NotMrNiceGuy

There is a retirement divide.

I’ll start by saying that I don’t know what the answer is, but I do believe it needs to be addressed before we develop our strategy going forward.

I’ll be blunt about it rather than beat around the bush to save time.

As I see it:

The older crowd (less than eight years to retirement) wants the A-Plan bumped to make up for some of the loss of value eroded by inflation. From the vote, I believe they will prioritize this over pay, the DC Plan, and scope.
The middle crowd (25 years to 15 years until retirement) wants a mix. A bump in the A-Plan (slightly less than the older crowd) for reduced retirement volatility, and a more robust B-plan with cash over cap. This keeps the wealth in your name in case FDX takes a turn for the worse. Maybe a spillover MBCBP for tax advantages.
The younger crowd — I’m not gonna pretend I know what they want. I’ve talked to some that really like the A-Plan. I’ve talked to others that think it burns up too much negotiating capital and they would prefer all the money in their own name. Given the time-value of money, time is on their side. I think they would be fine with 20% CoC with a spillover MBCBP.

My point is this — we have a focus problem. I don’t know if we can succeed in negotiations going for three different goals. And I am concerned that the A-Plan is an albatross around our necks just like it has been for the last 17 years.

Look, I’m a middle zoner. This is my personal perspective. I think the A-Plan is great. It levels out the volatility of retirement. When I laid out my goals for this retirement, I wanted to increase the A-Plan by 30% and the B-Plan by 30% with cash over cap. But there are some drawbacks to the DB. I didn’t personally prioritize the A-Plan bump because of its weight in negotiations combined with its embattled history with inflation. I was looking for something more sustainable. However, I knew our guys that are approaching retirement had wanted to conquer that A-Plan improvement since 2006. I felt that was a worthy cause. The problem arises when the TA1 proposal completely neglected the B-fund, left cash over cap untouched, and had meager pay rates and undercut future improvements to the A-Plan by directing new hires into the MBCBP. We put all the eggs into the older retirement basket and left everyone else out to dry. And looking at the way the senior blocks voted, they were completely fine with it. IMO, this would be tantamount to an NC run by junior folks leaving the A-Plan untouched and releasing a TA that only improved the B-plan with no cash over cap. That would be completely worthless to the pre-retirement crowd. I can see that. What I can’t see is why the older crowd (other than a small minority) couldn’t see the other side.

We have competing goals combined with a lack of empathy for the needs of both sides. This being the case, we need to come up with creative solutions that might not meet our personal goals, but at least advance the ball in a meaningful way.

I think the third problem is dividing the crew force in terms of retirement plans going forward. Let’s say this TA passed and a 40 year old elected to take the traditional A-Plan bump. Fast forward eight years and now 2,000 folks retired and there are 1,000 new hires on the MBCBP with no ties to the A-Plan. The demographics of the crew force have completely changed. What if the new hires want to increase only the MBCBP to 15% and shoot for QOL improvements in the next contract? That 40 year old will soon be a 64 year old (66?) with a 25 year old pension with a capped 9% DC hoping for a Hail Mary retirement increase on his last contract? Sound familiar? We can’t make the same decisions and put ourselves in the same predicament.

I get that this a very hard problem that is highly contentious. I probably hurt some feelings just by voicing it. And if I have done so, I’m sorry. But we have to address this now and get a plan together. I don’t know what the answers are. I’m hoping we can get some bright minds to figure this thing out.

Again, not trying to hurt feelings. We just need to solve this harsh reality.

BlueMoon

41 and 7+ years.

I’m a no vote for anything that gets rid of the A-plan.

threeighteen

OP - well written post describing problem… and I agree.

whatever fix that we get needs to be an improvement for all, not just the guys over 60.

A big concern I had with the yes voters this round was their ambivalence towards the problems that the TA retirement created. They said “you can just solve that next round”

that really ticked me off because we spent all of our negotiating capital on retirement this round, and gave up what was probably billions of dollars in concessions to get retirement fixed and we ended up walking out the door with something that was completely laughable and worse than where we started.

BoilerUP

Maintaining your current contractual 2% FAE, but establishing a UPS-style Flat Dollar Amount retirement scheme, could be a vehicle that gets crewmembers to the desired defined benefit for a MUCH lower funding liability. The FDA would have to be renegotiated/extended every subsequent contract, which requires negotiating capital each time, but that incremental funding liability lowers pension liability for the Company and frees up more contract value for other areas.

Just as an example:

Maintain 2% FAE, 25YOS and $260k compensation limit...$130k max defined benefit as baseline defined benefit.
$6,600/YOS Flat Dollar benefit for 25 YOS: $165,000. 30YOS: $198,000. Increase the YOS benefit by $200 every DOS+ to provide a relative inflation hedge on benefit value, albeit not a cost of living adjustment retroactive to everyone already retired.

