What should A-plan sunset be worth?
 

At a recent hub turn meeting a block rep stated we got zero credit for splitting and sunsetting of the A-plan in TA 1.0. As in the $3.8B that PM and ALPA touted didn't include ANY added money for pilots in exchange for releasing (in the future) the company from this subtantial obligation. Reason given was it's too hard to cost out the benefit to the company 10-15 years from now, when the a-plan would likely be fully phased out. If this was discussed in the sales pitch or on bookface, I missed it. IF we sunset the a-plan, it should be an enormous windfall for the pilots.

Windfall is a poor choice of words. Every cent of A plan value currently held and into the future has been either earned or negotiated. It is an asset (owned by the collective we) that must only be sold at what WE view as a fair price. We agree that this price is ENORMOUS. It is certainly not something that should be sunsetted for free because it's too difficult to do math.

"We're switching you to a new plan that will give you way more money and cost us a lot less"

Must be weird to live in a fairy tale.

Random Thoughts on Retirement
 

We had two retirement options with the failed TA. Option 1 improved upon the pension by 30% and left the DC of 9% capped unchanged. For anyone retiring in the next ten years, this is a no brainer. Best in class among all airlines.



Option 2, when viewed through the lens of history as well as contrasting with other existing retirement schemes, is not as cut and dry. Option 2 was a split between MBCBP and DC into the 401(k), 11% and 9%, respectively. Both of these contributions are capped at IRS Compensation Limits ($345,000 in 2024). In addition, the fiduciary would be FedEx with a target rate of 6.5%.



Before we look at other airlines, some questions are worth raising.

• The first is the value of the A-Plan in option 1 compared with the value of the MBCBP in Option 2. With a conservative investment portfolio in the MBCBP, is 11% capped contributions equivalent to a pension that is valued at $169K? Not from my perspective.
• The second question is allocation of company funds. Is it more beneficial to put a higher percentage of contributions into the MBCBP as opposed to a DC into your 401(k)? If the goal is to take advantage of tax advantaged accounts, would it not be better to have more going into the 401(k)? The company would still contribute 20% of until IRS limits. But if the higher contributions were to the 401(k), you would ultimately be able to max out your 401(k) with less of your personal dollars, resulting in more discretionary income. Not to mention the fact that returns in the MBCBP are likely more conservative for younger investors given the proposed portfolio mix.
• The third question highlights the fiduciary. I see no benefit to having FedEx serve as the fiduciary. It’s just that simple. Any fiduciary should be third party.

(Sidebar: I can’t remember this last highlight exactly, but the allowance of an annual transfer from the MBCBP to the 401(k) must also be available starting at 59 ½ ).



The next phase of this discussion concerns the existing retirement schemes and how they came to be. As a result of the turmoil in the early 2000’s, the pension plans for the legacy carriers were largely decimated and used to pay off bankruptcy debts. Seeing the large expenses associated with pensions, the legacies decided to choose non-diversified DC into the 401(k) leaving the brunt of risk onto the employee. In order to bridge the gap, the carriers also offered to throw profit sharing into the mix (also happens to be pensionable). Recently, all legacy carriers and SWA (Big 4) added the MBCBP as another offering for further diversification of their retirement achieved in negotiations (SWA has not been ratified yet). As it stands today, the Big 4 all have a mix of DC, MBCBP, and Profit Sharing. In addition, they all have cash over IRS contribution and compensation limits.



Below is a snapshot of the retirement offerings for the Big 4 in 2026:



DAL, AAL, and UAL

DC: 18% Cash over Cap

MBCBP: Excess Spillover Cash directed here

PS: 18% of Profit Sharing pensionable into 401(k)



SWA

DC: 18% Cash over Cap

MBCBP: Two Funding Mechanisms

#1 - Excess Spill Cash from NEC (Non-Elective Contribution) is directed here.

#2 - 2% of Income will be directly deposited in the MBCBP

Note: Contributions stop at IRS Limits and the remainder is paid out as cash.

PS: Not Pensionable.



