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StarClipper 10-12-2018 06:18 AM

Retirement Plan Negotiations?
 
Surpringly the MEC really gave the negotiation committee the permission to move forward and negotiate our retirement plan with the company. Wow I’m so shocked be his decision. 😏😏😏

What these guys fail to realize is even if we give this up now. The company is still going to come for more next contract negotiation. The company goal is to take as much as we will give them and it looks like my union goal is the give the company as much as the company wants.

NewOldGuy 10-12-2018 08:09 AM

I agree. Not sure why we’re even negotiating? This thing is supposed to be so “wonderful” for us both. We’re outside of section six. I don’t think we should be pursuing it at all, but if we are it shouldn’t be “negotiated”. We should be submitting a “shoot for the moon proposal” and the company can either take it or leave it! Then hopefully our union would still allow us to have an input at some point.
To be clear, I don’t believe we should be pursuing this at all, but if we are, there should be ZERO negotiating required.


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gatorhater 10-12-2018 10:19 AM

Apparently those survey results are vastly different than the opinions I hear in person.

I guess it’s a little bit like every contract I’ve ever voted on. Difference there is you can usually find a few people in favor of it, I’ve yet to talk to a fellow pilot with less than 20 years and older than 30 who is in favor of this. There were one or two but since you can find their phone numbers on the ALPA website, I don’t count them.

kwri10s 10-12-2018 12:35 PM

Can a proposal be made that would only allow members to vote on any proposed change to the retirement plan, outside of normal section 6 negotiations, if the member has not already maximized their retirement under the current plan?

In other words if you already have your 25 YOS and max cap of $260, then you cannot vote on any change outside normal section 6. It seems we have pilots that cannot in any way be negatively affected by any change, able to vote on a process that might have significant adverse affect on those that do not already have their 25 YOS and $260 cap.

In effect we are allowing a "B scale" retirement vote if those that are already "whole" can vote to make others less than "whole".

Thrust Hold 10-12-2018 12:42 PM


Originally Posted by NewOldGuy (Post 2690217)
I agree. Not sure why we’re even negotiating? This thing is supposed to be so “wonderful” for us both. We’re outside of section six. I don’t think we should be pursuing it at all, but if we are it shouldn’t be “negotiated”. We should be submitting a “shoot for the moon proposal” and the company can either take it or leave it! Then hopefully our union would still allow us to have an input at some point.
To be clear, I don’t believe we should be pursuing this at all, but if we are, there should be ZERO negotiating required.


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From what I've been told this is being done outside of Section 6, so that we aren't subject to any Status Quo type Arbitration should there be any. Pensions are no longer Status Quo and could compromise our position.

Don't shoot the messenger. Just what I was told when I inquired.

jetstar1 10-12-2018 02:15 PM

How much money would have been lost yesterday had we been in a VB plan? The A plan didn’t lose a dime. Now if you are the pilot retiring by the end of the year under the VB plan, sorry for your bad luck.

They better be shooting for the moon! At least a 10% raise and an increase to at least 12% on the B plan. The company already figured out how to find the pitfalls in this new plan. We are stupid if this gets ratified.

Every pilot that has the high five gets their cake and eats it too under this plan. A lot will get screwed. I thought before that ALPA didn’t want to have two groups of pilots under different plans? Call it what you will, this will be those that get both.

I also heard this BS. There are some people trying to get an adjustment for those with the high five that are too close to retirement that wouldn’t be able to get any more $$ from the VB plan. How about NO! This is ridiculous!

kronan 10-12-2018 02:27 PM


Originally Posted by jetstar1 (Post 2690378)
How much money would have been lost yesterday had we been in a VB plan? The A plan didn’t lose a dime. Now if you are the pilot retiring by the end of the year under the VB plan, sorry for your bad luck.

The A plan didn't lose a dime? Really, that's what you think?

I'm thinking the A plan assets lost a pretty hefty percentage (S&P 4% this week, Nasdaq 3.7%)
YTD on SPX (500 Index fund) is still at 3.5% after the losses of this week.

Pension Benefit, however, unchanged.
How this week would impact on the VB Benefit, hard to say. Will say that as negotiated we'd receive the Higher of Market Returns or the 2% Floor.

And, if negotiated as desired, every single pilot has a 260 FAE x YOS. (Soft Freeze)

NewOldGuy 10-12-2018 02:48 PM

Retirement Plan Negotiations?
 

