2% pay raise in Oct 2020
09-05-2020 | 05:17 PM
#271
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Joined: Apr 2006
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From: 767 CA
i know last time some, or at least the IND rep (who is now retired) voted to send the TA to the whole union for a vote because he (they) didn't think it was his (their) job to give it a thumbs up or down. In reality it is the MECs job to decide if it is the best we can do. The union as a whole can only say yes or no. The MEC can say, no its not good enough yet, do some more negotiating
09-05-2020 | 06:17 PM
#272
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From: Gear Monkey
I think if anyone had said changing the Earnings Cap to $285k was a huge win and cost the company a ginormous amount of $$$, they'd have been laughed off of this forum.
So, Dr K. Let's assume that the PSPP was considered, adopted, and approved 5 years ago...with a delayed implementation-so first retirees hit the street in Dec 31st of 2018.
The nitty gritty that we know of the PSPP is that it requires an annual contribution into our newly split off Pilot Only Retirement Trust fund. Let's assume a 1% salary contribution for this example. Let's assume 200 pilots retire each year 2018-2020. Let's assume the stock market loses 30% each year.
Pilot payroll is in the 1.2B range, so that's a lot of zeros there 1,200,000,000
1% of that is $12,000,000
2018 the DC limit was $275,000
So at 200 per, that's $1,100,000 of pension payout (assuming a 2% floor)
So, at year end we wind up with $10,900,000 minus 30% is $7,630,000
Plus $12,000,000 gets us to $19,630,000
DC limit was $280,000 so that's $1,120,000.
Year 1 folks would draw $1,100,000
So that puts our Trust at $17,410,000 minus 30% = $12,187,000
Plus $12,000,000 gets us to $24,187,000
DC Limit this year is $285,000 so that's $1,140,00
Year 1 folks another $1,100,000
Year 2 folks another $1,200,000
That puts our Trust at $20,827,000 minus 30% = $14,578,000
Rinse and repeat.
Hopefully it's a no brainer that year after year after year after year of 30% losses is going to eventually cause some liquidity issues in our Pension.
But how likely is that?
Or better yet, how likely is FedEx to survive an economic implosion like that. Painful for me to imagine how deep the furloughs would actually go.
So, Dr K. Let's assume that the PSPP was considered, adopted, and approved 5 years ago...with a delayed implementation-so first retirees hit the street in Dec 31st of 2018.
The nitty gritty that we know of the PSPP is that it requires an annual contribution into our newly split off Pilot Only Retirement Trust fund. Let's assume a 1% salary contribution for this example. Let's assume 200 pilots retire each year 2018-2020. Let's assume the stock market loses 30% each year.
Pilot payroll is in the 1.2B range, so that's a lot of zeros there 1,200,000,000
1% of that is $12,000,000
2018 the DC limit was $275,000
So at 200 per, that's $1,100,000 of pension payout (assuming a 2% floor)
So, at year end we wind up with $10,900,000 minus 30% is $7,630,000
Plus $12,000,000 gets us to $19,630,000
DC limit was $280,000 so that's $1,120,000.
Year 1 folks would draw $1,100,000
So that puts our Trust at $17,410,000 minus 30% = $12,187,000
Plus $12,000,000 gets us to $24,187,000
DC Limit this year is $285,000 so that's $1,140,00
Year 1 folks another $1,100,000
Year 2 folks another $1,200,000
That puts our Trust at $20,827,000 minus 30% = $14,578,000
Rinse and repeat.
Hopefully it's a no brainer that year after year after year after year of 30% losses is going to eventually cause some liquidity issues in our Pension.
But how likely is that?
Or better yet, how likely is FedEx to survive an economic implosion like that. Painful for me to imagine how deep the furloughs would actually go.
I'm trying to understand your model and your math above.
In the first year of the payout, your 200 pilots get 2% of $275,000 because they only had 1 year in the plan - so that's 2% x 1 x $275,000 = $5,500 per pilot....x 200 pilots = $1,100,00 total....correct?
