Earnings Call
09-17-2020, 08:46 AM
#21
Gets Weekends Off
Joined APC: Nov 2005
Position: 757 Capt
Posts: 2,418
Originally Posted by DR K
Quote - "After ratification, my Union sought the actuarial data from FedEx. And finally obtained it after signing a non-disclosure with the company. My Union went outside of ALPA for a hired gun to evaluate FedEx managements claim that improving our Pensions was excessively expensive due to changes in funding, administrative, and indirect costs due to the Pension Protection Act of 2006. And, both consulting groups, with a fiduciary duty to FedEx ALPA...confirmed those costs.
So, you can either believe that. Or rationalize that our hired guns just told our Union what we wanted to hear. You can believe people whose sole business is evaluating finances and pensions. Or you can believe what a Pilot posts on the internet, about how easy it would be for FedEx to improve our Pension. (Certainly doesn't address FedEx's willingness to do so)"
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So how is it again that the company cannot afford a modest A plan increase to our 130k without prohibitive costs yet kiron can get our pension to $357K AND BEYOND with an acceptable amount of stress to the company? They must be actuarial and investing magicians and figured out how a VB/PSPP is not beholden to the "funding, administrative, and indirect costs due to the Pension Protection Act of 2006." It's either (A) a unicorn plan never used in the history of American business or (B) using astronomically high investment returns in its projected performance. FACT.
So, you can either believe that. Or rationalize that our hired guns just told our Union what we wanted to hear. You can believe people whose sole business is evaluating finances and pensions. Or you can believe what a Pilot posts on the internet, about how easy it would be for FedEx to improve our Pension. (Certainly doesn't address FedEx's willingness to do so)"
-------------------------------------------------------------------------------------------------------------------------------------------------------------------
So how is it again that the company cannot afford a modest A plan increase to our 130k without prohibitive costs yet kiron can get our pension to $357K AND BEYOND with an acceptable amount of stress to the company? They must be actuarial and investing magicians and figured out how a VB/PSPP is not beholden to the "funding, administrative, and indirect costs due to the Pension Protection Act of 2006." It's either (A) a unicorn plan never used in the history of American business or (B) using astronomically high investment returns in its projected performance. FACT.
Traditional A plan would have to be at $480k to hit the 50% level.
Using 2%, $130k today would be worth $287k in 40 years.
PSPP would require a Contribution of payroll each and every year.
How much $$ is FedEx currently required to put into our Pension Trust each and every year.
(If you said $0, you'd be correct)
09-17-2020, 08:59 AM
#22
Gets Weekends Off
Joined APC: Nov 2005
Position: 757 Capt
Posts: 2,418
Oh,
And the Returns used to create those examples used the Actual market returns between 1999-2016 (could be wrong on the end date)
For the years of service beyond 2016, assumption was no secret sauce historic returns. In other words, the value of each years pension accumulation based solely on the 2% floor.
So, in your example for the lady lucky enough to have been hired at Age 25 by FedEx, that's 23 years of absolutely No market return to add value to her pension.
And the Returns used to create those examples used the Actual market returns between 1999-2016 (could be wrong on the end date)
For the years of service beyond 2016, assumption was no secret sauce historic returns. In other words, the value of each years pension accumulation based solely on the 2% floor.
So, in your example for the lady lucky enough to have been hired at Age 25 by FedEx, that's 23 years of absolutely No market return to add value to her pension.
09-17-2020, 12:03 PM
#23
Line Holder
Joined APC: Mar 2018
Posts: 95
Originally Posted by kronan
After ratification, my Union sought the actuarial data from FedEx. And finally obtained it after signing a non-disclosure with the company. My Union went outside of ALPA for a hired gun to evaluate FedEx managements claim that improving our Pensions was excessively expensive due to changes in funding, administrative, and indirect costs due to the Pension Protection Act of 2006. And, both consulting groups, with a fiduciary duty to FedEx ALPA...confirmed those costs.
But again I ask you a question specifically in response to this quote of yours - "My Union went outside of ALPA for a hired gun to evaluate FedEx managements claim that improving our Pensions was excessively expensive due to changes in funding, administrative, and indirect costs due to the Pension Protection Act of 2006. And, both consulting groups, with a fiduciary duty to FedEx ALPA...confirmed those costs."