Originally Posted by kronan (Post 2690386)
The A plan didn't lose a dime? Really, that's what you think?



I'm thinking the A plan assets lost a pretty hefty percentage (S&P 4% this week, Nasdaq 3.7%)

YTD on SPX (500 Index fund) is still at 3.5% after the losses of this week.



Pension Benefit, however, unchanged.

How this week would impact on the VB Benefit, hard to say. Will say that as negotiated we'd receive the Higher of Market Returns or the 2% Floor.



And, if negotiated as desired, every single pilot has a 260 FAE x YOS. (Soft Freeze)



Kronan,
The difference is the loss on the A Plan’s funds yesterday are the Company’s problem. They have to make that up. The loss on the VB plan comes from OUR pockets, hence the reason for the floor AND the hurdle rate. They take the money from the VB plans profits in excess of 5% (current proposed hurdle rate) to guarantee the 2% in down years. What happens at times when the VB has an extended period of less than 5%? In other words the funds aren’t there? Then that money comes from the capital in the fund and this lowers investments and lowers compound growth. It’s a pyramid scheme and we’re doing it to ourself. Robbing Peter to pay Paul except in this case we are Peter!


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FrankTheTank 10-12-2018 04:25 PM


Originally Posted by gatorhater (Post 2690270)
Apparently those survey results are vastly different than the opinions I hear in person.

I guess it’s a little bit like every contract I’ve ever voted on. Difference there is you can usually find a few people in favor of it, I’ve yet to talk to a fellow pilot with less than 20 years and older than 30 who is in favor of this. There were one or two but since you can find their phone numbers on the ALPA website, I don’t count them.

Where are those results? :mad:

Fdxlag2 10-12-2018 04:49 PM


Originally Posted by FrankTheTank (Post 2690461)
Where are those results? :mad:

In the vault. Classified Secret No Line Pilot.

pinseeker 10-13-2018 03:38 AM


Originally Posted by kronan (Post 2690386)
How this week would impact on the VB Benefit, hard to say. Will say that if negotiated we'd receive the Higher of Market Returns or the 2% Floor.

And, if negotiated as desired, every single pilot has a 260 FAE x YOS. (Soft Freeze)

Fixed it for you :)

pinseeker 10-13-2018 03:40 AM


Originally Posted by Fdxlag2 (Post 2690471)
In the vault. Classified Secret No Line Pilot.

Hey, where's the like button?:)

kronan 10-13-2018 07:29 AM

Thanks for the Fix pinseeker

Newoldguy,

the Money is NEVER in our hands, until the Pension checks are cut.

Whether it's our current A plan or the VB plan. The Company is the sponsor and the $$ just isn't in our hands until after retirement. The Only retirement money that's in our hands is the B plan.

The VB plan is a Pension plan. Covered by ERISA and PBGC.

In the event of a long, or dramatic market down turn, FedEx is still obligated to meet Pension obligations. Barring bankruptcy, and even in Bankruptcy it Still takes Govt agreement to terminate a Pension plan.

NewOldGuy 10-13-2018 07:42 AM


Originally Posted by kronan (Post 2690663)
Thanks for the Fix pinseeker

Newoldguy,

the Money is NEVER in our hands, until the Pension checks are cut.

Whether it's our current A plan or the VB plan. The Company is the sponsor and the $$ just isn't in our hands until after retirement. The Only retirement money that's in our hands is the B plan.

The VB plan is a Pension plan. Covered by ERISA and PBGC.

In the event of a long, or dramatic market down turn, FedEx is still obligated to meet Pension obligations. Barring bankruptcy, and even in Bankruptcy it Still takes Govt agreement to terminate a Pension plan.



I understand that but what you fail to understand is that with the new program the VB plan becomes the bank account for “guaranteeing” the floor. Currently FEdex is the guarantor. In other words if Fedex doesn’t get the returns on the investment it hopes for, they have to make it whole to guarantee the current A plan payouts. Under the new program if the VB doesn’t get the returns on investments it needs to pay the floor Fedex doesn’t put more money in, the Money comes from within the VB plan to pay the floor guarantee. That’s what makes it a pyramid scheme. That’s what is attractive to Fedex is it becomes a fixed cost for them. That’s just one of the things that should be a red flag for us. Because if the market downturns, say for 5 years and doesn’t return enough to pay those guarantees, it comes from the fund capital. Which in turn lowers the re-investment capital (in an already down turned market) which reduces compounding gains putting the growth and guarantees at risk at some future point even though Fedex and the PBGC remain compliant. But you can’t get money from a fund which has exhausted itself. I believe (and this is only one of the many faults with this plan) you fail to see the Forrest for the trees in this case.


