The pilot assumes almost all of the investment risk, which is far more than the pilot has now. The Company dumps ALL of the investment risk up until the point the Retirement Fund performs so poorly that the stabilization fund is depleted. The only limits on the pilot' investment risk are numbers to be negotiated. The floor protects the upside, and the hurdle limits the upside.

If the plan works as designed, The Company will have ZERO investment risk. The pilot will be the only party with investment risk.


"Individual pot of money [that] runs out" has not been used to describe the Variable Benefit Plan. Another straw man.

Nobody said it wouldn't pay out benefits for a lifetime. Another straw man.

The Variable Benefit Plan cannot be compared to a traditional Defined Benefit Plan. At best it can be described as a Hybrid Plan. Anybody with a smartphone and an ounce of Google-foo can find numerous descriptions of the "new" plan concept that has been suggested for failing Defined Benefit plans that combines features of a Defined Benefit Plan and a Defined Contribution Plan.

What The Company puts in is an amount of money every year proportional to the employee's annual salary, up to the IRS Defined Contribution Compensation Limit. That amount of money, whatever it is, is the last The Company ever has to worry about the pilot's eventual retirement benefit. It may go up, or it may go down, and The Company doesn't care. The Benefit the pilot receives upon retirement for each year's salary will VARY depending on how the Retirement Fund performed in the market. The shares he "accumulated" each year will be multiplied by the value of a share that year, and that will determine the lifelong Retirement Benefit the pilot will receive each year. The fact that the amount is a fixed amount then does not make it a Defined Benefit plan.

This video has only received 2,267 views. It's a pity, because this is Greg Reardon of Cheiron explaining how the Variable Benefit Plan works. He's the guy who started using the term pancakes. I BEG you all to watch this video, and I have it cued here right before the most important part: https://youtu.be/LvjGtv6POFM?t=1119





The amount of cash The Company must contribute to the fund to support the 2% "Floor Accrual Rate" is a tiny detail that would have to be negotiated. In the first year of the example used in the above-linked video, the pilot accrues a retirement benefit of $5,007. How much money in the fund is needed to match that liability? Oh, wait, $5,007 is not the liability, really, because that number can go up or down depending on the performance of the fund. The only real liability is the floor, and even that is supported by the stabilization fund. So, if the plan functions as advertised, The Company gets a discount on every pancake. Plenty of details for our "experts" to negotiate.

Where'd you come up with 580?

We can't tie the calculation to twice the DB limit because the IRS has set the rules for how the calculations are done. The limit is the IRS DEFINED CONTRIBUTION Compensation limit because that's the law. Reference the above-linked video at 25:36.


All the details (apart from the IRS rules) are negotiable.

The Final Average Earnings Cap is also negotiable.


§ 401(a)(17) of the IRS code refers to the annual compensation limit for DEFINED CONTRIBUTION plans

§ 415(c) of the IRS code refers to the Limitation for DEFINED CONTRIBUTION plans

So, No, we don't have a CBA provision to establish a non-qualified plan in the event the IRS lowers the DEFINED BENEFIT limit. If you could stick to the facts instead of what you "think" it is, it might be less confusing.


Every year counts in different ways for different plan types. If all we have are two defined contribution plans, like our current "B" Plan and the proposed Variable Benefit Plan, then every Credit Hour of every year counts towards improving the retirement benefit and the "B" Plan balance.

Under our current "A" Plan, a traditional Defined Benefit Plan, every year counts as a Year of Service, and that equates to 2% of the pilot's "High Five" Final Average Earnings. Maybe it's a young family, or maybe it's an aging parent, or maybe it's a family member with a major illness that causes the pilot to pay more attention to his home life than his flying gig. Maybe it's just a desire to remain senior in a lower-paying seat to improve his quality of life. Regardless of the reason, the pilot gets to choose to work less and still get 2% Years of Service credit under our "A" Plan. Under the Variable Benefit Plan, he won't have that choice.




Your expectation ...

To Be Negotiated.



Fixed contribution. That's right.

How does that economic collapse impact on Traditional "A" plans? That's The Company's problem, because they bear ALL of the investment risk.

Oh, and those highly-compensated executives still have a personal vested interest in the the success or failure of the fund since they're in it too.




Not when a Company wasn't going through a bankruptcy. I'm sure you know bankruptcy rules have changed to make it much more difficult for companies to use it as a tool to unload debt and walk away scot free. Delta used bankruptcy to do just that right before the bankruptcy laws changed because they knew they wouldn't be able to do it after the change.


The Variable Benefit will also be subject to inflation. Our "A" Plan benefit has not been hurt by inflation, it has been hurt by our failure to raise the FAE CAP at the same rate as we have raised hourly pay rates. A pilot close to retirement may not see ANY improvement from the PSPP over the current "A" plan with the current FAE Cap, but EVERYONE will see a SUBSTANTIAL improvement over the "status quo" by raising the FAE Cap.