In the second year, it appears your next 200 pilots get 2% of $280,000, but once again, you only multiply that by 1 year....2% x 1 x $280,000 = $5,600 per pilot....x200 pilots = $1,120,000....correct?
If so, I think this is in error. The pilots retiring in the second year, have 2 years of credit in the new retirement plan.
Their amount would be twice what you estimate: 2% x 2 years x $280,000 = $11,200 per pilot.....x200 pilots = $2,240,000
And subsequently, the 3rd group to retire would get: 2% x 3 years x $285,000 = $17,100 per pilot.....x200 pilots = $3,420,000
Extrapolate out to a 25 or 30 year career, and we see this 2% floor grows the total liability for each "year group" of retirees each year.
For example, if over the next 25 years the DC limit grew at 1% per year (approximately 28.24% when compounded), it would be $365K.....and that years floor payout would be: 2% x 25 years x $365,000 = $182,500 per pilot....x200 pilots = $36,500,000
Plus, all the other payouts for the other year groups 1 thru 25. A rough guess (without a spreadsheet) is that total would be $470,250,000 for all year groups. It would grow substantially larger each year, as all subsequent year groups would have about 25 years (or even more) in the new plan.
Bottom line, I'm unsure the modeling you outline above is accurate for the "2% guaranteed floor", and thus the plans ability to sustain a 30% loss every year and remain viable is also questionable.
In Unity,
DLax
09-05-2020 | 06:49 PM
#273
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Joined: May 2015
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i know last time some, or at least the IND rep (who is now retired) voted to send the TA to the whole union for a vote because he (they) didn't think it was his (their) job to give it a thumbs up or down. In reality it is the MECs job to decide if it is the best we can do. The union as a whole can only say yes or no. The MEC can say, no its not good enough yet, do some more negotiating
We are pilots with no formal training in this field, negotiating against Company attorneys with decades of experience, who are incentivized to ensure that our mistakes to us appear innocuous, yet are significant enough to fail the mediation litmus test...It is subtle, but beyond our appreciation.
I can go on ad nauseam with examples, however what I have learned over the years watching this process is this:
DO NOT GIVE UP ANYTHING you truly value...Discussions of giving up a defined benefit plan for some unknown plan that might benefit some while abandoning others is just silliness....Our Union can’t negotiate what “lie flat seats” means, how can you expect them to negotiate something as complex as the variable plan?...As others have said, there are ways to expand our retirement without sacrificing the defined benefit plan...(Cash over cap is an example)
I attended the “Dog and Pony” show associated with the ratification of the 2015 Contract and was struck by one statement made by our Union leadership at that time...That statement was: “In this process, we didn’t leave one dime on the table...Not one dime.”
Not to diminish the efforts of our negotiators and their commitment, but I still wonder if that was a true statement, or if they just ran out of money, and resolve...What happens if that same thing happens when it’s time to negotiate our retirement?
Last edited by Miso; 09-05-2020 at 06:59 PM.
09-05-2020 | 06:58 PM
#275
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Joined: Jul 2007
Posts: 3,203
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From: Gear Monkey
Which benchmark was used in the modeler for equities?
Which benchmark was used in the modeler for bonds?
What asset allocation was used in the modeler?
What are the current third party 10-year forecasts (i.e Vanguard, Fidelity, Schwab, Morningstar, etc) for both equities and bonds?
What annual pay increase was used?
What annual increase in the IRS 401(K) Earnings Cap was used?
What hurdle rate was used?
What (if any) "cap" was used on the funds annual return? (....."excess" returns above this cap would NOT be used to increase a retirees benefit, rather they would be held in reserve to create a stabilization fund)
How many pilots understand how the assumptions above affect their actual future payout in the Variable Benefit Plan?
How sensitive are the modeler results to variations in the estimated parameters?
In Unity,
DLax
Which benchmark was used in the modeler for bonds?
What asset allocation was used in the modeler?
What are the current third party 10-year forecasts (i.e Vanguard, Fidelity, Schwab, Morningstar, etc) for both equities and bonds?
What annual pay increase was used?