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Fdxlag2 10-13-2018 07:56 AM


Originally Posted by NewOldGuy (Post 2690668)
I understand that but what you fail to understand is that with the new program the VB plan becomes the bank account for “guaranteeing” the floor. Currently FEdex is the guarantor. In other words if Fedex doesn’t get the returns on the investment it hopes for, they have to make it whole to guarantee the current A plan payouts. Under the new program if the VB doesn’t get the returns on investments it needs to pay the floor Fedex doesn’t put more money in, the Money comes from within the VB plan to pay the floor guarantee. That’s what makes it a pyramid scheme. That’s what is attractive to Fedex is it becomes a fixed cost for them. That’s just one of the things that should be a red flag for us. Because if the market downturns, say for 5 years and doesn’t return enough to pay those guarantees, it comes from the fund capital. Which in turn lowers the re-investment capital (in an already down turned market) which reduces compounding gains putting the growth and guarantees at risk at some future point even though Fedex and the PBGC remain compliant. But you can’t get money from a fund which has exhausted itself. I believe (and this is only one of the many faults with this plan) you fail to see the Forrest for the trees in this case.


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Exactly what are the “insurance fees” that the PBGC collects on this plan vs what are the fees they collect on our current plan? That will tell you how much the PBGC guarantee really means.

pinseeker 10-13-2018 08:08 AM


Originally Posted by kronan (Post 2690663)

The VB plan is a Pension plan. Covered by ERISA and PBGC.

In the event of a long, or dramatic market down turn, FedEx is still obligated to meet Pension obligations. Barring bankruptcy, and even in Bankruptcy it Still takes Govt agreement to terminate a Pension plan.

Quick question Kronan. Since all of this still needs to be negotiated, what happens if the company refuses to accept a floor guarantee and the union sends this for ratification and it passes?

Under the VB plan, the company wouldn't have any defined benefit obligations in the event of a long or dramatic market down turn. Wouldn't we, the pilot group suffer all of the losses under that scenario?

kronan 10-14-2018 06:51 AM


Originally Posted by pinseeker (Post 2690680)
Quick question Kronan. Since all of this still needs to be negotiated, what happens if the company refuses to accept a floor guarantee and the union sends this for ratification and it passes?

Under the VB plan, the company wouldn't have any defined benefit obligations in the event of a long or dramatic market down turn. Wouldn't we, the pilot group suffer all of the losses under that scenario?

Quick question. Why on earth would the Union do that?

2nd Question. How long does it take investments to snap back from the typical downturn?

3rd Question. Assuming there's No Floor....why would there be a hurdle rate?

4th Question. You seem to be implying that there's no Bottom to the value of the notional shares the VB plan creates. But if there's no Bottom, exactly what does the PBGC guarantee? And why should FedEx pay premiums if the PBGC insurance is worthless?

5th Question. If I believe the Internet rumors of "Not a Single Person I've talked to is Pro VB plan"...how on Earth would something that anecdotally 90% of FedEx pilots are opposed to with a 2% floor, pass without a floor?

pinseeker 10-14-2018 07:49 AM


Originally Posted by kronan (Post 2691080)
Quick question. Why on earth would the Union do that?

For the same reason the union sold the last contract with misinformation.


2nd Question. How long does it take investments to snap back from the typical downturn?

It has taken as long as 13 years since I have been here.


3rd Question. Assuming there's No Floor....why would there be a hurdle rate?

Look at the presentations to see why there is a hurdle rate.

4th Question. You seem to be implying that there's no Bottom to the value of the notional shares the VB plan creates. But if there's no Bottom, exactly what does the PBGC guarantee? And why should FedEx pay premiums if the PBGC insurance is worthless?

The PBGC doesn't guarantee what the plan is worth. They guarantee if the plan goes under, that they will assume payments, at a discounted rate usually.

5th Question. If I believe the Internet rumors of "Not a Single Person I've talked to is Pro VB plan"...how on Earth would something that anecdotally 90% of FedEx pilots are opposed to with a 2% floor, pass without a floor?

