pinseeker

You mean like the MEC did by giving the company their retirement proposal two years before section 6 negotiations without any agreement from the company to negotiate retirement at the time?

Talk about handing the other side the play book weeks before you go to the Super Bowl and inviting them to your practice sessions. We are our own worst enemy. Who really thought that was a good idea?

Tuck

Tony - great to read your thoughts on here again - you are a book of knowledge. Glad you are starting this discussion as there hasn't been much of it in a while and we area month away from early openers.

I definitely believe that most pilots are either a) unaware of the PSPP or b) against it. That doesn't it's a bad plan though. There hasn't been a good job in explaining what it is in the last 2 years or so and that's pretty problematic at this time.

Let me apologize for not being able to use the multi quote system - for whatever reason I can't get it to work.

Indexing the FAE Cap would be great, but I'm not even asking for that -- THIS time. Including a cost of living multiplier for the Defined Benefit would be great, too, but I'm not asking for that, either. I realize that getting the FAE cap back to a level that provides a 50% replacement ratio is a big step, and I'd be happy with that first big step. As I've observed before, some will say it's too big of a step, it will cost The Company too much money. I look at it from the other side -- The Company has saved a lot of money by failing to raise the FAE cap all these years. They have the money to fix it now.


I don't believe it matters if the Company has the money or not - that's really irrelevant in negotiations. My back of the napkin math shows that asking for an additional $100k/yr per pilot for about 20 + years in retirement is worth more than the entire cost of our 2015 CBA. I would love to have that but there's a reason why you don't offer $10K on a house listed for $1million - you won't even get a response.

We will likely end up at the NMB with a mediator on this round as we have in all others. I think any mediator would laugh with our proposal when compared to industry standard - which is what mediators do. The response would not be good. Heck I'd like to get a 30% increase in book rates on day 1 and there's no doubt the Company can afford it but I wouldn't ask for something that has zero chance in passing - as a $100k increase to the DB would.

The beauty of the PSPP, among some other things, is that it is actually doable - it is possible from both ends. The Company has been very firm in saying they will not improve our DB plan (now there may be a little wiggle room there as there is in all things) but the PSPP, in theory, can provide a "win" to the Company as it reduces its PBO even as it costs them more cash. So it does have a potential to pass.

We spent at least 18 months during the 2015 CBA passing language that would call for an improvement to the DB plan and in the end it got us nowhere. Yes, yes, I know - we haven't "tried" hard enough - we haven't negotiated hard enough. But there is a bit of a reality check here. We have said there's no touching our vacation plan - I believe the crew force when we say that. The Company may be thinking THEY haven't tried hard enough to diminish the industry leading vacation plan but I doubt it - just like I doubt we will get an extra $100K in DB improvements. Based on our history, I'd rather not waste another 18 months getting us nowhere. Yes, the Company has to consider anything we pass but there's no requirement beyond that. They can merely counter with current or, as they have done in the past, counter with freezing DB and increasing DC.


That dynamic wasn't even considered in trying to determine which pilots would fall into the "donut hole." We have pilots whose combination of years of service and age will not permit them to see any benefit from the PSPP, even if they work a full schedule. Those pilots would be "made whole" in some way (not specified) so that they will not be any worse off than if we had never changed to the PSPP. In other words, they will see no harm, but also NO BENEFIT from the change. Or, in OTHER words, they will be left behind -- no improvements. That violates another tenant of negotiations: Nobody gets a pass, and nobody gets left behind.


Disagree - there absolutely is a benefit to even those in the donut hole. There are three big advantages to the PSPP as I see it.
a) no limit on years of service
b) ceiling is indexed to IRS limits
c) ability to let your money grow in retirement

Now the donut hole people are guaranteed no less than they would get under the legacy plan but there's a good chance they will end up with more just based on market returns. The PSPP calculator that we all got to use a few years ago had assumptions based on the stock market returns - much like our fuel reserve can be viewed today. There is a chance that the return will be poor than models predict in which case the donut pilot would end up the same as legacy but there is a GREATER chance that the pilot would benefit from market returns and end up with more than the legacy plan. Now a lot of this depends on where exactly the pilot is in his career - if he chose to never upgrade as a senior pilot or to wait on his upgrade until his last five years he has a higher chance of just getting those legacy numbers.

In addition, benefit (c) above is huge. The ability to let your money remain in the market and adjust for inflation is a huge benefit. Say you have 20 years in retirement - during that time you don't make your 401K invest in nothing but money markets - you likely invest it in low risk options to still capture a small gain and offset inflation - that's why the old 4% rule lasts for longer than a straight pay out. This would be similar - most pilots would likely let their PSPP money remain in the market - there would be some dips, just like there is now in your 401K, but models tell us that your benefit would overall increase. That's huge - how great would it be NOT to have a DB payout in retirement that decreases in value annually? As far as adding a COLA to the legacy plan? I don't believe that's ever been done in any private pension - so the chance of getting that as well is low. The PSPP gives you that option though.