How do these stated regulations and fees THAT APPLY TO DEFINED BENEFIT PLANS, including any associated with the 2006 PPA or ERISA or PBGC premiums, effectively handcuff the company from modestly improving the payout levels of our current A plan for future retirees (us) yet do not prevent the new VB/PSPP from DOUBLING OR TRIPLING the payout for future retirees (also us)?
For this improvement to be the case, either (A) the new plan does not have the same arduous pension trust funding requirements as our current A plan and therefore more of the company contributions can be distributed as retiree income or (B) the plan forecasts its investment performance based on extremely rosy stock market projections alone not the reality of 0% interest rates on fixed income securities and tepid forecasts of stock market returns.
If the case is (A), then I would be very concerned that our plan's new trust would not be funded in a way that would justify the max payout in the event of a PBGC takeover. Wouldn't it stand to reason that if our fund was going to produce almost triple the payout to retirees it would need to be funded in manner consistent with that? Is the new plan going to be funded roughly 3 times the amount of our current A plan? If not, then where are the 2006 PPA restrictions on the VB/PSPP? Could we get shafted like so many other airline pension funds when we inevitably have problems? With the current funding requirements of our A plan, I think that we could reasonably expect to be protected for the max payout allowed by PBGC regulations. In this proposed plan one that no other company has ever used, I think we would be exposed big time to a severe reduction in pension income. If we can get the company to contribute TWO OR THREE TIMES MORE than they currently are, why not apply leverage to our beautiful safe and proven current A plan???
If the case is (B), then it is remarkable how this new professionally managed pension fund will outperform our current professionally managed fund.
Originally Posted by kronan
Oh,
PSPP would require a Contribution of payroll each and every year.
How much $$ is FedEx currently required to put into our Pension Trust each and every year.
(If you said $0, you'd be correct)
PSPP would require a Contribution of payroll each and every year.
How much $$ is FedEx currently required to put into our Pension Trust each and every year.
(If you said $0, you'd be correct)
Fortunately for the company, they are intransigent and have drawn a line in the sand so they don't have to contribute any more ever. Fortunately for us, we have found a plan which avoids the onerous funding requirements of the 2006 PPA and ERISA and PBGC yet can still double or triple our pension income. /sarc
Originally Posted by kronan
So, in your example for the lady lucky enough to have been hired at Age 25 by FedEx, that's 23 years of absolutely No market return to add value to her pension.
If you can only focus on one of my points, I would appreciate that you direct your response to the questions concerning the 2006 PPA and lack of applicability the new VB/PSPP. I really do hope that you can effectively educate me on something that I don't understand here and will ease my concerns about why there are radically different regulations associated with the funding of the new scheme. Dr K
09-17-2020, 09:59 PM
#25
Gets Weekends Off
Joined APC: Apr 2013
Posts: 1,622
Originally Posted by kronan
Yep, that's what we all focused on going into 2015. That FedEx can afford it. Q1 of 6 years ago FedEx's operating income was 987M.
FedEx can easily afford to up the Income replacement ratio for our Intl Capts, that's what my Union told me.
6 years ago FedEx made a direct dealing attempt. A hard freeze to the A plan for a 16.5% Cash over Cap B plan.
Not a shock to me since every private company has eliminated their Pension obligations if they could.
Just laughed at that offer though, because FedEx can easily afford to improve my Pension. My MEC Chairman and NC Chairman told me so.
Then, in the midst of highly profitable years, my NC said they just couldn't get the company to budge on improving my Pension. That it was a line in the sand.
After ratification, my Union sought the actuarial data from FedEx. And finally obtained it after signing a non-disclosure with the company. My Union went outside of ALPA for a hired gun to evaluate FedEx managements claim that improving our Pensions was excessively expensive due to changes in funding, administrative, and indirect costs due to the Pension Protection Act of 2006. And, both consulting groups, with a fiduciary duty to FedEx ALPA...confirmed those costs.
So, you can either believe that. Or rationalize that our hired guns just told our Union what we wanted to hear. You can believe people whose sole business is evaluating finances and pensions. Or you can believe what a Pilot posts on the internet, about how easy it would be for FedEx to improve our Pension. (Certainly doesn't address FedEx's willingness to do so)
The one thing that I know to be absolutely true, is every action FedEx has taken for the past 6 years shows me they want to be out of the Pension business altogether.
To the extent of paying MetLife 210 Million to transfer Pension obligations for 41,000 retirees.
To the extent of giving vested former employees a lump sum, to the extent of $1.3B to 18,300 takers.