Because the union will convince enough people that their plan is so secure, it doesn't need a floor. Just like they convinced enough people that they knew what lie flat seats and known reserve days meant.

The answers are above. You never answered my question.

Shaman 10-14-2018 07:59 AM


Originally Posted by kronan (Post 2691080)
Quick question. Why on earth would the Union do that?

Because as we've seen before this pilot union places a greater emphasis on achieving any resolution than on an outcome favored by most of our pilot group.


Originally Posted by kronan (Post 2691080)
2nd Question. How long does it take investments to snap back from the typical downturn?

The answer is it depends and you surely know that. Past performance is not indicative of future results.


Originally Posted by kronan (Post 2691080)
3rd Question. Assuming there's No Floor....why would there be a hurdle rate?

Because that's a way to convince interested parties that this is a "good deal" and then everyone is left wondering what the @#$ happened?!


Originally Posted by kronan (Post 2691080)
4th Question. You seem to be implying that there's no Bottom to the value of the notional shares the VB plan creates. But if there's no Bottom, exactly what does the PBGC guarantee? And why should FedEx pay premiums if the PBGC insurance is worthless?

True or False there's never been a VB plan that has had to exercise the guarantees offered by the PGBC?


Originally Posted by kronan (Post 2691080)
5th Question. If I believe the Internet rumors of "Not a Single Person I've talked to is Pro VB plan"...how on Earth would something that anecdotally 90% of FedEx pilots are opposed to with a 2% floor, pass without a floor?

Because a large percentage of this membership relies heavily on the recommendations of elected leadership and most are unwilling to, demand/expect more by leveraging their negotiating position to achieve it.

I am against this plan. I think the entire thing is a fools errand. It would have been an entirely different matter if the company had come forth and said we would like to propose an alternative to the A-plan and its would look like XYZ. But instead we've gone to them cap in hand with a proposal that we're arguing is going to be "mutually beneficial" for all parties and no downside risk to the pilot group.

If its too good to be true it probably is.

HDawg 10-14-2018 09:19 AM

I bet the company won’t find any loopholes in this greatest thing since cannned beer retirement. I mean they’ve been pretty honest on iron clad provisions in the current contract.

FXLAX 10-14-2018 09:30 AM

Retirement Plan Negotiations?
 

Originally Posted by kwri10s (Post 2690327)
Can a proposal be made that would only allow members to vote on any proposed change to the retirement plan, outside of normal section 6 negotiations, if the member has not already maximized their retirement under the current plan?



In other words if you already have your 25 YOS and max cap of $260, then you cannot vote on any change outside normal section 6. It seems we have pilots that cannot in any way be negatively affected by any change, able to vote on a process that might have significant adverse affect on those that do not already have their 25 YOS and $260 cap.



In effect we are allowing a "B scale" retirement vote if those that are already "whole" can vote to make others less than "whole".


They could negotiate it so that those with their high five are exempt from the VBP. But I don’t think they can prevent a member in good standing from voting.


Originally Posted by Thrust Hold (Post 2690329)
From what I've been told this is being done outside of Section 6, so that we aren't subject to any Status Quo type Arbitration should there be any. Pensions are no longer Status Quo and could compromise our position.



Don't shoot the messenger. Just what I was told when I inquired.


Unless there is some arbitration clause in the contract (like Alaska), there is no arbitration during section six negotiations unless both parties agree to it. And that is usually the last step before being released to a cooling off period. Which typically means that the MEC declines because there is more leverage during a cooling off period than during arbitration.


Originally Posted by NewOldGuy (Post 2690217)
I agree. Not sure why we’re even negotiating? This thing is supposed to be so “wonderful” for us both. We’re outside of section six. I don’t think we should be pursuing it at all, but if we are it shouldn’t be “negotiated”. We should be submitting a “shoot for the moon proposal” and the company can either take it or leave it! Then hopefully our union would still allow us to have an input at some point.
To be clear, I don’t believe we should be pursuing this at all, but if we are, there should be ZERO negotiating required.


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As opposed to section six negotiations, the parties are not obligated to negotiate. So if either side shoots for the moon, the other side can simply walk away and never look back. Typically, negotiating outside section six (LOAs, and MOUs), its done because each party have mutual interests that don’t require federal law that forces them to negotiate in good faith. So if you were to shoot for the moon during these negotiations, you might as well just save your energy because it wouldn’t go anywhere.