That's all I'm asking, is for everyone to tell their Block Reps what they meant when they said (in the polls and surveys), "Improve the 'A' Plan." For me, it's simple -- increase the FAE cap to twice the IRS limit.


Definitely agree here - we need to be a lot more involved and active. Call your rep - give them your thoughts. Ask them questions about how to improve the A plan. The reps should all have a good understanding of the PSPP. This is a huge part of the next negotiations and we will be better off with more people understanding the options, our history in bargaining for pension improvements, expectations from both sides and then decide what is best in our interest.

Good discussion.

pinseeker

Tuck, I agree, this is a good discussion.


Here are my concerns with the PSPP:


First, only one of our DB plans can be protected by the PBGC. If we go to the PSPP and freeze our current DB plan, which plan gets protected. Now, that may not matter much for someone who has been on the property five years or less, however, you have been here quite a while. How would you feel about your earned DB benefits not being protected by the PBGC. The only way to prevent this is to transfer our earned benefits from the current DB plan and incorporate them into the PSPP. How would that affect the funding status of the company DB plan? I doubt the company would take money out of that plan to fund a new plan. The other option is to allow pilots to chose which plan they want to be a part of. If we all go to the PSPP, then that is most likely the plan that will be protected. If we are allowed to chose, then we wasted 6+years, because the company offered to raise the FAE during the last negotiations if we put all new hires under a DC plan.


Second, in the PSPP, the pilot assumes the investment risk and the company assumes the longevity risk. However, the company still controls the investments. If I am assuming the investment risk, why don't I get to chose my investments until I retire. In an ideal world, we would get a very low hurdle rate and a floor level that pays much higher than our current DB plan. But, the company would want just the opposite. Remember, the hurdle rate is what is used to determine the amount that the company will contribute to the PSPP. If I were the company, assuming the longevity risk, I would try to balance my investments to stay just above the floor rate. What incentive do they have to earn any more? By doing that, they mitigate the longevity risk by not having as high of a benefit to pay and a balance of investments that are conservative enough to practically guarantee that they can meet their obligations.


Third, as Tony stated, some pilots will do fine under the PSPP while others will do no worse than if they retired under the current plan. Who wants to volunteer to be one of the pilots that does no worse than the current plan? I know that I don't want to volunteer for that if we switch.


Fourth, the MEC has already floated the idea that the pilots could shoulder the cost of a stabilization fund by capping the returns is good years.I bet the company would jump on that. Right now, they have that burden with our current DB plan.


As far as keeping your DB plan in the market to keep up with inflation, that is why I will keep my DC plan in the market. The problem with keeping the PSPP in the market after you retire is that your DB retirement balance can go down. According to the lectures, the value of a pancake is only determined at the end of every year. When you retire, your number of pancakes are set and there is not a floor for you any more. So, is it still a defined benefit if you do that? I would prefer to keep up with inflation with my DC plan where I control the investments and the investment risk. I can also freeze my value at any time during the year, I don't have to wait until the end of the year to see how the market closes to know the value of my plan.


There are many variables of the PSPP that need to be negotiated and all of those parts will determine how good the plan is. The MEC has already stated that they are ecstatic with the results in the calculator. Why would the company offer any more. I think that they already set the high water mark from which the company will negotiate down from. The company has had almost two years to try to figure out how to outsmart us with our own plan. We always end up screwing ourselves by thinking that we can outsmart the company. The company controls system form, hiring, pairings, and yes, retirement benefit investments. Right now they have an incentive to balance max rate of return along with investment safety. With the PSPP, investment safety will be their only concern.


Why not try to raise the FAE cap on our retirement. As Tony stated, it's a simple computation. The NC has already stated that the start up costs for the PSPP will be in the billions of dollars. If the company used that money to raise the FAE instead, what would that number be? I asked the NC that very question, and I was told that it would be to hard to calculate. However, they expect me to believe that they can negotiate a complicated retirement plan with many variables that will be safer and better than the current plan. I just don't buy it.

Tuck

Tuck, I agree, this is a good discussion.


Here are my concerns with the PSPP:


First, only one of our DB plans can be protected by the PBGC. If we go to the PSPP and freeze our current DB plan, which plan gets protected. Now, that may not matter much for someone who has been on the property five years or less, however, you have been here quite a while. How would you feel about your earned DB benefits not being protected by the PBGC. The only way to prevent this is to transfer our earned benefits from the current DB plan and incorporate them into the PSPP. How would that affect the funding status of the company DB plan? I doubt the company would take money out of that plan to fund a new plan. The other option is to allow pilots to chose which plan they want to be a part of. If we all go to the PSPP, then that is most likely the plan that will be protected. If we are allowed to chose, then we wasted 6+years, because the company offered to raise the FAE during the last negotiations if we put all new hires under a DC plan.