The first item that should jump out at you is that every single carrier is paid cash over the IRS limits. Even now with our current 9% DC, every December we have to monitor our after tax contributions to make sure we don’t miss out on free money from the company into our DC. Meanwhile, the other carriers have been cash over cap for the better part of a decade. This becomes a major issue considering the climbing pay rates. Next year, the top WB CA rate is $447 for the legacies. If 1000 credit hours are earned, that means their companies will contribute $80,450. This does not include profit sharing which has averaged another 1.8% retirement contributions at Delta. That’s nearly 20% uncapped. If FedEx ALPA achieves that same pay rate with our current capped setup, that means a total contribution of $69,000. That’s 16.5% more for in tax advantaged retirement for the legacies. That difference will only be exacerbated anytime inflation is less than their 4% raises over the next three years.

We had the best retirement in 2015, bar none. BOTH of our retirement options should be the best going forward considering retirement is our primary focus. Handling it during this set of negotiations will ensure that we can focus on QOL the next time around.



The next point I’d like to highlight is Profit Sharing. Part of the price the companies were willing to pay for the loss of the pensions in bankruptcy was profit sharing. Delta’s was famously the most generous and now the legacies all share this plan. Not only is it pensionable, but it ultimately boosts the hourly rate. I’m not necessarily saying that we should aim for profit sharing, but it is a value that came by way of those airlines losing their pensions to make up for that loss. We are sunsetting our pensions by only valuing it at a capped 11%. That is insanely low for the value it brings to the company by getting rid of it.


To bring all this minutiae to a close, I would say that the market average right now is:

DC: 20% Cash Over Cap (when you include pensionable profit sharing)

MBCBP: Spillover cash

Profit Sharing: Yes



SWA added a nice nice automatic 2% into the MBCBP. Something to consider.



To accept anything less is to fall behind our peers and undervalue the sunsetting of our Traditional A-Plan.

I would like to nominate NotMrNiceGuy for a seat on the negotiating committee.

Wonderful post.

Well written and well thought out.

We have some very smart people in our crew force, and even though the "SM" people seem to think otherwise, there are even some smarter than they.

work it backwards
 

Long time stalker... first time poster:

Very good analysis of what the current contracts can offer... but I encourage everyone to work backwards from an end date, assuming we are all lucky enough to reach that without an illness.

disclaimer: I'm in year 24.... I was a no vote as I do not want to see the pension sunsetted w/o an option.

The calculations above look great but it is all predicated on a healthy career with max earnings and significant hour accumulation... where a pension is based on a high five and yos

I estimate I will retire with around 2.5MM in my 401k(maxing it most yrs) with slightly above conservative returns/under s&p avgs. I believe I will be able to take 10k per month out plus a full pension of 10.4k(hopefully more in TA 2.0) for a total of 20.4k pretax w/o social security.... or about 245k/yr income w/o decreasing my 401k balance. I bought a term life policy to cover my wife if I die early or I may also take a survivor benefit w/ less income generation tbd.

I ran some finance calc estimations ... having zero and having the company and yourself add a total of 7k per month for 25yrs at a conservative but reasonable 8% ... you will have 6.14MM in your account. To generate an income, if you withdraw 4% per year, you will have 246k per yr income pretax. Very similar income... except, yes it's your money if you die... but, you have to work(fly) and have a healthy career. You also can't spend large chunks because you need the balance for income generation.

Some different perspective as I get closer to the endgame. Be nice, first time poster here 🤣

Pensionable?
 

Sorry to be "slightly" off topic here, but can someone explain to me what "pensionable" means? Or at least what the implications are when it comes to earnings that are pensionable vs. non-pensionable? I've looked at the MW definition of the term and it doesn't really give insight into what it means as far as benefits like the MBCBP are concerned. TIA.

Per diem is non pensionable, and ALPA does not collect dues from it, which is one reason why it does not increase to US government per diem rates, as it should.

Back when we could claim "lost per diem" on our taxes, mine was over 10K per year. I am sure it is twice that now. The company writes this off as a business expense and we should get full per diem, indexed by the government rates, every year. Oh, and that money is TAX FREE TO US.

Just another one of many things wrong with our contract.

I’m sure there’s a more complicated, specific definition, but I’ll try to simplify it. It’s basically any form of income that can earn credit for direct contributions by the company.

