I’m not a black helicopter guy. But the new ALPA chair is a FedEx guy. This new plan has got some momentum behind it that most people can’t explain.

Maybe a push for ALPA to create a bargaining standard for retirements in the industry? Are they strategically plotting for other majors to fall under same plan?

This is my imagination getting out of control...but you have to wonder!

 

And yet....I thought a major selling point was that "every dollar counts". Did I dream this or did they claim it? If I'm not crazy, and you are right about salary being limited by the IRS limit, it sounds like a blatant lie that every dollar will count.

So can someone tell me where I am misinformed?

 

That is not correct. That limit is not in play for the VBP. Just like it is not in play with our current A plan. The max benefit you can receive this year is $220

Here are some IRS definitions:

Contributions to a defined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. Actuarial assumptions and computations are required to figure these contributions.

In general, the annual benefit for a participant under a defined benefit plan cannot exceed the lesser of:

100% of the participant's average compensation for his or her highest 3 consecutive calendar years, or
$220,000 for 2018 ($215,000 for 2017)

The dollar amounts are subject to cost-of-living adjustments in future years.

Or try this:

Compensation and contribution limits are subject to annual cost-of-living adjustments. The annual limits are:

salary deferrals - $18,500 in 2018 ($18,000 in 2015 - 2017), plus $6,000 in 2015 - 2018 if the employee is age 50 or older (IRC Sections 402(g) and 414(v))
annual compensation - $275,000 in 2018. $270,000 in 2017 (IRC Section 401(a)(17))
total employee and employer contributions (including forfeitures) - the lesser of 100% of an employee’s compensation or $55,000 for 2018 ($54,000 for 2017 not including "catch-up" elective deferrals of $6,000 in 2015 - 2018 for employees age 50 or older) (IRC section 415(c))

 

As a captain who is in the top 1/3 of the master seniority list and only flies his awarded line, I still haven't maxed out my high 5 under the current retirement. I haven't reached the IRS earnings limit 1 time. If this VB plan passes, you better bet that I will work extra, especially if they don't do a realignment bid.

I wonder how this will effect the next section six negotiations if a lot of pilots are working extra to maximize their VB retirement?

 

You need to watch the videos again. They are talking about a capped earnings VB plan that follows the IRS earnings limit.

The modeler on the website uses a capped earnings VB plan as well. Just try putting in current earnings as $350K, then try putting in current earnings as $400K. The retirement number doesn't change.

Yes, the IRS allows for an uncapped plan such as the one MLB has, but we are not pursuing that type of plan according to the propaganda that has been distributed so far.

 

By the way, the VB plan isn't a defined benefit plan, it is a variable benefit plan. How about posting what the IRS says about variable benefit plans?

 

Yes, you are right about the modeler, it definitely has caps. I put in my desired parameters, and it seems to not give me any greater benefit after 254K. If I go down below 206K, it gives me ZERO benefit. So from this, it looks like if you don't have too many years left before you retire, you'd better upgrade or at least make sure you have some healthy paychecks during those years, or you get NOTHING. Except a freeze of your A plan.
And not everyone who is close to retirement has their 25 years and high five, there are plenty of people who will fall short.

I think there are going to be a lot of losers in this plan if they go with the proposed model. They need to do far better than this.

 

There is no such thing as a Variable Benefit plan with the IRS. All discussions about retirement plans are based on how you are paid or your benefit. There are two types of benefit plans: Defined contribution plans - 401(k), profit-sharing, and other defined contribution plans generally pay retirement benefits in a lump sum or installments.

Defined benefit plans - The normal method distribution is an annuity paid over the employee’s life or the joint lives of the employee and his or her spouse (unless they elect otherwise). https://www.irs.gov/retirement-plans...-plan-benefits


We are calling this a Variable Benefit Plan because that is what Blitzstein called it in his Warton MBA thesis (https://pensionresearchcouncil.whart...Blitzstein.pdf)

It's really some sort of hybrid plan. (https://www.irs.gov/retirement-plans...d-benefit-plan) This plan does not exist anywhere else in the format that has been proposed to us. MLB has a somewhat similar plan in that eligible members get a defined benefit that is not a fixed amount. However, MLB players are qualified if they play one day and even if they work the max number of years, then they are maybe 40. So the plan has decades to have returns before they begin paying out.

This is a Defined Benefit plan for the sake of the IRS and Variable for us as we will not be guaranteed a benefit.

 

I hear what they keep saying, but I don't think they are using the terms correctly. Here are the IRS limits from their web site: https://www.irs.gov/newsroom/irs-ann...18500-for-2018

The only thing that even comes close to what they keep saying is The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $270,000 to $275,000.

I'm not sure how that applies to our situation. If you have another reference I'm all for it, but I don't think so. There are max limits the IRS uses for computational purposes (what has to be deposited into the company accounts in order for the fund to be fully funded). That might be where those numbers keep coming from. The IRS has so many different types of limits keeping track of them is a full time job, which is why we don't do our own bookkeeping. Some are much higher like The Code provides that the $1,000,000,000 threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is adjusted using the cost-of-living adjustment provided under Section 432(e)(9)(H)(v)(III)(bb) All the things you would need to understand and apply to run or design a plan are staggering. That's being the Guinea pig on a new type of plan that does not exist seems really stupid.

 

Agreed, the IRS has no section about VB plans. Maybe later we can give up more when the company says that they need to protect themselves from possible legislation just like we did with health care.

So why did you quote the IRS section and state that the VB plan has no earnings cap when if you watch the videos and use the modeler, it clearly does as proposed.