What annual increase in the IRS 401(K) Earnings Cap was used?
What hurdle rate was used?
What (if any) "cap" was used on the funds annual return? (....."excess" returns above this cap would NOT be used to increase a retirees benefit, rather they would be held in reserve to create a stabilization fund)
How many pilots understand how the assumptions above affect their actual future payout in the Variable Benefit Plan?
How sensitive are the modeler results to variations in the estimated parameters?
In Unity,
DLax
09-05-2020 | 07:08 PM
#276
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Joined: Mar 2018
Posts: 95
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Kronan -
I'm trying to understand your model and your math above.
In the first year of the payout, your 200 pilots get 2% of $275,000 because they only had 1 year in the plan - so that's 2% x 1 x $275,000 = $5,500 per pilot....x 200 pilots = $1,100,00 total....correct?
In the second year, it appears your next 200 pilots get 2% of $280,000, but once again, you only multiply that by 1 year....2% x 1 x $280,000 = $5,600 per pilot....x200 pilots = $1,120,000....correct?
If so, I think this is in error. The pilots retiring in the second year, have 2 years of credit in the new retirement plan.
Their amount would be twice what you estimate: 2% x 2 years x $280,000 = $11,200 per pilot.....x200 pilots = $2,240,000
And subsequently, the 3rd group to retire would get: 2% x 3 years x $285,000 = $17,100 per pilot.....x200 pilots = $3,420,000
Extrapolate out to a 25 or 30 year career, and we see this 2% floor grows the total liability for each "year group" of retirees each year.
For example, if over the next 25 years the DC limit grew at 1% per year (approximately 28.24% when compounded), it would be $365K.....and that years floor payout would be: 2% x 25 years x $365,000 = $182,500 per pilot....x200 pilots = $36,500,000
Plus, all the other payouts for the other year groups 1 thru 25. A rough guess (without a spreadsheet) is that total would be $470,250,000 for all year groups. It would grow substantially larger each year, as all subsequent year groups would have about 25 years (or even more) in the new plan.
Bottom line, I'm unsure the modeling you outline above is accurate for the "2% guaranteed floor", and thus the plans ability to sustain a 30% loss every year and remain viable is also questionable.
In Unity,
DLax
I'm trying to understand your model and your math above.
In the first year of the payout, your 200 pilots get 2% of $275,000 because they only had 1 year in the plan - so that's 2% x 1 x $275,000 = $5,500 per pilot....x 200 pilots = $1,100,00 total....correct?
In the second year, it appears your next 200 pilots get 2% of $280,000, but once again, you only multiply that by 1 year....2% x 1 x $280,000 = $5,600 per pilot....x200 pilots = $1,120,000....correct?
If so, I think this is in error. The pilots retiring in the second year, have 2 years of credit in the new retirement plan.
Their amount would be twice what you estimate: 2% x 2 years x $280,000 = $11,200 per pilot.....x200 pilots = $2,240,000
And subsequently, the 3rd group to retire would get: 2% x 3 years x $285,000 = $17,100 per pilot.....x200 pilots = $3,420,000
Extrapolate out to a 25 or 30 year career, and we see this 2% floor grows the total liability for each "year group" of retirees each year.
For example, if over the next 25 years the DC limit grew at 1% per year (approximately 28.24% when compounded), it would be $365K.....and that years floor payout would be: 2% x 25 years x $365,000 = $182,500 per pilot....x200 pilots = $36,500,000
Plus, all the other payouts for the other year groups 1 thru 25. A rough guess (without a spreadsheet) is that total would be $470,250,000 for all year groups. It would grow substantially larger each year, as all subsequent year groups would have about 25 years (or even more) in the new plan.
Bottom line, I'm unsure the modeling you outline above is accurate for the "2% guaranteed floor", and thus the plans ability to sustain a 30% loss every year and remain viable is also questionable.