For example, take the profit sharing at SWA and DAL for example. Let’s say that both companies have pilots that earn $20,000 in PS. Since PS is pensionable at DAL, their pilots will earn 18% DC in 2026. That means that their PS will credit another $3,600 (20,000 X 0.18) into the 401(k). OTOH, SWA PS is not pensionable, so they do not earn any extra credit to the 401(k).

As another poster pointed out, per diem is not pensionable and FDX doesn’t not include it in per diem DC calculations.

Thats my understanding of it anyway. Maybe a DAL pilot can chime in.

401k and B fund contributions are seperate contributions and have different limitations. B fund is percentage( delta 18%, Fedex 9% x pensionable earnings capped by the ESRA, IRS limits funded by the company. 401k Is capped dependent on age and is funded by the pilot and possibly partialy funded by the company(fedex match first $500).

On the Fedex Fidelity account statement it only shows the combined 401/B fund but you can ask your advisor and they can give you the break down of the amount in both accounts.Vanguard use to show it. I forget the reason why it show combined accounts.

The 401k is not predicated on having a healthy career. However, it does require the company to double-down on the employer retirement contribution when a pilot goes out on LTD to make them "whole" (Ex: 17% goes to 34%). That is how they are successfully utilized at other airlines.

Healthy career also includes that you fly your line during your later years. When I was in my 30's, I would flex by swapping a 6hr for an 8 or maybe an extra trip per month when the kids were in college. In my 50's, I can't even tell where to find open time on VIPS... if there was any.

Another thing.. if my wife knew I had 6MM + in a retirement account, that would likely be enough for her to trade me in... 2.5MM and half a pension doesn't look as good to the boss.🤣 Happy New Year!!

11% MBCBP doesn't even come close to replacing a 130k pension, or even a 170k pension.

Even with cash over cap, which doesn't make sense because we would have been the only airline to even have a cap on our MBCBP because of how poorly it was negotiated.

Ha. What do you think a 130k pension is worth? Odds are it's not as much as you think.

What do you think it is worth? Most pilots I fly with have no idea. They also do not know th IRS limits on the 401K, B-Fund much less how the protections on the A plan changed after all the bankrupt airlines occured. Also the tax advantages and disadvantages on the different retirement saving vehicles.

The union has been doing Podcast hopefully they will cover a lot of this.

Accoding to an available annutiy from Schwab, the cost to purchase a $130k/year annutiy retiring at age 65 and collecting immediately is $1,643,603.

Ours has the survivor benefit, that will increase the cost if not already included.

They have some survivor options priced, but there are tons of variables (age of spouse and what percentage you want them to receive) If you select that option with Fedex, you won't be getting $130k per year - It will cost you.

I did the same thing on Schwab with survivor and it was 2.0M.

I can see it being 2 million depending on the age of the survivore. My point is Fedex doesn't give that benefit to you. You can elect the survivor benefit and what percentage they would receive. The cost for the survivor benefit is taken from the $130k you would receive without a survivor. When I run my numbers, the cost for the survivor benefit is around $1000/month.

Be aware that neither the company or the union can take away a earned and accrued pension benefit under federal law. You can freeze the A plan going forward but you can't reduce or change any accrued benefit. Regardless of what you negotiate under a new plan the company will be paying A plan benefits until the last pilot on the list at date of signing retires.

Im curious, just for clarity, is that during or after one retires? I can understand not reducing someone that is retired and has no voting rights but if 100% vote to reduce their A plan to 10k for a 5 million dollar bonus, would that not be allowed?

Whatever you have accrued to that point cannot be reduced by federal law. For example if you had 20 YOS and an FAE at or above $260k, you couldn’t have less than 2%*20*260k = 104k pension.

ALPA can be sued if it doesn’t represent the pilot group fairly. So it cannot negotiate one demographic’s future benefits away to improve another without opening itself to legal liability.

You guys who want a meaningful pension increase are going to have to accept the split retirement. Otherwise, you’re going to screw everyone out of a lot of money.

Thank you for the response but would you mind showing your work?

What work?

Companies can I believe offer pension buyouts but it has to be on a individual basis and voluntary.

second paragraph

https://pensionrights.org/issue/chan...r%20the%20plan.