So Yes, FedEx is profitable-and can support ponying up a Filet Mignon for all of us.
Equally true in 2015, they just don't want to sign that blank check. Not quite sure why their approach will be different, this time.
But,
I'm just fine working under our current CBA until they do. Might take awhile.
And, don't forget, regardless of what the TA is...we have to show FedEx who's the boss by rejecting it.
FedEx can easily afford to up the Income replacement ratio for our Intl Capts, that's what my Union told me.
6 years ago FedEx made a direct dealing attempt. A hard freeze to the A plan for a 16.5% Cash over Cap B plan.
Not a shock to me since every private company has eliminated their Pension obligations if they could.
Just laughed at that offer though, because FedEx can easily afford to improve my Pension. My MEC Chairman and NC Chairman told me so.
Then, in the midst of highly profitable years, my NC said they just couldn't get the company to budge on improving my Pension. That it was a line in the sand.
After ratification, my Union sought the actuarial data from FedEx. And finally obtained it after signing a non-disclosure with the company. My Union went outside of ALPA for a hired gun to evaluate FedEx managements claim that improving our Pensions was excessively expensive due to changes in funding, administrative, and indirect costs due to the Pension Protection Act of 2006. And, both consulting groups, with a fiduciary duty to FedEx ALPA...confirmed those costs.
So, you can either believe that. Or rationalize that our hired guns just told our Union what we wanted to hear. You can believe people whose sole business is evaluating finances and pensions. Or you can believe what a Pilot posts on the internet, about how easy it would be for FedEx to improve our Pension. (Certainly doesn't address FedEx's willingness to do so)
The one thing that I know to be absolutely true, is every action FedEx has taken for the past 6 years shows me they want to be out of the Pension business altogether.
To the extent of paying MetLife 210 Million to transfer Pension obligations for 41,000 retirees.
To the extent of giving vested former employees a lump sum, to the extent of $1.3B to 18,300 takers.
So Yes, FedEx is profitable-and can support ponying up a Filet Mignon for all of us.
Equally true in 2015, they just don't want to sign that blank check. Not quite sure why their approach will be different, this time.
But,
I'm just fine working under our current CBA until they do. Might take awhile.
And, don't forget, regardless of what the TA is...we have to show FedEx who's the boss by rejecting it.
Originally Posted by Noworkallplay
No such thing as a “great negotiating environment”. The company will always find a reason to not pay labor or “share the wealth”. Although FedEx is doing well, the company will point to the concessions currently going on at other major properties. Its up to the collective group to demand it and hold the line for it. They will not give a penny more than they have to to get a yes vote unless we apply pressure.
09-18-2020, 04:54 AM
#26
Gets Weekends Off
Joined APC: Jan 2011
Posts: 150
Originally Posted by PurpleToolBox
It's almost as if you two were management for the company.
This company knows they can toy with the MEC and negotiating committee, but they know not to upset the entire pilot group. If 5000 of us demand an A plan increase, it will happen.
09-18-2020, 04:57 AM
#27
Banned
Thread Starter
Joined APC: Jun 2018
Posts: 1,838
Originally Posted by PurpleToolBox
It's almost as if you two were management for the company.
09-18-2020, 06:15 AM
#28
Line Holder
Joined APC: Nov 2016
Posts: 56
-- Nice job Dr. K! My comments are in blue.
-- Exactly Dr. K. Here is another question posed to Richard Hudson: (me) Could the plan terminate due to company inability to put more money into stabilization fund? (Hudson) The stabilization fund is an extra layer of funding that typically protects retirees in the event of a market downturn. Funding a stabilization reserve is an option in the variable benefit plan design and not a requirement so it does not need to be funded. If however, there is an extra cash call on the employer to put more cash in the main pension fund which the employer is not able to do, the plan can freeze benefit accruals to help fix the funding crisis. If that is still not sufficient to fix the problem than the plan may be forced to look at termination.
-- I have posted MANY informational materials to the private website for exactly this reason. Some information given by union is factually incorrect and some information on this forum is the same. The website is a repository for US to review documents for ourselves and arrive at whatever conclusion befits us. The site strives to offer readers talking points or better understanding of our current issues regarding retirement.
-- Since site IS private - one must Private Message to get access. People are reviewing my site for accuracy and I welcome others to do the same. Once I feel this product reflects the most accurate information - I will post elsewhere (like JetFlyers).