NewOldGuy 10-14-2018 09:37 AM

LAX, that’s exactly my point. This VB will already weaken our future negotiation stance in future contract negotiations. So if it’s not “the moon”, we shouldn’t even bother. It should be the moon or nothing at all.


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UnusualAttitude 10-14-2018 09:53 AM


Originally Posted by NewOldGuy (Post 2691141)
LAX, that’s exactly my point. This VB will already weaken our future negotiation stance in future contract negotiations. So if it’s not “the moon”, we shouldn’t even bother. It should be the moon or nothing at all.


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I couldn’t agree with you more. Unfortunately having spoken to several reps they completely disagree.

-UA

kronan 10-15-2018 12:12 PM

[/COLOR]Originally Posted by kronan View Post
Quick question. Why on earth would the Union do that?

For the same reason the union sold the last contract with misinformation.

The real answer is they wouldn't. And there was no misinformation last time. SL apparently didn't take any notes on deviation issues, but that's a long way from declaring it misinformation. And all of the other issues in the TA were highlighted by individuals both in the Union, or here. Or are you now arguing that there was NOBODY on APC irked with the TA?


2nd Question. How long does it take investments to snap back from the typical downturn?

It has taken as long as 13 years since I have been here.
13 Years? Really. Guess that means there's another 3 years to go until my Investments recover from the Worst, absolutely worst economic collapse in my life time. Doesn't quite match up with the performance data my IRA, Vanguard, and Quicken are outlining.
Not even the Stock Price for FedEx. Pretty sure I recall something like 50$ a share back in 2008



3rd Question. Assuming there's No Floor....why would there be a hurdle rate?

Look at the presentations to see why there is a hurdle rate.
They Go hand in hand. Shared reward in good times.
No impact during the okay times. Potential to drop to the Floor Benefit in the bad times


4th Question. You seem to be implying that there's no Bottom to the value of the notional shares the VB plan creates. But if there's no Bottom, exactly what does the PBGC guarantee? And why should FedEx pay premiums if the PBGC insurance is worthless?

The PBGC doesn't guarantee what the plan is worth. They guarantee if the plan goes under, that they will assume payments, at a discounted rate usually.

PBGC doesn't guarantee a discounted rate. They provide a maximum benefit. Ranging roughly from 42k-65k (Age 60-65) You seem to be implying that in a market collapse the VB payout would go to 0...which isn't the case, expectations are a 2% floor for Pension benefits

5th Question. If I believe the Internet rumors of "Not a Single Person I've talked to is Pro VB plan"...how on Earth would something that anecdotally 90% of FedEx pilots are opposed to with a 2% floor, pass without a floor?

Because the union will convince enough people that their plan is so secure, it doesn't need a floor. Just like they convinced enough people that they knew what lie flat seats and known reserve days meant.

And Yet...that's not in any way shape, or form, what the Union is proposing. And there's been more than one person who's taken the time to add up all the Reserve Days post VTO release and they've found, drum roll please, 80% of Known R days published in the bidpack.
And again, read the grievance on lie flat seats. We essentially lost because we had NO Documentation that supported SL's contention.
One could, and perhaps should, wonder whether he really asked the question or simply dreamed he did...but that's a long way from believing he intentionally "lied" during the ratification period and then convinced ALPA to spend the $$ Grieving the issue rather than fessing up

pinseeker 10-15-2018 01:16 PM


Originally Posted by kronan (Post 2691694)
And Yet...that's not in any way shape, or form, what the Union is proposing. And there's been more than one person who's taken the time to add up all the Reserve Days post VTO release and they've found, drum roll please, 80% of Known R days published in the bidpack.
And again, read the grievance on lie flat seats. We essentially lost because we had NO Documentation that supported SL's contention.

So why did the union put out a message complaining about the VTO's and the company taking away reserve lines? Are you saying that they are just complaining about what they sent out for ratification and it passed? OK.:rolleyes:

The misinformation was that the new pay rates equated to a 3% per year increase since the amenable date. Our current MEC Sec and future block 4 rep both proved that was not true, yet the NC and MEC president kept saying it. Misinformation and a sales job!