If married when you retire, you are legally required by Fedex to take the minimum survivor benefit unless your spouse legally waives their right to your pension. It's roughly a 10% reduction based on the 50% slide down to spouse when you die.

Employers are generally free to change retirement plan rules for the future as long as most benefits earned up to the date the plan is changed are protected.

Retirement benefits that are protected up to the date the plan rules change include:

• Pension benefits payable at age 65 or other “normal retirement age”
• The share of a special early retirement benefit earned as of the date of the change – if the employee continues to work under the plan and meets the age and/or service requirements for the benefit

Retirement benefits that are not protected as of the date the plan rules change include:

• Special early retirement benefits if the employee has not met all of the requirements for the benefit as if the date of the rule change and does not continue to work for the employer or employers sponsoring the plan
• Disability benefits if the employee is not receiving the benefits at the date of the rule change
• Lump sum payments if the employee has not qualified for the payment as of the date of the rule change
• Most cost of living adjustments

Thanks for sharing. I'll add that the benefit of having a CBA is that ALPA has to agree to any changes to future plans as well.

Can you give the reference where a retirement benefit cannot be decreased by a contractual change voted on by the employees? Ie, if down the road the crew force decides to vote to decrease the A fund cap down to $200k and that is what is then in the contract, where in the IRS regs that not allowed. I know that cannot effect retired pilots, but pilots still on property. Thanks

IRC 411(d)(6).

"In general, the anti-cutback rules protect a participant’s accrued benefits, early retirement benefits, retirement type subsidies, and other forms of optional benefit offered under qualified retirement plans. Section 411(d)(6) generally provides that the accrued benefit of a participant may not be decreased by an amendment to the plan."

https://www.irs.gov/retirement-plans...rement%20plans.

https://www.law.cornell.edu/cfr/text/26/1.411(d)-4

Thanks for the quote, but I think you cherry picked. So let me do the same thing. Here's a quote from farther down the page. "The final regulations provide guidance on the circumstances under which a qualified retirement plan can be amended to eliminate or reduce early retirement benefits, retirement-type subsidies, or optional forms of benefits. Specifically, the final regulations provide rules under which a plan may be amended to eliminate benefits that are burdensome to the plan and participants and have minimal value to plan participants."

Yes I also picked a quote that really does not add to the discourse either. But that's what you did. Posting an answer you knew did not answer the question. In full disclosure, I cannot find any reference where an employee group amended their contract to reduce a benefit. But I also cannot find any reference that says an employee group is prohibited from decreasing their benefit. Ball is still in your court. Where does it say an employee group cannot decrease their own benefit??? That is the posed question. Could the A plan be contractually diminished down the road by the pilots?

Your accrued benefit cannot be reduced. By law. Simple as that. If you had 20 years at 338k earnings cap, you can’t suddenly have 20 years at 200k.

Future accruals of benefits in a pension, conceivably could be reduced. This would have to be agreed upon by the Union per the CBA.

This is highly unlikely as it wouldn’t be fair to that group relative to another group of pilots, which goes against the whole point of a union.

Nothing is risk free. There’s a risk of not getting a pension increase without ending it for new hires. There’s a risk of the pension being frozen or terminated regardless of what we decide for TA2.

Again, please give me a reference that says if the employee group agrees to lower their benefit it cannot be reduced. I agree the company cannot reduce your benefits. However, the split retirement concern is whether the majority of the pilots who don't have an A plan can lower the A plan benefits if those that still have it, in order to increase their cash balance or B fund later. In a TA years from now. Is it possible or not? Reference please.

I don’t have the reference at my finger tips, but A plan benefits already earned are yours. A Plan benefits you could earn are open for “negotiation“. This isn’t really new. The legacy pensions that were “lost” to bankruptcy didn’t actually disappear. The beneficiaries retained what was already earned, but lost the ability to add on. It is true that some companies dumped already accrued benefits onto the PBGC which has a cap on benefits. However, even then, most of the plans were well enough funded to pay out most of what was earned up to the point PBGC assumed responsibility. Pensions are not a risk free place to park company paid money. However, when you measure it against the risks of a 401k the only significant plus for the 401k is the ability to pass unused money to your heirs.

