OK, gotcha. So you're just rehashing the process described in the video but using the current IRS Defined Contribution Compensation Limit instead of the 2018 value. Of course, that value may or may not increase or decrease from year to year.

Careful with your conjunctions there. In a year where the value of shares decreases, the total value of the Pension Trust would only increase if the amount of The Company's contributions exceeds the payments made to retired pilots. Naturally, this will be the case in the infancy of such a program. That doesn't guarantee that it will always be the case. So, initially the value of assets in the Variable Benefit fund would increase BECAUSE the Company's annual contributions to the fund will exceed the payments to retirees.

Or will they? That has not been described, and it would have to be negotiated. If the Company only has to worry about a $5,800 annual benefit for -- what did you say, how many pilots will retire the first year? -- " (roughly 120-150 people retire each year)" -- what's to say their initial contribution won't be correspondingly small? That's less than a million dollars the first year. The lint in Mr. Smith's jacket pocket is probably worth more.

I don't know how much cash The Company will have to contribute to the fund any year any more than you do -- unless you're getting secret information from the Negotiating Committee (which wouldn't surprise me). You are making a pretty big assumption, then, to claim that the value of the Variable Pension fund would increase even when the market decreases.







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No. I'll type this slowly.

• IRS Defined Contribution limits apply to Defined Contribution plans
  • The IRS Defined Contribution "Compensation Limit" caps the amount of an employee's salary which can be used to calculate the contribution
  • The IRS Defined Contribution "Contribution Limit" caps the total number of dollars which can be contributed
• IRS Defined Benefit limits apply to Defined Benefit plans
  • The IRS Defined Contribution "Annual Benefit Limit" caps the annual benefit a retired employee can receive from a Defined Benefit plan
• IRS Defined Contribution limits DO NOT APPLY to Defined Benefit plans
• IRS Defined Benefit limits DO NOT APPLY to Defined Contribution plans

I don't know how to make it more clear.



No. Actually, there are several ways to improve our Defined Benefit Plan.

We could change the multiplier. It is currently 2% per year of Service. We could change it to 2.2%, just like we did for pilots who had 25 years of service as of June 1, 1999. Or we could change it to 2.03% like we did for pilots aged 54 with 20 years of service as of October 30, 2006. We could change it to 2.5% for the first five years, and 2.1 for the next 20 years.

How any such change would affect each and every pilot would have to be analyzed, understood, and accepted as our preferred way of "improving" our "A" Plan. In any event, the numbers would have to be negotiated.

We could change the Years of Service Cap. Instead of 25, we might choose 27, or 30, or 35. Some pilots would benefit from such a change, specifically those hired at a young age. Anyone hired after age 35 would have to work beyond the Normal Retirement Age of 60 in order to take advantage of a higher Years of Service Cap, and those hired after age 40 would never benefit from such a change. In fact, The Company might want to negotiate a penalty for retiring before Age 65 in exchange for such a change. I know, doesn't mean we'd have to agree to it, but my point is that it's not as simple as it might seem at first look.

We could change the "High Five" aspect of the Final Average Earnings calculation. The IRS says the Defined Benefit is to be based on the Highest THREE years of earnings; our High Five is more restrictive.

Regardless of how we might change any of the above, the final calculation is limited by the FAE Cap of $260,000. Raising that cap is the single improvement that helps EVERY PILOT, now and in the future.







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You're giving me hope.







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First of all, there is no IF when it comes to the Defined Contribution Compensation limit. It's the law.

Second, it would be realistic to want similar protective language, but there is no guarantee that we would get it. It would be -- once again -- negotiable.


Here's why I "bypassed Paragraph 1. It talks about 2 non-qualified plans that would be provided in the event the Compensation Limit or the Contribution Limit, both which apply to our Defined Contribution ("B") Plan, are lowered. Sentence #1 says, "The terms and conditions of [the plans] shall be as provided in [the plans]." The "Non-qualified Pension Plan for Pilots" is the "Compensation Limit Plan". The last sentence of that paragraph just reminds us that the combination of those non-qualified plans and our "A" Fund Defined Benefit Plan cannot exceed $260,000 Final Average Earnings. There is no suggestion of any protection for our "A" Fund should the IRS Defined Benefit limit be reduced.