In Unity,
DLax
And on that topic DLax - in the event of pension plan termination, the VB/PSPP as a "fully PBGC compliant" fund (as it is advertised) will only payout based on the PBGC's estimation of the plan's level of funding and expected future payouts (not necessarily promised payouts). The PBGC's payout determination could be anywhere from hundreds of dollars per year to a max of 65K$ per year for the terminated pension fund. The way this VB/PRSPP avoids the funding issues raised by the company as an impediment to improving the current A plan could be our undoing in the event of plan termination. Look around and let's face the fact that plan termination is a real threat in our future and plan accordingly.
While we would hope to receive 65K per year, this alternative funding that is a fraction of our current A plan's funding methodology would probably yield in a fraction of that 65k from the PBGC. This is critical to understand, that the buzz phrase "fully PBGC compliant" has wide variety of meanings when it is shown on powerpoint to us. What is being actively advertised as an ingenious financial move to us (the low funding requirements of the new plan while still being PBGC compliant) could later prove to be disastrous.
The PBGC could easily demonstrate that our plan could never produce a 2% floor and was thus a true variable plan and we understood the investment risks associated with this plan when it was ratified by the membership.
It looks to be impossible to have the relatively small funding requirements of variable plan coupled with the higher promised obligations of a traditional pension plan. DR K
Last edited by DR K; 09-05-2020 at 07:31 PM.
09-05-2020 | 07:33 PM
#277
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Joined: Apr 2013
Posts: 1,626
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I was not around prior to CBA 2015 but, the 2015 secondary system was still in place when I was hired. Many guys hatted it because it didn't have a "reasons" report and preferences did not look at seniority. It was a wish with no response at best. Most people hated it. PBS was on property well prior to the 2015 CBA. The new system is way more transparent and has many more options. As a guy who has used both, the new system is 1000 times better..... As for pass over that was a give and everyone who I have talked to knew that was being given up for a "Slot Denial Payment". It obviously doesn't pay as much but that's a give and take. Negotiations is just that. Its not called "demands" for a reason.
You haven't even seen the new secondary system because it hasn't been implemented yet. Read your contract. How many years has it been? What we have now is what ALPA has let FedEx experiment with.
As I said before, the secondary system affected a few number of people. Now PBS affects more people. The old system sucked for a reason because we didn't want that many secondary lines. Now look at how many we have. How much of our bidpack is consumed by PBS. And here someone like you is praising it. Shameful and ignorant at the same time. You are the frog that has been placed in cool water and the temperature is slowly rising.
09-05-2020 | 08:13 PM
#278
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Joined: Jul 2006
Posts: 505
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Another thing to remember with the VBP; is the main selling point to the company is that they can "fix" their costs as much as possible for their projections. In order to do that, the company will be "investing" a set amount each year. Now while the pro-PBS folks like to say that amount will be negotiated. The big problem is that it is a SET amount. You do not get a retirement pancake based on the amount that you earn that year, rather you get a pancake based upon the percentage of the total that you earned. It will not be a "set" amount that you earn. For example, if you earn $200k this year and $300k the next you will not get 1.5 more pancakes this year than last year. You do not earn one pancake for every $XXX. If a FO in HKG earns 8 times what you earn, then he/she gets 8 times the pancakes that you do. It's is all about your earnings compared to everyone else. Unlike everything else we do now, where you earn a percentage of your earnings towards your retirement. I hate to use this year as an example since we'll never see this again. IF we had this plan in 2015, then your pancakes this year would be based upon your total earnings with the "same" amount contributed towards the plan by the company as last year. So everyone flying AVA/Draft will out pancake those that are not doing Draft/AVA, since it's a percentage. So they are taking your pancakes. The total number of pancakes available to be divided up each year remains mostly constant.