Originally Posted by DR K
Thanks Kronan. It's really tough nailing down answers by the VB/PSPP supporters.
But again I ask you a question specifically in response to this quote of yours - "My Union went outside of ALPA for a hired gun to evaluate FedEx managements claim that improving our Pensions was excessively expensive due to changes in funding, administrative, and indirect costs due to the Pension Protection Act of 2006. And, both consulting groups, with a fiduciary duty to FedEx ALPA...confirmed those costs."
-- The "hired guns" were companies that sell a product, namely variable defined benefit plans (and they have no "fiduciary duty" to ALPA). The first page linked below shows Blitzstein/Coffing/Kalwarski - Milliman and Cheiron... they all do the same type strategy and sell this to companies (FedEx types). Ironically, our union hired them to "solve" a perceived company problem. These companies are not typically hired by EMPLOYEES or workers to change the companies defined benefit. Companies hire them because their defined benefit is severely underfunded and/or they do not have CBA protected workers, but want to retain them by offering a similar product after discontinuing the original pension. These plans are GOOD for COMPANIES.
https://www.ifebp.org/education/sche...es_Part_II.pdf
How do these stated regulations and fees THAT APPLY TO DEFINED BENEFIT PLANS, including any associated with the 2006 PPA or ERISA or PBGC premiums, effectively handcuff the company from modestly improving the payout levels of our current A plan for future retirees (us) yet do not prevent the new VB/PSPP from DOUBLING OR TRIPLING the payout for future retirees (also us)?
-- Per my recent email correspondence with Richard Hudson, formerly of Cheiron now with First Actuarial, ALL DB plans to include the PSPP continues paying the same to PBGC (no change). The only cost differences year to year under current plan are interest rate and mortality, but since the plan is fully funded (annotated by Annual Reports, latest Quarterly filings, and 5500), FedEx does not need to contribute to "fund" anything. By moving to Variable plan, the company effectively would move this risk to individual and future trust investment company.
For this improvement to be the case, either (A) the new plan does not have the same arduous pension trust funding requirements as our current A plan and therefore more of the company contributions can be distributed as retiree income or (B) the plan forecasts its investment performance based on extremely rosy stock market projections alone not the reality of 0% interest rates on fixed income securities and tepid forecasts of stock market returns.
If the case is (A), then I would be very concerned that our plan's new trust would not be funded in a way that would justify the max payout in the event of a PBGC takeover. Wouldn't it stand to reason that if our fund was going to produce almost triple the payout to retirees it would need to be funded in manner consistent with that? Is the new plan going to be funded roughly 3 times the amount of our current A plan? If not, then where are the 2006 PPA restrictions on the VB/PSPP? Could we get shafted like so many other airline pension funds when we inevitably have problems? With the current funding requirements of our A plan, I think that we could reasonably expect to be protected for the max payout allowed by PBGC regulations. In this proposed plan one that no other company has ever used, I think we would be exposed big time to a severe reduction in pension income. If we can get the company to contribute TWO OR THREE TIMES MORE than they currently are, why not apply leverage to our beautiful safe and proven current A plan???
-- Per email with Richard Hudson: (me)Though most plans have a stabilization feature, if investments decline for a period of time (thinking post Nikkei 225 1989 top), could the defined benefit pay less than the floor? (Hudson Response) Yes, while some actuaries have stated that these plans always remain fully funded this is simply not the case. If you have a long duration of consistent market declines and the plan has a floor benefit, the floor benefit could be put in jeopardy. There are several plan design considerations that can help ensure the floor benefit is paid.
-- "could we get shafted like so many other airline pension funds..." - United 2002 and Delta 2005 bankruptcies were underfunded and went to PBGC. American 2011 was fully funded and remains a "standard termination" in that PBGC saw that pension assets could meet obligations (as required by 2006 Act) and ALL frozen participants will receive everything due (at retirement). FedEx could enter bankruptcy tomorrow and ALL vested participants (over 5 years) would get exactly what was promised because the pension is 103% funded. The 28 Billion in assets would remain protected from creditors and be managed until all participants stop "collecting."
If the case is (B), then it is remarkable how this new professionally managed pension fund will outperform our current professionally managed fund.
-- Pension assets grew 15% year over year for May 19 to May 20. 7.7% over last 15 years (net of all fees). Their growth of nearly 3 billion dollars (nearly 28 billion now) over last year dwarfs the roughly 900 million in payouts.