FrankTheTank 10-15-2018 01:21 PM

You want me to trust the Union.. Show me the survey results! What are they hiding and not telling us?

badflaps 10-15-2018 01:56 PM

PBGC is over rated, while a number of years back, twenty-five years came out to $2334. a month. I hear stories of recent high $5000's but no verification. Plus they are big time in the hole.:eek:

Fdxlag2 10-15-2018 02:21 PM


Originally Posted by kronan (Post 2691694)
PBGC doesn't guarantee a discounted rate. They provide a maximum benefit. Ranging roughly from 42k-65k (Age 60-65) You seem to be implying that in a market collapse the VB payout would go to 0...which isn't the case, expectations are a 2% floor for Pension benefits?

So if the PBGC guarantees the same payout for both plans doesn’t it follow that the PBGC “premiums” will be the same for both plans?

golfandfly 10-15-2018 02:52 PM


Originally Posted by Fdxlag2 (Post 2691773)
So if the PBGC guarantees the same payout for both plans doesn’t it follow that the PBGC “premiums” will be the same for both plans?

I am not saying this is true or not, but was recently told that the PBGC would not guarantee both pensions (our current A plan and the variable). This could be complete nonsense, I have absolutely no idea.

Fdxlag2 10-15-2018 03:08 PM


Originally Posted by golfandfly (Post 2691785)
I am not saying this is true or not, but was recently told that the PBGC would not guarantee both pensions (our current A plan and the variable). This could be complete nonsense, I have absolutely no idea.

I think the actual rule is they will pay one pilot for one plan. My only point you can’t pretend the stabilized variable (giant shrimp) plan can save PBGC payments if the payout is the same.

golfandfly 10-15-2018 03:35 PM


Originally Posted by Fdxlag2 (Post 2691792)
I think the actual rule is they will pay one pilot for one plan. My only point you can’t pretend the stabilized variable (giant shrimp) plan can save PBGC payments if the payout is the same.

Well, if this is actually true, this is a huge issue. Granted, I’m already a no voter, but this would be a nonstarter for many of us.

pinseeker 10-15-2018 03:52 PM


Originally Posted by golfandfly (Post 2691785)
I am not saying this is true or not, but was recently told that the PBGC would not guarantee both pensions (our current A plan and the variable). This could be complete nonsense, I have absolutely no idea.

Like you said, if this is true, it could have huge implications on retirement. We give up our A plan with a soft freeze, but that money isn't protected under the PBGC. What would happen the pilot that has 15 years, we go to the VB plan, and 9 years from now the A plan gets terminated. All of that soft freeze money could be gone.:mad:

pinseeker 10-16-2018 11:06 AM


Originally Posted by kronan (Post 2691694)
[/COLOR]


2nd Question. How long does it take investments to snap back from the typical downturn?

It has taken as long as 13 years since I have been here.
13 Years? Really. Guess that means there's another 3 years to go until my Investments recover from the Worst, absolutely worst economic collapse in my life time. Doesn't quite match up with the performance data my IRA, Vanguard, and Quicken are outlining.
Not even the Stock Price for FedEx. Pretty sure I recall something like 50$ a share back in 2008



In 1999, the DOW reached $11400. In 2012, 13 years later, it was $12800. That's a 12.3% increase in 13 years. Some snapback. As a matter of fact, if the DOW had just met the 5% hurdle rate that the MEC is proposing, the DOW should be around $27500 today. Last I checked, it was still under $26000. In Jan 1999 the S&P was at about $1250. In Jan 2012, it was at $1300. That's a $50, or 4% increase in 13 years.

Reese 10-16-2018 12:39 PM

DOW Scenario:
Dec 1999: 11,497
Dec 2010: 11,577
Dec 2012: 13,104

Say your account was worth $250,000 in Dec 1999.
You invest $2,500/quarter into a DOW index fund.

Total Investment in Dec 2012: $382,500
Account Value: $497,250
Total Return: ~30% Simplified Annual Return: 2.3%

S&P500 Scenario:
Jan 1999: 1,279
Jan 2012: 1,312

Again, your account was worth $250,000 in Dec 1999.
You invest $833/month into an S&P 500 index fund.

Total Investment $380,000
Account Value: $465,950
Total Return: ~25% Simplified Annual Return 1.9%

The timespan from 1999-2012 wasn't great to say the least (one correction, one recession), but given it was a pretty rough 12-13 years, if you stayed invested, you fell just short of keeping up with inflation (2.5%).

Now, continue the dollar cost averaging after a recovery, and in Oct 2018...

