I’m not sure if this is the direction your question is going, but here is what I found from a brochure describing sponsor premiums.

Even if this is True, Do I Still Have to Pay Big Premiums to the PBGC to Sponsor a DB Plan?

The variable benefit plan is a DB plan and is subject to Pension Benefit Guaranty Corporation (PBGC) premiums. However, the major portion of the premiums paid by current traditional DB plan sponsors is in the “variable rate premium” portion. The variable rate premium is a percentage of the amount of underfunding for the plan. Thanks to three different Congressional actions, this premium, which was less than 1% just a few years ago, is scheduled to increase to over 4% of the underfunding of the plan in a few years. But with the variable benefit design, the plan will always be very close to 100% funded because there is no investment risk by the sponsor. A plan with no underfunding does not pay variable rate premiums!

It is also important to note that as long as the hurdle rate is at least 5%, the plan is not considered a “statutory hybrid plan” per final IRS regulations and thus would be exempt for those special rules.

Findley: Variable Benefit Plan Brochure

 

Great you can Google - but you still didn't answer my question. You said it was too expensive - so tell us oh wise one what is the cost to FedEx.

 

Good question! The reason this variable plan is never underfunded is probably because it pays out less to retirees when the underlying investments don’t do well. the line in that brochure that there is no investment risk for the company means exactly that - the company just pays out less to retirees.

the stabilization fund of our proposed plan is supposed to account for this and not payout less to retirees but it is a major sticking point with the company and hasn’t been fully explained in my opinion. If the PBGC is going to guarantee our new plan with constant Payout liabilities and a volatile underlying fund mix the premiums would be high IMO.

Also - if the stabilization fund makes the new plan more expensive for the company I don’t see why we don’t ask for that as improvements on the current proven plan.

 

That will lead to significant spillover for any mid-level 75 Captain, senior WB FO, and all WB Captains (assuming C/O Cap). I’d prefer to utilize tax advantaged or retirement focused options (DB, Max out HSA, etc.). If you want pay, go directly for the hourly rate.

 

the cap issues are contractual for the most part right and not from the irs?

If we get a 15% B fund on 285k of pensionable earnings for 2020, that is 42k into each b fund from the company leaving only 15k to put in ourselves to reach the 57k limit for the year.

if you make 360k in this example the 15% comes out to 54k from the company and a mere 12k cash over cap that could be paid.

so our contract is the issue with spillover not so much the irs limits right? Then let’s fix the B fund too.

 

Long time, no see...

Pursuing the Stabilized Variable Plan is problematic for numerous reasons many of you have already mentioned - and negotiating the appropriate “hurdle rate” hasn’t even been mentioned

A typical DB fund is invested in 50% stocks & 50% bonds, because it must not only grow, but actually pay out benefits to current retirees.

Anyone seen the current yield on a 10 year treasury?

Anyone know the Feds current plan for interest rates?

Anyone know what happens to the value of bonds when rates eventually do rise?

(Please research & understand the return from bonds over the past 15 years won’t be replicated for quite some time)

Negotiating a stabilized VB plan with a “hurdle rate“ anywhere above 3% would be naive and irresponsible.

With that said, I propose...

Keep current A Fund structure (High 5 FAE, 25 years at 2%) with 2 changes:

Index current $260K cap to the 401(a)(17) limit.
(Currently $285K)

This limit is adjusted annually by Federal Govt using an inflation index similar to that used by Social Security and Military Retiremets. Not huge, but not zero and wouldn’t require renegotiation

Additionally, allow 1% increase for YOS between 26-30 years

So 30 year career pays (25 x 2% + 5 x 1%) = 55% of High 5 FAE

(Note: This alone is a 10% increase for guys who want to work longer),

And increase B fund from 9% to 12% over the life of the next contract

(Note: Our B fund has grown from 5% to 9% over the past 14 years)

And finally, Increase/remove B Fund limit paying out “Cash over Cap”

In this plan, there are reasonable increases for all pilots - immediately and in the future

In Unity,
DLax

 

You've been missed, DLax.

And where, oh where, is Raptor?

 

I don’t think you’ll find any disagreement with your proposal on this board. I think it would be ideal.

One thing I’ll mention in regards to indexing to the IRS Limit is that is not guaranteed to always index up. As part of the Omnibus Bill in 1993, it was actually indexed down from $235,000 to $150,000. This regulation would not affect the VBP.

Max Compensation Limit


Variable Benefit Plan March 2018
Fast Forward to 9:09

 

You're spot on with all of this.

 

You are really an idiot. Do you realize the consultants have made an incredible amount of money selling us this ridiculous plan. One that the company laughed at.