On this point, in any Defined Benefit plan like our current A plan, a company is required to contribute the amount necessary to fulfill its pension obligations based on our pilot group's actuarial statistics and the investment performance of the trust fund. If the company fails to ensure that the trust is at the 100% funding level, their PBGC premiums skyrocket, the stock price suffers due to weak financials consistent with those outstanding liabilities and mismanagement, and there are similar costly effects that would show up on new company bonds issued. If the pension trust investments are performing well enough to cover those liabilities, then the company does not have to contribute each and every year. What you are unintentionally pointing here out is that the company's liabilities to retirees are not increasing because our contractual pension benefits have not increased, which is a failure in CBA negotiations. If we improved the current A plan and more contributions by the company were required to meet the 100% funding requirements of those liabilities, then they would indeed contribute more to the pension trust fund next year as required.
--"their PBGC premiums will skyrocket" - disagree there. For single employers (FedEx), there is an $83 fee per individual ($423,000 for 5100 pilots, but the pension trust has 185,000 people) and a $45 per $1,000 in "unfunded Vested Benefits." This is essentially 4.5% of an amount of unfunded vested benefits (pilots over 5 years btw). FedEx solved this by issuing 2.3% bonds and voluntarily contributing 1 billion to pension (essentially staying 103% funded and avoiding 4.5% paid to PBGC)... At least that is my understanding and with low rates currently, financially genius move.
Fortunately for the company, they are intransigent and have drawn a line in the sand so they don't have to contribute any more ever. Fortunately for us, we have found a plan which avoids the onerous funding requirements of the 2006 PPA and ERISA and PBGC yet can still double or triple our pension income. /sarc
As to your example of the lady lucky enough to have been hired at Age 25 missing out on years of market returns, your statement demonstrates that you consider the VB/PSPP to be a very BIG B PLAN. An A plan should not designed to be a BIG B PLAN, and your desire to overly subject the A plan to the risks of possible stock market returns actually destroys the benefits of a diversified retirement system consisting of a relatively risk-free fixed income A plan coupled with a B plan/401k that can be subject to more risk according the retiree's individual appetite. We need improvements on the current A plan and B plan, but the proposed plan is really creating a BIG B PLAN to go along with our current LITTLE B PLAN. It really looks like you are wanting to go all in on the stock market with our retirement with the VB/PSPP and reject the relative safety of leveraging our company's solid financials that are also backed by a pension insurance policy and decades of laws and regulations designed to protect the current A plan. The BIG B PLAN would be similar to the LITTLE B PLAN, in the company only has to contribute 9% of pilot payroll to the LITTLE B PLAN and x% of pilot payroll each year to the BIG B PLAN. All this gambling with our future standard of living in retirement is to avoid the stress of confronting intransigence and erasing lines in the sand.
-- Exactly Dr. K. Though this would be a "Defined Benefit" Big B plan - the plan structure relies on a market that does not decline over time. Per Hudson's email, benefits CAN decline if extended market conditions decline. THAT risk shifts from the Company to the individual. The company simply pays a set portion of pensionable earnings and/or stabilization feature. But what is lost to many is this point - during a prolonged market decline or economic decline, not only are your shares (pancakes) not accruing the same rate (due to lower earnings from less flying - think 4A2b type), but the share VALUE is declining as well and MORE $$ are required by company to fund any "Stabilization" feature.
-- Kronan mentioned time period of modeler - 1999 to 2017 were the inclusive dates. BUT, 1999 was a 19% up year (roughly 1230 to 1484 on S&P). From Dec to 1999 the return to that portion (after 2000 high) was 2007, but then declined rapidly AGAIN and didn't rise until 2013. The good news for ALL those FEDEX retirees from 1999 to 2013 - NOT ONE needed to worry about market conditions affecting Pension Benefit!!!!
If you can only focus on one of my points, I would appreciate that you direct your response to the questions concerning the 2006 PPA and lack of applicability the new VB/PSPP. I really do hope that you can effectively educate me on something that I don't understand here and will ease my concerns about why there are radically different regulations associated with the funding of the new scheme. Dr K
But again I ask you a question specifically in response to this quote of yours - "My Union went outside of ALPA for a hired gun to evaluate FedEx managements claim that improving our Pensions was excessively expensive due to changes in funding, administrative, and indirect costs due to the Pension Protection Act of 2006. And, both consulting groups, with a fiduciary duty to FedEx ALPA...confirmed those costs."