DOW
Total Invested: $450,000
Account Value: $1.14M
Total Return: ~150% Simplified Annualized Return: 8.1%

S&P500
Total Invested: $447,420
Account Value: $1.25M
Total Return: ~179% Simplified Annualized Return: 9.4%

Annual Inflation from 1999-2018: 2.2%

If you're buying high and selling low, that's your fault. If you're not staying invested, that's your fault.

But the VBP will essentially dollar cost average throughout it's life. So simply comparing the DOW/S&P500 numbers from one year to the next and saying it's the "breakeven" point, doesn't fully grasp the big picture of compound interest and dollar cost averaging.

TonyC 10-16-2018 01:00 PM


Originally Posted by Reese (Post 2692296)

But the VBP will essentially dollar cost average throughout it's life. So simply comparing the DOW/S&P500 numbers from one year to the next, doesn't fully grasp the big picture of compound interest and dollar cost averaging.


I wouldn't consider one purchase each year to be dollar cost averaging. That's what the notional Variable Benefit Plan does. Calculate Annual earnings, calculate share price, determine number of new shares to be added to your Hope Chest.

And there will be no compounding of interest involved in this scheme. Your X1 "pancakes" you get in the first year will still be X1 pancakes the day you retire, and the X2 pancakes you get in the second year will still be X2 pancakes. They won't be working hard making more pancakes along the way. When it comes time to retire, the number of pancakes you'll have will be the sum of the pancakes you earned each year along the way.

The only VARIABLE will be the value of ALL of your pancakes, which you won't know until you retire. Every pancake will have the same value, regardless of when they were accumulated, and that value will be determined by how well the fund performs that last year. If it happens to be a bad year, too bad, so sad for you. If we've negotiated a floor, at least we'll have that working for us. If we've negotiated an option to leave the money in the account and wait for a rebound, good luck with that.

But, sorry, no compounding of interest. In fact, comparing the the DOW / S&P 500 numbers from one year to the next is EXACTLY pertinent to that situation, that decision.







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Reese 10-16-2018 01:03 PM

In comparison, the A fund lost 38% of it's value between 1999-2012, and 50% from 1999-2018.

Reese 10-16-2018 01:08 PM


Originally Posted by TonyC (Post 2692310)
I wouldn't consider one purchase each year to be dollar cost averaging. That's what the notional Variable Benefit Plan does. Calculate Annual earnings, calculate share price, determine number of new shares to be added to your Hope Chest.

And there will be no compounding of interest involved in this scheme. Your X1 "pancakes" you get in the first year will still be X1 pancakes the day you retire, and the X2 pancakes you get in the second year will still be X2 pancakes. They won't be working hard making more pancakes along the way. When it comes time to retire, the number of pancakes you'll have will be the sum of the pancakes you earned each year along the way.

The only VARIABLE will be the value of ALL of your pancakes, which you won't know until you retire. Every pancake will have the same value, regardless of when they were accumulated, and that value will be determined by how well the fund performs that last year. If it happens to be a bad year, too bad, so sad for you. If we've negotiated a floor, at least we'll have that working for us. If we've negotiated an option to leave the money in the account and wait for a rebound, good luck with that.

But, sorry, no compounding of interest. In fact, comparing the the DOW / S&P 500 numbers from one year to the next is EXACTLY pertinent to that situation, that decision.







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You've got me there, not sure what the contribution timing would be, maybe once per year, maybe quarterly, but probably not monthly. In a way, still dollar cost averaging, but dividends/reinvestments are still compounding.

However, common misconception about the "pancake" belief.

You're earning shares/pancakes throughout your career. The individual share value/price goes up and down depending on the market, sometimes you earn share at a high price, sometimes at a low price. (but those shares will act like shares of an index fund).

When you retire, you can choose a "locked" payout, but you can also choose a "variable" payout. If the market is at an all time high, maybe "lock" in your pension (but you lose inflation protection in the long run). Market is down when you retire, chose the "variable" payout, and when the market recovers, so will your pension.

Reese 10-16-2018 01:42 PM

Think of it this way, you've accumulated "pancakes"/shares over your career. Let's say the year you retire your X number of "pancakes" are worth $1M that could pay a dividend/pension of an arbitrary 3%, so $30,000/year. Your min accrual/base value says those shares can never be worth less than $500,000, ie, $15,000/year.