I've heard that recently from a few guys - the company offering to raise the FAE - I don't believe that's true. I've never heard it from anyone at the table and I've asked them. We know the Company offered a nice DC raise (I think their opening bid was around 16% and likely could have gotten to 18%) but I've never heard of them offering to improve the DB plan for legacy pilots if DC only for new pilots. I think this is a urban legend brought up by those that really want to focus on DB improvements. Check your sources, ask the R&I and NC during that time and the MEC during that time.

On the PBGC I agree - that is a risk with only one plan covered.


Second, in the PSPP, the pilot assumes the investment risk and the company assumes the longevity risk. However, the company still controls the investments. If I am assuming the investment risk, why don't I get to chose my investments until I retire. In an ideal world, we would get a very low hurdle rate and a floor level that pays much higher than our current DB plan. But, the company would want just the opposite. Remember, the hurdle rate is what is used to determine the amount that the company will contribute to the PSPP. If I were the company, assuming the longevity risk, I would try to balance my investments to stay just above the floor rate. What incentive do they have to earn any more? By doing that, they mitigate the longevity risk by not having as high of a benefit to pay and a balance of investments that are conservative enough to practically guarantee that they can meet their obligations.


No I don't think you understand it correctly. The company input would be a straight % of total pilot salary - the % would be negotiated and the actual amount would grow as total pilot earnings (typically) grow year over year. This plan actually costs the Company MORE cash in the long term than the current DB plan. Their inputs to the current DB plan are slowly decreasing as inflation takes over - in the PSPP the actual cash from the Company would grow year over year and keep up with our salaries - thus not requiring any future negotiations. Now that could be seen as a negative for the Company but they now have a known number to contribute every year and no more PBO. As far as investment goes, it would be done by a third party that would be mutually agreed to by the CO and ALPA. No one has ever said that the Company controls the investments.


Third, as Tony stated, some pilots will do fine under the PSPP while others will do no worse than if they retired under the current plan. Who wants to volunteer to be one of the pilots that does no worse than the current plan? I know that I don't want to volunteer for that if we switch.


Like I said, there are outyear improvements that are difficult to measure but are not "no worse". The ability to allow your investments to stay in the market during an average 20 year retirement does not exist today for the DB plan (it does for the DC plan and EVERY pilot does this exact thing because it's the smart thing to do) - that ability would be available under the new PSPP. The donut hole people here we are talking about are pilots that were hired at a much later age - typically upper 40s or later - so they were never going to get a great benefit. Now there probably are a few (very few IMO) pilots that over a 25 year career were planning on camping in the right seat until the last 5 years and working min hours and never worrying about their high 5 until those last 5 years. Doing that under the PSPP would likely hurt you - BUT you will get no less than what you would have earned under the legacy plan. In reality, with pay rates as they've been and pilot work ideas as they are, these pilots may be more of an academic exercise than any reality.


Fourth, the MEC has already floated the idea that the pilots could shoulder the cost of a stabilization fund by capping the returns is good years.I bet the company would jump on that. Right now, they have that burden with our current DB plan.


The cap is protection for the plan - when the current DB plan has a great market return year, the Company can opt, and often does, to put nothing in that year or very minimal. That's the plus of a DB plan to a corporation. Under the new PSPP, the Company would continue that % of pilot salary input regardless of how the market did. So returns are say 5% over hurdle rate, their would be cap and excess earnings would go into the stab fund to help during a downturn but, over a certain rate within that cap, returns would likely go back to the pilots (all to be negotiated) - BUT the company would still be required to put in their annual input which is huge.


As far as keeping your DB plan in the market to keep up with inflation, that is why I will keep my DC plan in the market. The problem with keeping the PSPP in the market after you retire is that your DB retirement balance can go down. According to the lectures, the value of a pancake is only determined at the end of every year. When you retire, your number of pancakes are set and there is not a floor for you any more. So, is it still a defined benefit if you do that? I would prefer to keep up with inflation with my DC plan where I control the investments and the investment risk. I can also freeze my value at any time during the year, I don't have to wait until the end of the year to see how the market closes to know the value of my plan.


Yup, there will be some fluctuations - most likely in the early years of retirement as we know, historically, the market always goes up. So you may, for example, start with $130K, then during a bear market go down to $124k, then $118K then when it returns back to $126k, $136k, and upwards from there. It won't be for everyone - but for many (most I predict), that have sufficient retirement funds elsewhere to cover the fluctuations, this will be a huge win.