-- The "hired guns" were companies that sell a product, namely variable defined benefit plans (and they have no "fiduciary duty" to ALPA). The first page linked below shows Blitzstein/Coffing/Kalwarski - Milliman and Cheiron... they all do the same type strategy and sell this to companies (FedEx types). Ironically, our union hired them to "solve" a perceived company problem. These companies are not typically hired by EMPLOYEES or workers to change the companies defined benefit. Companies hire them because their defined benefit is severely underfunded and/or they do not have CBA protected workers, but want to retain them by offering a similar product after discontinuing the original pension. These plans are GOOD for COMPANIES.
https://www.ifebp.org/education/sche...es_Part_II.pdf
How do these stated regulations and fees THAT APPLY TO DEFINED BENEFIT PLANS, including any associated with the 2006 PPA or ERISA or PBGC premiums, effectively handcuff the company from modestly improving the payout levels of our current A plan for future retirees (us) yet do not prevent the new VB/PSPP from DOUBLING OR TRIPLING the payout for future retirees (also us)?
-- Per my recent email correspondence with Richard Hudson, formerly of Cheiron now with First Actuarial, ALL DB plans to include the PSPP continues paying the same to PBGC (no change). The only cost differences year to year under current plan are interest rate and mortality, but since the plan is fully funded (annotated by Annual Reports, latest Quarterly filings, and 5500), FedEx does not need to contribute to "fund" anything. By moving to Variable plan, the company effectively would move this risk to individual and future trust investment company.
For this improvement to be the case, either (A) the new plan does not have the same arduous pension trust funding requirements as our current A plan and therefore more of the company contributions can be distributed as retiree income or (B) the plan forecasts its investment performance based on extremely rosy stock market projections alone not the reality of 0% interest rates on fixed income securities and tepid forecasts of stock market returns.
If the case is (A), then I would be very concerned that our plan's new trust would not be funded in a way that would justify the max payout in the event of a PBGC takeover. Wouldn't it stand to reason that if our fund was going to produce almost triple the payout to retirees it would need to be funded in manner consistent with that? Is the new plan going to be funded roughly 3 times the amount of our current A plan? If not, then where are the 2006 PPA restrictions on the VB/PSPP? Could we get shafted like so many other airline pension funds when we inevitably have problems? With the current funding requirements of our A plan, I think that we could reasonably expect to be protected for the max payout allowed by PBGC regulations. In this proposed plan one that no other company has ever used, I think we would be exposed big time to a severe reduction in pension income. If we can get the company to contribute TWO OR THREE TIMES MORE than they currently are, why not apply leverage to our beautiful safe and proven current A plan???
-- Per email with Richard Hudson: (me)Though most plans have a stabilization feature, if investments decline for a period of time (thinking post Nikkei 225 1989 top), could the defined benefit pay less than the floor? (Hudson Response) Yes, while some actuaries have stated that these plans always remain fully funded this is simply not the case. If you have a long duration of consistent market declines and the plan has a floor benefit, the floor benefit could be put in jeopardy. There are several plan design considerations that can help ensure the floor benefit is paid.
-- "could we get shafted like so many other airline pension funds..." - United 2002 and Delta 2005 bankruptcies were underfunded and went to PBGC. American 2011 was fully funded and remains a "standard termination" in that PBGC saw that pension assets could meet obligations (as required by 2006 Act) and ALL frozen participants will receive everything due (at retirement). FedEx could enter bankruptcy tomorrow and ALL vested participants (over 5 years) would get exactly what was promised because the pension is 103% funded. The 28 Billion in assets would remain protected from creditors and be managed until all participants stop "collecting."
If the case is (B), then it is remarkable how this new professionally managed pension fund will outperform our current professionally managed fund.
-- Pension assets grew 15% year over year for May 19 to May 20. 7.7% over last 15 years (net of all fees). Their growth of nearly 3 billion dollars (nearly 28 billion now) over last year dwarfs the roughly 900 million in payouts.
On this point, in any Defined Benefit plan like our current A plan, a company is required to contribute the amount necessary to fulfill its pension obligations based on our pilot group's actuarial statistics and the investment performance of the trust fund. If the company fails to ensure that the trust is at the 100% funding level, their PBGC premiums skyrocket, the stock price suffers due to weak financials consistent with those outstanding liabilities and mismanagement, and there are similar costly effects that would show up on new company bonds issued. If the pension trust investments are performing well enough to cover those liabilities, then the company does not have to contribute each and every year. What you are unintentionally pointing here out is that the company's liabilities to retirees are not increasing because our contractual pension benefits have not increased, which is a failure in CBA negotiations. If we improved the current A plan and more contributions by the company were required to meet the 100% funding requirements of those liabilities, then they would indeed contribute more to the pension trust fund next year as required.