The reduced funding liability of the Flat Dollar Amount could allow redistribution of value that otherwise would have gone to funding a 2% FAE, $330k compensation limit DB to a larger defined contribution with CoC, higher payrates, work rules, etc. It could maintain a balanced but greatly enhanced DB/DC retirement benefitting senior to junior, younger to older.

This is not a panacea, simply an idea from an outsider.

DLax85

Excellent post. Reasonable tone and reasonable description of the facts at hand. Not meant to offend. Meant to express an opinion, and perhaps persuade & educate. Thank you.

One solution may be to ensure “Choice For Everyone”

If all the retirement options are truly of equal value, then restricting anyone to a particular plan is unnecessary. The failed TA provided choice, except for future hires. That implied the plan was of a lessor value - especially if a future pilot was not hired at a young age.

The TA met a huge company goal - cap & sunset the A plan. And it actually gave scheduling & QOL concessions TOO. That was shocking to many.

Clearly Pay Rates & Scope were issues too.

The next set of negotiations will need to adequately address ALL of these concerns, but perhaps only marginally. New, candid, transparent surveying will be critical.

In Transparency, Integrity and Unity (for Everyone),
DLax

PurpleToolBox

Let me be the naysayer. I don't think this had anything to do about retirement. Ok it did, but not what you're thinking. I think it had everything to do with that "unconscionable" comment and Scope.

Clearly the younger folks thought they were being sold out, possible risk of job stability for the retirement increase. Had Scope not been opened this would probably and sadly would have passed even with all the concessions.

FreightFlyer91

I still don't think it would have passed due to all the concessions and the lagging pay rates. For everyone who says this isn't the old FedEx, that's true. It's also not the old FedEx pilot group. And I'm not talking about old vs young. But there's been a ton of hiring the last 8 years and it's a whole new/different pilot group. A lot of people who have been through the struggles with management at the regionals and the ACMI carriers.

NotOldNotYoung

The retirement options were not of equal value or cost to the company. Raising the A plan was the expensive part. The 11% MBCBP is the cheaper part. While it may yield a larger retirement for those not yet hired or younger pilots hired, it did not offset the declining value if you chose to freeze your A plan at $290k FAE and current YOS. But if you have >10 years to go and stay with A plan, its value depreciates. Those in the middle were left with 2 mediocre choices. In the end the company saves as more end up on 11% contribution plan. Those savings and lower pay rates paid for A plan bump that favors those with <5 years to retire. If you shift money away from the A plan to get pay rates, you get more No votes from older crowd to offset yes votes from younger crowd. We have an inherent demographic divide that will be a challenge to reconcile.

Herkguy80

Idea:

A plan frozen at 260FAE for all with following exception: You can increase the FAE or increase your B plan on a sliding scale:

330 FAE keeps 9% B plan going forward.

260 FAE gets 15% b plan going forward.

300 FAE gets a 11% b plan, etc etc.

You would need experts to tweak the FAE/B plan percent ratio.

Would this make both groups happy?

Synixman

My understanding is, legally, we can only have one "Defined Benefit" plan going forward. As the IRS classifies the MBCBP as a "Defined Benefit", we cannot run both (A Plan and MBCBP) concurrently as choices for new hires. So if (BIG IF) the MBCBP is the "way forward", there does have to be a break point where we move to that as a group, and people have the decision to stay with the A Plan or move on to the MBCBP.

I was a no voter on the retirement package alone.. I was initially opposed to the soft sunsetting of the A Plan, but later it moved to the lack of funding to both PRSP and MBCBP, lack of transition funding for middle zoners, and anemic pay rates/QoL items. No one at the Union would provide details, but it felt as if we put tons of value into 20 years of A Plan value that would never get increases again and everything else was left behind. The NC would allude to this as they talked about how the MBCBP would be "easy" to increase in future cycles because it's just a fixed % pay cost, not the complicated and expensive funding formulas for A Plans.

The 9% PRSP (capped) and 11% MBCBP (capped), along with no profit sharing, is severely lacking vs industry peers. The Pax carriers are coalescing around 18% B Fund, Profit sharing, and DC excess spilling into the MBCBP tax free. You can race these during a career and the DL style plan wins going away. The DALPA podcast talking about this vehicle is enlightening IMO.

So I'll say I'm divided on this one. The MBCBP in theory has pros, but we bare all the market risks. Shoving lots of company money into PRSP and MBCBP alleviates this, and one plan going forward unifies us. The A Plan really valuable, takes the risk away from us, but is expensive to fund and dragging increases out of the company is painful, of which there are no durable examples here of increases. I would love to see cogent analysis from our professionals that isn't in the form of a modeler from Cherion as part of a sales job.