There are many variables of the PSPP that need to be negotiated and all of those parts will determine how good the plan is. The MEC has already stated that they are ecstatic with the results in the calculator. Why would the company offer any more. I think that they already set the high water mark from which the company will negotiate down from. The company has had almost two years to try to figure out how to outsmart us with our own plan. We always end up screwing ourselves by thinking that we can outsmart the company. The company controls system form, hiring, pairings, and yes, retirement benefit investments. Right now they have an incentive to balance max rate of return along with investment safety. With the PSPP, investment safety will be their only concern.


People give the Company way too much credit. They are not smarter than you. Get that in your head. CRS is not smarter than the pilot they are scheduling - well not the well informed, well read pilot which I know our negotiators are. I don't believe the Company has spent any time looking at this plan since they initially rejected it - based on not enough time or money to look into it. Anyone who has been here for a while realizes that they aren't some masters behind the curtain. They likely are just beginning to look at openers now - they have likely given very little thought to the PSPP. I don't think we screw ourselves by thinking we can outsmart the Company because typically our guys at the table ARE smarter than their guys - but we do have a lot more people, with very different ideas and needs, making decisions and that's where we screw ourselves - I'm not sure how to overcome that part.


Why not try to raise the FAE cap on our retirement. As Tony stated, it's a simple computation. The NC has already stated that the start up costs for the PSPP will be in the billions of dollars. If the company used that money to raise the FAE instead, what would that number be? I asked the NC that very question, and I was told that it would be to hard to calculate. However, they expect me to believe that they can negotiate a complicated retirement plan with many variables that will be safer and better than the current plan. I just don't buy it.


Start up costs in the billions of dollars? Where did you hear that? In a lecture? On a posted you tube video, in a comm? I've never heard anything like that. The start up costs are not billions because in the beginning, there isn't much value to the PSPP - you have to have stabilization fund but the other costs are not so expensive - what makes you think they would be? I don't think there's anything confusing about raising the FAE - that's not the issue nor has it ever been. The problem with raising the FAE is it immediately puts a huge PBO cost to the Company - something they have said time and time again they do not want. In fact, it is mentioned in their annual actuarial reports. But cash alone, kind of like what they offered in the DC plan in 2015? That's something I believe they MAY consider.

Keep discussion going - it's good for all of us.

USMCFDX

5% over the hurdle rate?? YHGTBSM

Do you understand how the funds will be invested? It will be exactly how the retirement funds are currently invested.

Do you know what the historical return has been?

You will not be getting 18% returns try 5% to 6% if we are lucky.

This is one of the major problems with this sales job. Pilots do not understand what the investment profile will be and think we will have sky high returns.

Tuck

The company's target in the pension fund is around 6%. I would suspect that ours will be similar - however there are outlier years where you make far more than the target...also years where you make far less. The model has gone through extensive Monte Carlo simulations so the "luck" is about the same as your current DB fund getting what it gets.

I 100% agree with you that pilots do not understand the plan. The conservative return targeted was explained well in every by the briefers - I've never heard anyone saying it would be targeted higher - in fact, it's very conservative (more than the Company's actually) and that gives me a decent amount of confidence. And even with that conservative targeting it still reaches the numbers in the calculator. Did you attend any of the small group meetings about the PSPP?

Stan446

If guys would quit flying extra, we wouldn't be having this discussion. The company can raise the FAE, they just don't want to. When the extra flying stops, the company will have the incentive to change the DB. A few flights that don't go will get the company's attention real quick.

USMCFDX

Tell me what year that the FedEx fund made far more than the target. Pretty sure the best year was 9% once!, and plenty of zero and 1% years. Read anything about large scale retirement plans and the target and expected rates are now closer to 3%. The FedEx data is available online and I have posted it on here before.

This pancake plan will not see 10% returns.

I have read everything the union has put out about the pancake plan - I hate it and it is an automatic no vote from me. PM loves pancakes and we are stuck with it. I only hope enough people hate it and vote the TA down in 2 years.

NewOldGuy

My sentiments exactly. And explicitly expressed to my reps.


Sent from my iPhone using Tapatalk

pinseeker

Tuck,

To answer your questions, the MEC and NC chair told me that the start up costs would be in the billions. Maybe they were exaggerating, maybe not. If they were, I don't see the point.

Second, the question about the company offer of increasing the DB plan if we went to a DC plan came from a former MEC chair as well as several others who were involved with the MEC at the time.

Third, you mentioned in a reply to USMCFDX about the VB Plan calculator being very conservative. Didn't that calculator use the returns from the stock market, not the average FDX DB plan performance. They used that number for around 10 to 15 years, and then used the hurdle rate. Why not use the FDX DB plan performance rate or less if they wanted to be conservative? As I said earlier, what is the motivation for the company to get any return more than is required to stay above a floor rate, if they agree to a floor rate? Keeping the performance low would significantly reduce their longevity risk. It's much easier to keep underperforming the markets than outperforming them.