--"their PBGC premiums will skyrocket" - disagree there. For single employers (FedEx), there is an $83 fee per individual ($423,000 for 5100 pilots, but the pension trust has 185,000 people) and a $45 per $1,000 in "unfunded Vested Benefits." This is essentially 4.5% of an amount of unfunded vested benefits (pilots over 5 years btw). FedEx solved this by issuing 2.3% bonds and voluntarily contributing 1 billion to pension (essentially staying 103% funded and avoiding 4.5% paid to PBGC)... At least that is my understanding and with low rates currently, financially genius move.
Fortunately for the company, they are intransigent and have drawn a line in the sand so they don't have to contribute any more ever. Fortunately for us, we have found a plan which avoids the onerous funding requirements of the 2006 PPA and ERISA and PBGC yet can still double or triple our pension income. /sarc
As to your example of the lady lucky enough to have been hired at Age 25 missing out on years of market returns, your statement demonstrates that you consider the VB/PSPP to be a very BIG B PLAN. An A plan should not designed to be a BIG B PLAN, and your desire to overly subject the A plan to the risks of possible stock market returns actually destroys the benefits of a diversified retirement system consisting of a relatively risk-free fixed income A plan coupled with a B plan/401k that can be subject to more risk according the retiree's individual appetite. We need improvements on the current A plan and B plan, but the proposed plan is really creating a BIG B PLAN to go along with our current LITTLE B PLAN. It really looks like you are wanting to go all in on the stock market with our retirement with the VB/PSPP and reject the relative safety of leveraging our company's solid financials that are also backed by a pension insurance policy and decades of laws and regulations designed to protect the current A plan. The BIG B PLAN would be similar to the LITTLE B PLAN, in the company only has to contribute 9% of pilot payroll to the LITTLE B PLAN and x% of pilot payroll each year to the BIG B PLAN. All this gambling with our future standard of living in retirement is to avoid the stress of confronting intransigence and erasing lines in the sand.
-- Exactly Dr. K. Though this would be a "Defined Benefit" Big B plan - the plan structure relies on a market that does not decline over time. Per Hudson's email, benefits CAN decline if extended market conditions decline. THAT risk shifts from the Company to the individual. The company simply pays a set portion of pensionable earnings and/or stabilization feature. But what is lost to many is this point - during a prolonged market decline or economic decline, not only are your shares (pancakes) not accruing the same rate (due to lower earnings from less flying - think 4A2b type), but the share VALUE is declining as well and MORE $$ are required by company to fund any "Stabilization" feature.
-- Kronan mentioned time period of modeler - 1999 to 2017 were the inclusive dates. BUT, 1999 was a 19% up year (roughly 1230 to 1484 on S&P). From Dec to 1999 the return to that portion (after 2000 high) was 2007, but then declined rapidly AGAIN and didn't rise until 2013. The good news for ALL those FEDEX retirees from 1999 to 2013 - NOT ONE needed to worry about market conditions affecting Pension Benefit!!!!
If you can only focus on one of my points, I would appreciate that you direct your response to the questions concerning the 2006 PPA and lack of applicability the new VB/PSPP. I really do hope that you can effectively educate me on something that I don't understand here and will ease my concerns about why there are radically different regulations associated with the funding of the new scheme. Dr K
-- I have posted MANY informational materials to the private website for exactly this reason. Some information given by union is factually incorrect and some information on this forum is the same. The website is a repository for US to review documents for ourselves and arrive at whatever conclusion befits us. The site strives to offer readers talking points or better understanding of our current issues regarding retirement.
-- Since site IS private - one must Private Message to get access. People are reviewing my site for accuracy and I welcome others to do the same. Once I feel this product reflects the most accurate information - I will post elsewhere (like JetFlyers).
09-18-2020, 09:51 AM
#29
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Joined APC: Jun 2018
Posts: 1,838
Can we get back on topic???!!!!! Every thread is hijacked by the same 5 names who want to give personal opinions on a retirement plan that is not even being negotiated at this point, to my knowledge. If you have a hard feeling on how retirement is negotiated then do the survey. This thread was about the earnings call.......