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First, a Traditional Pension, a Defined Benefit Plan, has no Compensation Limits, so I don't know how you could say "the same" when comparing it to a Variable Benefit Plan. But let's let that slide for a moment.

The comparison to our unchanged Pension Plan is the first lie we've been told, the foundational lie upon which the whole story of the PSPP has been built. It doesn't take much to improve on $130,000, so they can make the PSPP look sweet if that's the standard by which a retirement package is judged.

It's NOT. The standard by which it should be judged is 50% of our REAL Final Average Earnings. Period.

Do we agree on that point?







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If you are correct on every point, please answer this question: Why, whenever this subject has been discussed or the question asked at numerous Joint Council Meetings and briefings, Focus Sessions, YouTube videos and podcasts, have we never been given an answer other than "It's to be negotiated"? If it's so straightforward and simple, why haven't we gotten ANY answer at all, much less a simple one?







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Thank you, DR K.

It's a Pension Plan which is a hybrid between a Defined Contribution Plan and a Defined Benefit Plan. It's a mix of risks and rewards, kind of like what we already have with BOTH a Defined Benefit Plan and a Defined Contribution Plan. For us to abandon our "A" Plan in favor of a Variable Benefit Plan would be a stupid move in the wrong direction on the risk and reward spectrum.







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"willing" to entertain.

We have the power to make them more willing to entertain.

Let me repeat that.

 

No, that's not my point at all. A pilot who retired in 1999 with a $130,000 annual pension still receives, if living of course, an annual pension of $130,000. Inflation has reduced the spending power of that $130,000.

A pilot who retires in 2021 with a $130,000 has not been hurt by inflation. He has been hurt because we failed to raise the FAE Cap as our pay rates went up. The IRS Defined Benefit limit has increased at about the same rate as our hourly pay rates, but the FAE Cap has not moved at all. That's our fault, not inflation.


I'm making no such assumption, although it would be great if that were to be the case. And, again, you're correct in assuming I don't think the Defined Contribution Compensation Limit applies to a Defined Benefit Plan. It DOES apply to the Variable Benefit Plan because the IRS says so.


Care to do the math for a 15-year wide-body Capt retiring in 1999? $260K FAE, $183.37/CH

[ANSWER: 1,417 hours of pay]

Your point?


You might be right. It might be immediate, or it might be phased in. It's ... to be negotiated.

Either way, I'm fine with it. In fact, if it's phased in to begin the month after I retire, I will be fine with it. It's still worth it to fix what has not been adjusted for 23 years. The money would be great, but the satisfaction of fixing it would be worth it for me.


Considerably north of $260,000.




I do NOT want more than I deserve. I have no moral ground upon which to stand if I ask for that. True, we'll only get what we negotiate. I have no compunction whatsoever asking for everything I deserve. The Company has made a lot of money off our backs, and they've saved a lot of money by not raising the FAE Cap a long time ago. It's time to make it right.




​​​​​​​Whew.



There. That's one way to spend a hotel confinement. ​​​​​​​







.

​​​​​​​

 

For the visual learners. Reverse math, in 1999, max DB payout per year, $130,000 - so CBA 28.B.3. = $260,000. Think left column is DB Plan and right column is DC Plan. Note that Reardon highlights the DC contribution limit - the entire modeler falls apart if 1994 occurs. What is also comical is our union parading Cheiron's ability to "forecast" the DC limit...

https://www.datair.com/annuallimits.htm
DB Limit.jpg
(sorry - tried to make this bigger - follow link)

From Podcast 6:
Captain XXX (the NC chairman) "Yes, so with the PSPP, we ultimately had a wide range of stabilization features and features to help mirror the similarities with what we have in today's traditional pension plan but there are clearly some differences in that. One of them is the annual benefit accrual amount, which is actually a percentage of the pilot's pensionable earnings. The nice feature there, again, is that that continues to increase as those IRS limits increase. So, you know, the current pension is capped out at $260,000. Well, that cap is removed and would increase as long as the IRS limits were increasing."