If you are a BLG flyer and the average pilot (including training flex/instructors, management, ALPA buy up, etc) is BLG plus 30% then the BLG flyer will get credit for 30% less towards his/her retirement. You will not earn the "estimated", "example", "forecast" or "proposed" credit that you modeled for. The modeler cannot take that into account. The modeler only assumes everyone earns average BLG and then you input how much you say you will make. There's just no way to model forward projections of over earners. Ask yourself based on your day in, day out conversations with others; are you an average earnings pilot or above or below. If the average is 6 months of carryover and you do zero than you are a huge below average, so you will get fewer pancakes. In our current system, your earning compared to others do not matter. You either get a good year or not and you get 9% on what you earn. You either hit your max contribution limit or not. But it's all about what you earn, not what you earn compared to others. Right now, you decide your quality of life vs monetary income and you don't really worry about your retirement being funded other than your B fund and 401k. But they are your decisions, not based upon what someone else decided to make. That's what makes it a Variable Benefit Plan, your benefit varies from year to year, otherwise it would just be a group B fund.
Fund returns are fund returns. We will be 45-50 percentage in stocks, then some % bonds, reinsurance, T-bills, etc. The fund will have to have a large "cash" position since payout will begin almost immediately as pilots retire. The fund will not return 15% in a year nor should it lose 15% in a year. That's the job of the risk assessors. I'd be surprised if we are even near 40% in stocks. The huge portion of the funds will begin to payout within the next 10 years. (about a third of the pilots are over 50) There are actual laws that govern the financial management of retirement funds and percentages that must in available in cash, etc.
If you are a BLG flyer and the average pilot (including training flex/instructors, management, ALPA buy up, etc) is BLG plus 30% then the BLG flyer will get credit for 30% less towards his/her retirement. You will not earn the "estimated", "example", "forecast" or "proposed" credit that you modeled for. The modeler cannot take that into account. The modeler only assumes everyone earns average BLG and then you input how much you say you will make. There's just no way to model forward projections of over earners. Ask yourself based on your day in, day out conversations with others; are you an average earnings pilot or above or below. If the average is 6 months of carryover and you do zero than you are a huge below average, so you will get fewer pancakes. In our current system, your earning compared to others do not matter. You either get a good year or not and you get 9% on what you earn. You either hit your max contribution limit or not. But it's all about what you earn, not what you earn compared to others. Right now, you decide your quality of life vs monetary income and you don't really worry about your retirement being funded other than your B fund and 401k. But they are your decisions, not based upon what someone else decided to make. That's what makes it a Variable Benefit Plan, your benefit varies from year to year, otherwise it would just be a group B fund.
Fund returns are fund returns. We will be 45-50 percentage in stocks, then some % bonds, reinsurance, T-bills, etc. The fund will have to have a large "cash" position since payout will begin almost immediately as pilots retire. The fund will not return 15% in a year nor should it lose 15% in a year. That's the job of the risk assessors. I'd be surprised if we are even near 40% in stocks. The huge portion of the funds will begin to payout within the next 10 years. (about a third of the pilots are over 50) There are actual laws that govern the financial management of retirement funds and percentages that must in available in cash, etc.
09-05-2020 | 08:39 PM
#279
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Joined: Jul 2007
Posts: 3,203
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From: Gear Monkey
Another thing to remember with the VBP; is the main selling point to the company is that they can "fix" their costs as much as possible for their projections. In order to do that, the company will be "investing" a set amount each year. Now while the pro-PBS folks like to say that amount will be negotiated. The big problem is that it is a SET amount. You do not get a retirement pancake based on the amount that you earn that year, rather you get a pancake based upon the percentage of the total that you earned. It will not be a "set" amount that you earn. For example, if you earn $200k this year and $300k the next you will not get 1.5 more pancakes this year than last year. You do not earn one pancake for every $XXX. If a FO in HKG earns 8 times what you earn, then he/she gets 8 times the pancakes that you do. It's is all about your earnings compared to everyone else. Unlike everything else we do now, where you earn a percentage of your earnings towards your retirement. I hate to use this year as an example since we'll never see this again. IF we had this plan in 2015, then your pancakes this year would be based upon your total earnings with the "same" amount contributed towards the plan by the company as last year. So everyone flying AVA/Draft will out pancake those that are not doing Draft/AVA, since it's a percentage. So they are taking your pancakes. The total number of pancakes available to be divided up each year remains mostly constant.