09-18-2020, 10:53 AM
#30
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Joined APC: Nov 2005
Position: 757 Capt
Posts: 2,418
Originally Posted by DR K
Thanks Kronan. It's really tough nailing down answers by the VB/PSPP supporters.
How do these stated regulations and fees THAT APPLY TO DEFINED BENEFIT PLANS, including any associated with the 2006 PPA or ERISA or PBGC premiums, effectively handcuff the company from modestly improving the payout levels of our current A plan for future retirees (us) yet do not prevent the new VB/PSPP from DOUBLING OR TRIPLING the payout for future retirees (also us)?
. What you are unintentionally pointing here out is that the company's liabilities to retirees are not increasing because our contractual pension benefits have not increased, which is a failure in CBA negotiations.
BIG B PLAN.
If you can only focus on one of my points, I would appreciate that you direct your response to the questions concerning the 2006 PPA and lack of applicability the new VB/PSPP. I really do hope that you can effectively educate me on something that I don't understand here and will ease my concerns about why there are radically different regulations associated with the funding of the new scheme. Dr K
How do these stated regulations and fees THAT APPLY TO DEFINED BENEFIT PLANS, including any associated with the 2006 PPA or ERISA or PBGC premiums, effectively handcuff the company from modestly improving the payout levels of our current A plan for future retirees (us) yet do not prevent the new VB/PSPP from DOUBLING OR TRIPLING the payout for future retirees (also us)?
. What you are unintentionally pointing here out is that the company's liabilities to retirees are not increasing because our contractual pension benefits have not increased, which is a failure in CBA negotiations.
BIG B PLAN.
If you can only focus on one of my points, I would appreciate that you direct your response to the questions concerning the 2006 PPA and lack of applicability the new VB/PSPP. I really do hope that you can effectively educate me on something that I don't understand here and will ease my concerns about why there are radically different regulations associated with the funding of the new scheme. Dr K
So, how do the various Laws\Regulations "handcuff" the company from a modest Traditional A plan improvement.
They don't prevent it in the slightest. They sure seem to make the company Unwilling to improve any Retirement. The company sure Seems to want to totally eliminate all Pension obligations. Or, are you interpreting the Company's direct negotiation efforts with us last time differently than I do.
And, what is a Modest A plan improvement Dr K? Is it a 10% gain? 20%.
It's BIG B PLAN. Well, No it's not. It's a Defined Benefit Plan. So, Dr K, our fortunate newhire hits FedEx after we transition to a PSPP. Spends 39 years at FedEx, and just on the brink of filing for that $375k pension, passes away. No doubt due to COVID 2064. So, Dr K, tell me. What happens to our newhires Pension? If she's single, is it something she can pass on in her will and leave to her heirs? What happens to her B plan? And after 39 years of 9%, that's gonna be some buckage. What do you think, $2M+. Oh wait, I forgot, the PSPP investing world is a bleak and dire place where FedEx goes bankrupt and no one makes any profits.
What I'm Intentionally Pointing out is that the Investment Returns FedEx has achieved on our Pension Trust exceeds their expectations. FedEx has used 6.5% for quite awhile and yet the Returns on our Pension Trust have exceeded that for years.
I'm not quite sure Why a PSPP Trust is going to perform so poorly while our Traditional Pension Trust has done so well (which we share with every other FedEx worker with a Pension). But, I'm not a Dr-nor did I stay at a Holiday Inn Express.
Year after Year a PSPP Trust would have $$ added to it. The idea that, God Forbid, FedEx Should go bankrupt and hand over the PSPP Trust $$ to the PBGC is certainly scary. Even scarier is the idea that the PBGC bases subsequent Pension Payments on the value of the funds handed over. It doesn't. A PBGC Pension payment is based only on the age you are when you begin collecting a Pension.
And regardless of whether it's our Current A plan, or the hypothetical PSPP, it is an absolutely HUGE haircut in Pension payments. Even if you begin collecting your pension at 65.
I have absolutely no doubt at all that our notional 40 year FedEx employee would prefer a Traditional A plan. It's definitely far superior to our hypothetical PSPP (tweak the Floor up and the relative values begin shifting)
But that also means a repeating need for a modest improvement to the A plan, every negotiation cycle.
Of course, in Modest Improvement World, that's easy to do. It's only in PSPP world that FedEx fails.
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