pinseeker

Sluggo, FedEx gets nowhere close to putting in the max amount of money allowed by IRS limits. Neither do the other airlines. I am not talking about money that you and I put into the plan, I am strictly talking about company contributions (money). For simplicity sake, let's use the current IRS earnings limit of $305K. Delta puts $48,800 into the B fund. UPS puts $36,600 into the B fund. FedEx puts $27,450 into the B fund. None of those plans reaches the IRS maximum contribution. The rest of that money comes out of our paychecks. When we talk about company provide retirement money, we should only include money that the company is paying, not our money. Even the money from your sick bank with a full disability bank is your money. If you had already reached the IRS maximum, the company gives you a check, it doesn't just go away.

So, the difference in money that UPS (the company) contributes to their pilot's B plan over a 25 year period has a very realistic potential of bridging the gap between their 25 year retirement and ours given the suggested 4% withdrawal from retirement savings. Now could they outlive that difference, sure. But 25 years is a long time after 60/65, so who knows.

DLax85

Yes - this is True if the company tries to put your sick bank $$ into your 401K/B fund accounts

However - it’s false if the pilots contributes $12,650 or more in ROTH 401K contributions after maximizing their pre-tax 401K contributions

$61K Max = Pre-Tax 401K + Roth 401K + Company $500 match + Company B Fund Max

$61K Max = $20,500 + Roth + $500 + $27,450

Thus Roth max = $12,650

If you make $305K or greater, and put in more than $12,650 in additional Roth contributions, you’ll be forgoing “free B Fund money” from the company

These numbers change each year, but ambitious savers need to keep paying attention

(Note: You’ll always get your Sick Bank payout, it just may be taxable)

pinseeker

Ok, I don't have a full disability account, so I don't know the finer points of what the company does with this.

Does the company pay the tax on the Roth contribution from the paid excess sick when you have a full disability account?

If so, then what you said makes sense. If not, then I don't follow. If I put $12650 after tax dollars into my Roth to reach the IRS limits and get paid the full 72 hours of sick, how is that different than not putting that money in and having $12650 from my unused sick go into the Roth after I pay the taxes on it and get the remainder of the 72*(pay rate) - 12650 in my taxable pay check? If the company is paying the taxes for the Roth contribution, I can see the benefit.

DLax85

I don't fully understand what you are asking...

Here's my understanding: B Fund Contributions and Excess Sick/Disability are two separate unrelated things --- though, both may end up in the same account.

If your retirement account is already at $61K max at the end of the year, there's no room for any of your Excess Sick/Disability to be contributed. It's paid directly to you as taxable income. Thus, you will always get paid out this excess amount (....up to 72 hours of sick), regardless of what you've contributed Pre-Tax or Roth.

For any pay period where your total earnings are still below $305K, and the company attempts to make a 9% B Fund payment to you, BUT you've already reached the $61K max due to additional ROTH 401K contributions you've elected to make, then you're out of luck, and no payment is made to you at all.

An Example: Let's assume you've made $280K in the first 11 months of the year. Thus, the company has contributed $500 match + $25,200 (9% B Fund). Let's also assume you contributed $20,500 (max pre-tax), and an additional $14,800 in voluntary ROTH (after-tax) contributions. Total it all up = $61,000

In Dec, you gross another $25K....which puts you at $305K for the year. The company would normally contribute another $2,250 (9% of $25K) but CAN'T do it, because you've already hit the $61K IRS limit.

Moral: Don't fill up your retirement to $61K too fast/too early with extra ROTH contributions - it can cost you "free B Fund money". The union has put warnings out about this for many years.

pinseeker

My question revolves around you stating that the company can put the excess sick bank money in your Roth 401K. As I understand it, all company contributions are tax deferred contributions while a Roth 401K is funded with after tax money and grows tax free. If the company is putting that money in your Roth 401K, who is paying the taxes on that after tax money, you or the company. If it is the company, then I see the benefit of having that money put in the Roth 401K rather than paying it to you and letting you put it in. If you are paying the taxes on it, then does it really matter who puts the money in the Roth 401K? Maybe you didn't mean that the company was putting the money in a Roth 401K, or I just misunderstood what you were saying. Maybe you were talking about tax deferred contributions that you would pay the taxes on upon withdrawal.

I do understand the potential hazards of allocating too much to contributions before the company max's out their B plan contribution, but it is good for everyone to review so they don't lose potential company money.

Tuck

Just want to thank UPS for raising the bar and giving us some decent numbers to pattern bargain off of. Yeah they didn't get any positive work rule changes but that's better than the liklihood of negative work rule changes coming with ours. Still hoping we can accomplish our goals this year but certainly not optimistic. Stated goal of 70% replacement income from Company retirement funding - 50% from defined benefit and another 20% from a DC plan - seems like we are very far off in what we want and what he Company is offering and little incentive for the Company to make changes based on current flying. Anyone check lately how many flights go unmanned? Prepare to be disappointed....ZERO open time trips remaining in 777 both seats as of today for rest of the month. Only a handful in the MD11 both seats.

DLax85

OK - now I see the confusion. The dollars potentially contributed due to your "Excess Sick Bank" are NOT considered post-tax ROTH 401K contributions into your Federal Express Pilot Retirement Savings Plan (PSRP)....which is the technical name of the whole plan. I guess I caused some confusion when I typed "401K/B Fund" in an earlier post. I was trying to communicate that all of these contributions go into the PSRP and are, collectively, subject to the $61K IRS limit. I did not mean to imply your "Excess Sick Bank" were considered ROTH contributions. They are not. Clear as mud??

nunyabiz

I don’t think ROTH means what you think it means. Every time you say ROTH I think you really mean excess AFTER-TAX. Which you can convert to ROTH (and doesn’t count towards the $20.5k limit). It’s called the Mega Backdoor ROTH. Perhaps that’s where your confusion is coming in.

Traditional + ROTH =$20.5k max/yr (between ALL plans you contribute to)

Traditional + ROTH + company 9% + company match + excess after tax =$61k max (per eligible 401k plan)

Your point remains to not fill up too soon, but you are referring to after-tax, not ROTH contributions. All $20.5k of your tax advantaged limit could be ROTH contributions if that’s what you wanted.

If you have another 401k (second job, TSP) the $61k limit is PER PLAN.


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DLax85

Other related thoughts, more relevant this to thread title....

Under the 2015 CBA our last pay raise was Nov 2020 pay period, correct? So any pay increase at signing should AT LEAST be an inflation adjusted equivalent from that date. Roughly speaking, thats about 14% today, correct? If so, that would take our current $335.46 WB Capt Year 15 rate to approx $381.90.. Minimum. Today! With inflation running 8-9% annually, that will only be adjusted higher as delays continue. And then the real forecasting games/negotiation begin. How long is the agreement? ...and what are the inflation forecasts moving forward over that time period. The old assumption that inflation will run at 3% per year is highly debatable - especially over the next 2- 3 years. Everyone still watching how high the Fed is willing to raise interest rates to reign it in. Beyond whatever retirement enhancements are agreed upon, the initial hourly pay rates, and the future rate increases over the life of the CBA, will be - and should be - hotly debated.

DLax85

I think nunyabiz is correct. I referred to the additional "after tax contributions" above the $20,500 limit incorrectly as ROTH. If one is doing this, and you look at your FEDEX PRSP statement you'll see the correct terms. My apologies for any confusion. -