Ask anybody nearing retirement what their ACTUAL High Five (not limited by $260,000) is today. If they have 25 years of service, divide that High Five by 2, and that's what they should get in retirement in return for their years of hard work making this Company not only possible, but fabulously successful. THAT's what they deserve, not some "modest improvement" over $130,000.






.

 

Excellent rebuttals Tony.

Having viewed the just-released Contract 21 Openers, I see now why kronan is so adamant in insisting the PSPP (pancake plan) is a Defined Benefit plan....our openers call for improvements to our Defined Benefit plan. The veil of secrecy in negotiations is thus maintained because if they believe (or pretend to believe) the PSPP is a DB plan, they then can claim to have delivered on their promise to "improve our DB plan."

So this is the "Talking Point" kronan is running with from the play called in the huddle...."it's a DB Plan and we're negotiating to improve it". Of course we won't know they're negotiating for pancakes until they spring it on us in the form of a Tentative Agreement. Clever attempt but these tea leaves are just too easy to read. I think I'll be more surprised if they actually negotiate for real improvements to our EXISTING DB Plan.

Pancakes are DOA. This will prove to have been a colossal waste of time and resources when any TA containing PSPP is voted down.

P.S. I really like the video that goes along with the Openers! Kudos to the folks who put that together!

 

My thoughts exactly. Looks like the first TÁ is a waste of time. Guess the real negotiations start in May 2022

 

It’s been a few years now that the NC chair and his ‘Pancake Posse’ have been trying to sell this VB plan to the pilot group. I cannot believe the train is still going. Looks like the TA will be our only opportunity to stop this. What a shame.

 

Notice in the video the forecast compensation limit based on the forecast IRS DC limit. The experts forecast that the limit in 2020 would be $290K when in fact it was $285K. They forecast the limits to increase from there to $295K and then $305K. In actuality, the limit went to $290K in 2021. We don't know what it will increase to in 2022 yet, but history has shown that it is more likely that the limit will be $295K, or stay $290K. It may increase to as high as $300K, but probably won't based on current history. So, the experts have the compensation limits off by $5000 currently and off by as much as $15000 next year. This was their conservative model and they have us being able to earn more than we can. This video was from early 2018, yet they overestimated the 2020 and 2021 earnings limit. So much for being overly conservative with their predictions.

 

Excellent observation, but ...

They also use very optimistic numbers to predict our annual salary increases, but ...

Regardless of how positive they are with their predictions of pay rates and IRS caps, the most important numbers to look at are the Final Salary and the Retirement Benefit. If the Retirement Benefit does not represent 50% of the active pilot's High Five, the plan does not represent an improvement over our original "A" Plan.

For example, in the above-linked video (around 10:45), a pilot who works from Age 25 to Age 65 should be pulling in $959,358 in annual salary (based on those optimistic predictions, but that's OK), but even after participating in the pancake plan for 40 years, his Retirement Benefit is only $357,959 per year. Now, they brag that that number is a 175% improvement over the current "A" Plan limit of $130,000, but they don't mention that it's only 37% of the active pilot salary!

Just for reference, a wide-body Captain retiring today with 25 years of service and a High-Five equal to 1000 times his current pay rate will receive a retirement benefit of $130,000, which is 38% of that High Five.

Maybe somebody can explain to me how THAT is an improvement.






.

 

I’ll bite. I’m as anti pancake as most on here, but their future 37% is significantly more than the current $130k at that future date 25 years from now if you assume a zero improvement line in the sand. That would be about 13.5%.

I’m sure that’s about as accurate as all their other assumptions.

 

I refuse to accept that assumption.






.

 

Forgive me for splitting hairs, but the Openers don't call for improving "OUR" Defined Benefit plan. Careful wording says our retirement "package" will "... [use] both Defined Benefit and Defined Contribution plans" and create a "sustainable balance between Defined Benefit and Defined Contribution plans." There is no hint that they'll fight to fix OUR Defined Benefit Plan.

And it is EXACTLY how I predicted it would be.So, I'll say it again. Ask your Block Reps if this so-called Defined Benefit is the Variable Benefit Plan with a newer set of sheep's clothing. They dressed it up once with the word Stabilized, and now they're trying to convince us it's Defined. If they tell you we're trying to improve our current "A" Plan, thank them and support them. If they say it's a "more robust" version of the PSPP, recall them. If they won't tell you what it means, recall them.

Talk is cheap. We need action. We can't waste time waiting for a TA we can't stomach.






.

 

I asked mine. He won't tell me if pancakes are in the proposal and that the document to the pilots was left vague on purpose so as not to tie the negotiating committee's hands.

Can't have the verbiage "IMPROVE THE A PLAN " and then not deliver once again.

To me it is just another example of ALPA telling us they know best so just be quiet and color.