Or if the limits decrease because tax law changed.... oh wait... that doesn't happen does it Cheiron? At least not in a "modeler."

Also from Podcast 6, same person:
"The second aspect of that which I mentioned was the final average earnings cap, which simply tracks along with the increasing IRS limit. When we first started looking into this plan design, it was $260.000. Now it's up to $285,000, exactly what Cheiron had predicted in their modeling and it continues to be supported by IRS improvements."

When I read that initially, I think coffee spewed on my computer... Just unbelievable that one simple search of historical IRS limits showed that ANYTHING tied to IRS is based on the whims of lawmakers... And I could have predicted a $5,000 increase without getting a bunch of $$ for "consultation." So, either the NC is "selling" this to us, or they didn't research this "plan" and Cheiron "sold" them on this, or they know all this and are lying. I give the benefit of the doubt of the best "worst" that they didn't research but got a nice sales job.

CBA 28.B.2.
2. A pilot’s retirement benefit at his normal retirement date (the “Pension Plan Formula”) shall be equal to the greatest of: (i) his final average earnings x 2% x credited years of service with the Company (Max. 25 years) for benefit accrual, (ii) the benefit described in Section 28.B.4., or (iii) a flat dollar benefit based upon a pilot’s flight hours, equipment flown, and seat position during a plan year.

2.7% X 15 X $260,000 = $105,500 (vs $78,000 now)
2.7% X 25 X $260,000 = $175,500 (~ 50% of 15 yr WB Capt pay'ish)
> 25 yrs = $175,500

CBA 28.B.2.
2. A pilot’s retirement benefit at his normal retirement date (the “Pension Plan Formula”) shall be equal to the greatest of: (i) his final average earningsx 2% x credited years of service with the Company (Max. 25years) for benefit accrual, (ii) the benefit described in Section 28.B.4., or (iii) a flat dollar benefit based upon a pilot’s flight hours, equipment flown, and seat position during a plan year.

2.0% X 15 X $260,000 = $78,000 (same as now)
2.0% X 25 X $260,000 = $130,000 (same as now)
2.0% X 35 X $260,000 = $182,000 (more)

The CONTRACT CAP:
CBA 28.B.3.
3. Final average earnings will be defined as the average of the highest five calendar years of compensation while working for the Company. In no event shall total final average earnings taken into account under the Pension Plan, the Compensation Limit Plan and the 415 Limit Plan exceed $260,000.

2.0% X 15 X $460,000 = $138,000 (if a 15 yr could average $460,000)
2.0% X 25 X $460,000 = $230,000 (current 2021 DB payout limit - would "match" benefit of 1999)

Changing either 2.0% or $260,000 helps everyone immediately.

But I think the 2.0% multiplier is a much better change for several reasons:
-- Pilots by 5th year vesting time (and many earlier) can get to 260,000 annually and then "max" the yearly benefit earlier (5 years average) - based on 2 or 3 year FO's, the average could be reached by year 8.
----- Once vesting occurs and meets 5 yr $260,000 FAE, the benefit is $7,020 (at 2.7%), if A plan freezes, then benefit is guaranteed. At year 8, this would be a max of $56,160.
----- VS a change to contract cap - at $460,000, the annual benefit at max is $9,200. But a year 8 FO or a NB Capt or a young WB Capt might only have $300,000 (might be too high) which is $6,000 or $48,000. The crossover is 5 yr average at $350,000 providing $7,000 - which could be 15 year or greater (excluding the 2020 pay anomalies).
-- The faster and higher accrual of "benefit" helps anyone with a medical condition that goes out earlier.

I would be happy with either one. The real takeaway is either of those are ONE SINGLE NEGOTIATED ITEM... That, and everyone understands it...

Thanks to TonyC for voicing and educating...