important for many reasons.)
It will show your "Highest 5" annual earnings from date of hire thru calendar year 2016
(Note: 2017 pensionable earnings and years of service, not included yet)
To cross-check your pensionable earnings for each year listed and to calculate your 2017 pensionable earnings, reference your Dec 31, 2017 pay statement:
Pensionable Earnings = Total Gross Pay - (Non-Taxable Per Diem + Taxable Per Diem)
For anyone who has yet to reach their "High 5", take a careful look at how your "accrued benefit" has increased over your tenure at Fedex.
Hopefully, you saved previous your previous annual statements.
Take a careful look at Year 6, when your very low pay from Year 1 was dropped from the "High 5" calculation, and your accrued benefit jumped significantly.
Also, look at each year you upgraded to the next higher paying seat. See how your "High 5" probably jumped significantly again, as the lowest paying year from your last seat "fell out" of the "High 5" calculation.
Of course, it increases every year (up to the $260K overall average) each year you make more money, but the "rate" it increases is the greatest the first 5 years you upgrade to a higher paying seat.
Under the proposed Variable Benefit system, we would be "giving up" this important feature of our "High 5" plan.
Not only would benefits accrue more slowly (i.e. your lowest paying years will ALWAYS count), but each year would be capped.
Under the current "High 5" system, only the "average annual earnings" is capped at the current $260K. Years above $260K can be counted in calculating the "High 5" average.
While there are many worrisome aspects of the proposed Variable Benefit Plan, giving up our current "High 5" method of calculating accrued benefits for a "Career Average Earnings" method is one of the most troublesome for many reasons.
It WILL absolutely lower the rate we accrue guaranteed retirement benefits. And it will ensure the guaranteed accrued benefit never reaches any newly negotiated cap (...unless, you begin the new plan with pensionable earnings greater than the cap).
Unfortunately, the majority of the pilots I've spoken with don't seem to understand how the new VB accrual rate will work.
Eliminating the "High 5" method is a major concession in the proposed VB plan.
Even under a VB type plan, calculating the "accrued floor benefit" could be done using a "High 5" method.
I highly encourage all pilots to dig deeper into the specifics of the proposed VB plan. Fully understand the differences, and the assumptions which have been made in the "modeler".
Let's all continue to research independently, think critically and ask questions about other options we could negotiate.
In Unity and Transparency,
DLax
#2
Line Holder
Joined APC: Jun 2014
Posts: 71
Everyone should vote no on the new variable plan that’s being offered just for the pure reason that every time the union tries to gain us a benefit we get bitten in the butt.
Here’s my survey....
1 do you trust your union?
2 do you think your union should focus more on issues like “single cargo pilot operations” instead of trying to give away our a plan
3 do you trust your union?
4 did our union negotiate well during the last contract negotiations?
5 do you trust your union?
6 if you submitted a question in regards to the new vb plan did it actually get published and answered?
7 do you trust your union?
8 does this vb plan look like another sales job by your union?
9 do you trust your union?
10 do you think it’s bs that any Block rep that voted yes to this last contract still in any mec position?
11 do you trust your union?
Here’s my survey....
1 do you trust your union?
2 do you think your union should focus more on issues like “single cargo pilot operations” instead of trying to give away our a plan
3 do you trust your union?
4 did our union negotiate well during the last contract negotiations?
5 do you trust your union?
6 if you submitted a question in regards to the new vb plan did it actually get published and answered?
7 do you trust your union?
8 does this vb plan look like another sales job by your union?
9 do you trust your union?
10 do you think it’s bs that any Block rep that voted yes to this last contract still in any mec position?
11 do you trust your union?
#3
Agreed.
Ya sure I want the “lie flat” guys negotiating an all new retirement plan for us! What could go wrong!?!?
Hey how’s that first class bank working or for ya??
Any thing these guys negotiate will be poked to Swiss cheese by the company, just like our contract.
Ya sure I want the “lie flat” guys negotiating an all new retirement plan for us! What could go wrong!?!?
Hey how’s that first class bank working or for ya??
Any thing these guys negotiate will be poked to Swiss cheese by the company, just like our contract.
#5
With all the web access trouble the company might not seem to be the best on the technology front but they sure seem to be deadly good at programming in efficiencies and eliminating our flexibility and improving their control of manpower assets. They come out with proposals dressed as a win win that in implementation seem pretty one sided and don't seem to be unchallenged or sometimes even mentioned by the union.
1. The bank carryover and canceled hotel money seemed like a pretty straightforward small contract improvement. However, in implementation it seems purposely complicated and designed to have you waste your hotel money if you don't fully track and transfer previous month's bank money. Why hasn't the company been challenged on making that process usable and default towards using bank money first?
2. The massive VTO increase and back door PBS doesn't seem to have been challenged at all? Why did we allow a company defined "known r-day" istead of a defined trips to r-day ratio?
3. If it is so advantageous for the company to remove their funding requirements and move to the VB plan why shouldn't we openly keep the same or better accrual rules and just gain a percentage of company's savings as easily quantified improvements in lifetime payouts. Seems that the company wants both a reduction in the funding requirements and a plethora of rule changes to decrease overall payouts and incentivise manpower efficiency.
4. The rules that came with the retirement notification bonus is another great example of our gain being washed out with increased efficiencies. A one line x dollars for x months of notification would have been a true bonus.
#6
However, in implementation it seems purposely complicated and designed to have you waste your hotel money if you don't fully track and transfer previous month's bank money. Why hasn't the company been challenged on making that process usable and default towards using bank money first?
2. The massive VTO increase and back door PBS doesn't seem to have been challenged at all? Why did we allow a company defined "known r-day" istead of a defined trips to r-day ratio?
4. The rules that came with the retirement notification bonus is another great example of our gain being washed out with increased efficiencies. A one line x dollars for x months of notification would have been a true bonus.
4. The rules that came with the retirement notification bonus is another great example of our gain being washed out with increased efficiencies. A one line x dollars for x months of notification would have been a true bonus.
Questions like these should have been posed by the NC to the company during negotiations. It was their JOB!!!!!!
The fact that these language loopholes and CBA "gotchas" were in the TA they recommended to the MEC and they passed on to us is truly pathetic.
To make matters worse, questions like these and others were asked and either answered incorrectly or ignored if the answer wasn't going to help with the sell job.
The same thing is going to happen with this retirement plan. They can spin it when they control the information flow. Choose to ignore difficult questions submitted on line or smooth over concerns by saying it will be negotiated later - just trust them. The smart folks here who continue to ask pointed questions and identify holes in the plan won't be allowed the same access to the crew force that the salesmen running the road shows have. If DLax or someone else who speaks this language wanted to send an open letter outlining the concerns many of us have and use the ALPA communication resources our dues pay for to disseminate that to the entire crew force - do you think our MEC would let that happen? Well, if they want us to trust them, the first step would be to publicly release properly vetted dissenting opinions. Put unfiltered, accurate information out regardless of whether it fits their agenda and let the chips fall.
All it would have taken to vote down our last contract was some additional education for 8% of the "can't be bothered to care" sheep in the middle of the pack. If they're kept penned up and isolated while being fed only what the MEC wants them to eat, the same thing is going to happen again.
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