If you are a BLG flyer and the average pilot (including training flex/instructors, management, ALPA buy up, etc) is BLG plus 30% then the BLG flyer will get credit for 30% less towards his/her retirement. You will not earn the "estimated", "example", "forecast" or "proposed" credit that you modeled for. The modeler cannot take that into account. The modeler only assumes everyone earns average BLG and then you input how much you say you will make. There's just no way to model forward projections of over earners. Ask yourself based on your day in, day out conversations with others; are you an average earnings pilot or above or below. If the average is 6 months of carryover and you do zero than you are a huge below average, so you will get fewer pancakes. In our current system, your earning compared to others do not matter. You either get a good year or not and you get 9% on what you earn. You either hit your max contribution limit or not. But it's all about what you earn, not what you earn compared to others. Right now, you decide your quality of life vs monetary income and you don't really worry about your retirement being funded other than your B fund and 401k. But they are your decisions, not based upon what someone else decided to make. That's what makes it a Variable Benefit Plan, your benefit varies from year to year, otherwise it would just be a group B fund.
Fund returns are fund returns. We will be 45-50 percentage in stocks, then some % bonds, reinsurance, T-bills, etc. The fund will have to have a large "cash" position since payout will begin almost immediately as pilots retire. The fund will not return 15% in a year nor should it lose 15% in a year. That's the job of the risk assessors. I'd be surprised if we are even near 40% in stocks. The huge portion of the funds will begin to payout within the next 10 years. (about a third of the pilots are over 50) There are actual laws that govern the financial management of retirement funds and percentages that must in available in cash, etc.
If you are a BLG flyer and the average pilot (including training flex/instructors, management, ALPA buy up, etc) is BLG plus 30% then the BLG flyer will get credit for 30% less towards his/her retirement. You will not earn the "estimated", "example", "forecast" or "proposed" credit that you modeled for. The modeler cannot take that into account. The modeler only assumes everyone earns average BLG and then you input how much you say you will make. There's just no way to model forward projections of over earners. Ask yourself based on your day in, day out conversations with others; are you an average earnings pilot or above or below. If the average is 6 months of carryover and you do zero than you are a huge below average, so you will get fewer pancakes. In our current system, your earning compared to others do not matter. You either get a good year or not and you get 9% on what you earn. You either hit your max contribution limit or not. But it's all about what you earn, not what you earn compared to others. Right now, you decide your quality of life vs monetary income and you don't really worry about your retirement being funded other than your B fund and 401k. But they are your decisions, not based upon what someone else decided to make. That's what makes it a Variable Benefit Plan, your benefit varies from year to year, otherwise it would just be a group B fund.
Fund returns are fund returns. We will be 45-50 percentage in stocks, then some % bonds, reinsurance, T-bills, etc. The fund will have to have a large "cash" position since payout will begin almost immediately as pilots retire. The fund will not return 15% in a year nor should it lose 15% in a year. That's the job of the risk assessors. I'd be surprised if we are even near 40% in stocks. The huge portion of the funds will begin to payout within the next 10 years. (about a third of the pilots are over 50) There are actual laws that govern the financial management of retirement funds and percentages that must in available in cash, etc.
A hybrid approach, combining a guaranteed fixed payout along with a higher, self/custom-invested B fund is a superior approach --- especially in an era of historically low interest rates.
The company's inability to meet their assumed rate-of-return is a primary reason they deem the A fund too expensive. It's not just new accounting rules. Yes, the A fund cap has not increased, but that does not mean it's "present value" hasn't increased.
We can Improve our Total Retirement by increasing B fund contributions and making some minor adjustments to the current A fund.
Let's all ensure our union leadership clearly hears that input, and presents multiple options to increase total retirement.
In Unity,
DLax
09-06-2020 | 04:44 AM
#280
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Joined: Sep 2015
Posts: 34
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There a a ton of reasons why I will not vote for any contract that shifts us to a variable plan. This one is a reason I had not considered. Thank you for your last post. I hope that anyone that commutes, flys BLG, delays upgrades, says no to draft, wants more time with their kids, cares for a sick spouse, child or parent realizes how negatively this will affect their retirement.
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