You could "lock in" that pension of $30,000/year if you wanted to and regardless of the market performance from then on, you'd get $30,000/year, doesn't matter if the worth of your pancakes drop to 0(extreme scenario obviously) or climb to $2M. Essentially a DB/fixed annuity.

But if you choose the "variable" pension option, then that first year you get $30,000.

But over the next 3 years your pancakes increase in worth to $1.5M, now you're receiving a 3% dividend of $45,000/year.

Over the years 3-5, the market is flat, and your pancakes/shares' worth remain at $1.5M, pension $45k.

At year 6 Amazon declares bankruptcy, and now your shares are worth $250,000. Your annual pension is to it's lowest possible level of $15k/year. (min accrual/guaranteed benefit).

As Kronan, UA, etc have pointed out, all of this is to be negotiated.

We don't want our good years that exceed the hurdle rate to be set aside and used as a surplus to fund our bad years. We want our good years to remain our good years. And in bad years, the COMPANY needs to pony up to make us whole and "guarantee" that min accrual/benefit with additional contributions (similar to a DB plan).

That's what the yellow bar on the benefit modular is showing you, the "min accrual benefit" in retirement regardless of market performance.

You can continue to theorize what the dudes with over 25 are gonna get and whether or not the folks in the middle are getting screwed, but understanding the basics of a VB plan is fundamentally important.

https://www.soa.org/News-and-Publica...olatility.aspx

TonyC 10-16-2018 01:54 PM


Originally Posted by Reese (Post 2692312)

In comparison, the A fund lost 38% of it's value between 1999-2012, and 50% from 1999-2018.


And whose problem is that? Not mine, because The Company still owes me the ...

... wait for it ...


... DEFINED Benefit


The same thing happens to the Variable Benefit Fund and the benefit I get is based on the poor performance of the fund in that last year.




Originally Posted by Reese (Post 2692316)

You've got me there, not sure what the contribution timing would be, maybe once per year, maybe quarterly, but probably not monthly. In a way, still dollar cost averaging, but dividends/reinvestments are still compounding.


What dividends? What reinvestments? I don't get any of that. The FUND will benefit, but it won't affect the number of shares I hold.




Originally Posted by Reese (Post 2692316)

However, common misconception about the "pancake" belief.

You're earning shares/pancakes throughout your career. The share value goes up and down depending on the market(and within those shares is compounding due to dividends).


No, there is no misconception here. The value of shares at the end of year one determines how many pancakes you get for year one. After that, and until the day you retire, it doesn't matter what the market or the fund does, you have exactly that many pancakes from year one. On the day you retire, the final year's performance of the fund determines the value of those pancakes, along with all of the other pancakes collected from each subsequent year. What happened in between collecting the pancakes and retiring doesn't matter. They don't make more pancakes, and they aren't worth any more or less because of fantastic or dismal performance of the fund in any year in between. The worth of every pancake you've ever earned is determined by the performance of the fund the last year before you retire.

If during your 25 years of collecting pancakes the fund outperforms your wildest dreams for 24 years, and then falls off the cliff in the last year, the value of your retirement pancakes will be determined by the horrible last year -- unless we've negotiated a floor. The total value of the retirement fund at the end of that 25 years may even far exceed the total value of the retirement fund at the beginning of the 25 years, but that doesn't matter, either. It's the performance of the fund in that year that matters.

Superperformance in years 20-24 could be a setup for an ironic finish.




Originally Posted by Reese (Post 2692316)

When you retire, you can choose a "locked" payout, but you can also choose a "variable" payout. If the market is at an all time high, maybe "lock" in your pension (but you lose inflation protection in the long run). Market is down when you retire, chose the "variable" payout, and when the market recovers, so will your pension.


IF an option is negotiated, and the Variable Benefit Plan results in a payout that's untenable, you can HOPE things will get better, and live off of vienna sausage and ramen noodles in the meantime.

And to be clear, it's not "market down" or "market recovers" that matters -- it's the performance of the Pension Account that matters. Who do you trust to run that?






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TonyC 10-16-2018 01:57 PM


Originally Posted by Reese (Post 2692341)

We don't want our good years that exceed the hurdle rate to be set aside and used as a surplus to fund our bad years. We want our good years to remain our good years. And in bad years, the COMPANY needs to pony up to make us whole and "guarantee" that min accrual/benefit with additional contributions (similar to a DB plan).


Then you don't want what the MEC is selling.






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