The anti cutback rule I quoted literally says you can’t have your accrued benefits reduced by an amendment to a plan. It doesn't matter if the union agreed to it or not, it’s an amendment. We’re talking about benefits protected by federal law. The union could only agree to reduce the accrual of FUTURE benefits. Which even then, that is unlikely, because it’s not fair to reduce one groups benefits for another.

At this point I don’t think you’re legitimately asking. You’re just being obtuse and demanding a reference from me, which I provided, that is not good enough for you.

Why don’t you reach out to an ERISA attorney, and ask your question? I suspect you’d refuse to believe them anyway because it conflicts with your view of reality.

We spent most of our negotiating capital in TA1 raising the pension. And you now think in the follow on contract we’re going to negotiate that away, as if that’s allowed by law?

If you wanted a pension increase, you got it. Take the win, man. It doesn’t happen without splitting the retirement. And your benefits are protected. Talk to an attorney before you spread fear, uncertainty, and doubt about retirement plans.

[size=0pt]Seriously READ YOUR OWN POSTED LINKS. Here "Section 411(d)(6) generally provides that the accrued benefit of a participant may not be decreased by an amendment to the plan." This is what we are discussing or questioning. Benefits that have NOT YET BEEN ACCRUED. Let's try a different very specific example. If TA1 had passed as advertised and all pilots with less than 5 choose the CBP. You had 5 years and 1 day and you chose to stay in the A plan. In 10 years, all the pilots with less than 15 YOS (greater than 50% of the voters) want to change the years of service credit to .5% per year, is that allowed? You will still have your 15 years and 1 day of credit at 2% per year, but your ongoing forward benefit (NOT YET ACCRUED) has been decreased by amendment. Amendments to the plan are allowed you just cannot lose accrued benefits. Can the employees voluntarily reduce their own retirement by amendment? It looks to me like they can, and that's the rub.

https://www.law.cornell.edu/cfr/text/26/1.411(d)-4

"(a)Reduction or elimination of section 411(d)(6) protected benefits—(1) In general. A plan is not permitted to be amended to eliminate or reduce a section 411(d)(6) protected benefit that has already accrued, except as provided in § 1.411(d)–3 or this section. This is generally the case even if such elimination or reduction is contingent upon the employee's consent. However, a plan may be amended to eliminate or reduce section 411(d)(6) protected benefits with respect to benefits not yet accrued as of the later of the amendment's adoption date or effective date without violating section 411(d)(6).[/size]

Amigo, you are wasting your time, unfortunately. He's here to sell TA1.0 retirement as a win, even though for most FedEx pilots it wasn't. He's trying to hold on to it at all costs. My guess from his username is that he is a service academy guy, class of 1980, and is getting realllll close to retirement and needs that TA1.1 very very soon.

Having been through a chapter 11 and losing a pension I can assure you that is the only way to reduce or eliminate a earned and accrued benefit. Even in chapter 11 it must be shown that the pension is grossly underfunded and but for that obligation the company can not reorganize. The Delta pension could have been saved with some changes to the lump sum option but pension law prohibited it. You have been quoted the law but for some reason can't grasp it. Think about it this way. Without the law protecting a earned and accrued benefit it would lose much of its worth. Any non union company could cancel a pension at any time. A union could decide to cut benefits to older workers to increase them for younger workers ect... It would also impact the PBGC.
How much clearer can this statement be from pension law?
"Employers are generally free to change retirement plan rules for the future as long as most benefits earned up to the date the plan is changed are protected."

Maintaining the current contractual 2% FAE/$260k defined benefit, but adding a Flat Dollar Amount (FDA) option of $6500/YOS that increases $200/year to cover inflation would 1. provide an immediate 25% increase in pension to crewmembers retiring in the next decade while 2. not being costed nearly as high for future pension funding liability and 3. maintaining the existing FAE defined benefit as a baseline for the future, continuing diversified DB/DC retirement for current and future FDX pilots.

FDA would allow for a redistribution of TA1 retirement 'pie' toward a higher defined contribution and cash over cap, benefitting crewmembers of all ages and seniority.

The downside is a Flat Dollar Amount defined benefit would require negotiating capital to extend/increase in subsequent contract cycles.

Just one thought to avoid a divisive "either/or" battle on retirement structure.