TonyC

Those are Annual Compensation Limits for Defined Benefit plans (Our "A" Plan).

The Defined Contribution Limits (B-fund, 401(k), surplus sick leave, etc.) for 2014 and 2015 are $52,000 and $53,000 respectively. (IRS Announces 2015 Pension Plan Limitations)






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TonyC

Yeah, sorta, but you're close.

All 401(k)'s are Defined Contribution plans, but not all Defined Contribution Plans are 401(k)'s.


All of those you listed -- 401(k), PMMP, RSP, etc., are Defined Contribution Plans, and are subject to the annual IRS limit.


If it's a Venn diagram, the big circle is the Defined Contribution Plans, and all those others are little circles inside the big circle.





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busdriver12

Okay, now I am really confused. I went back and looked at the B fund contribution (ie Money Purchase Plan), and the company contribution on 1/7 was about $13.00. I'm assuming they make contributions on that date for salary earned in December? Well, I made over 20K in Dec, and I only contributed $17.5K to the RSP, with no sick leave payout, so I wasn't close to the 52K max, that should not be limiting.

I feel like I had read something lately on this via the company, but can't find anything. I have never tracked this before, just trusted.

What am I missing here?? (Besides over 1K in my B fund contribution).

max8222

Busdriver, I started the thread and I think you are like me. You hit $260k in paying december so there was minimum contribution to your B fund. Once you hit $260k no more contributions from the company. You can still put in 401K up to the limits plus sick bank sell back up to i think $53k if less than 50 yrs old or $55k for over 50. It allows for catch up contributions.

busdriver12

max, that's the only thing that makes sense to me. I looked at the contract, didn't find that, but I did find this on the IRS website:

"Compensation limit for contributions

Remember that annual contributions to all of your accounts - this includes elective deferrals, employee contributions, employer matching and discretionary contributions and allocations of forfeitures to your accounts - may not exceed the lesser of 100% of your compensation or $52,000 for 2014 and $53,000 for 2015. In addition, the amount of your compensation that can be taken into account when determining employer and employee contributions is limited. The compensation limitation is $260,000 in 2014 and $265,000 in 2015."

At least the limit goes up a bit next year. Kind of weird that government has compensation limitations, but I guess I'm not too surprised.

FDXLAG

Not weird at all, politicians consider you rich and therefore want to limit the amount of taxes you can defer. These politicians generally are "pro labor".

busdriver12

They certainly aren't pro our sort of labor. If you closely read the presidents budget proposals, they are eye opening. Particularly the one that limits or stops you OR YOUR COMPANY from contributing to your retirement plans, in total as a MARRIED COUPLE. Those of us who are married to another person with a healthy retirement plan not only could be prevented from any further contributions to our 401K, but company contributions also.

Try negotiating that one. What would we have to give up, just to get our B plan back? I suspect the union would roll over on that one, so I'm glad this budget isn't going anywhere. However, it lets you know where they stand. Leave the rich donors alone, but stick it to the upper middle class.

Busboy

Are you referring to limiting contributions to tax preferred accounts to $3.4 million? You have $3.4 million in your 401K/IRA?

busdriver12

That's what it implies in the bold print, but when you read the fine print, it is far more odious. The maximum would be what would pay out a 210K annuity at age 62 (as apparently, who needs more than that?), at current annuity rates, would be accounts worth approx. 3.4 million. However, it is a soft target, changing every year. Annuity rates go up, the max allowed retirement account can go way down. If they adjust it for age, as implied, the amount could be tiny for people in their twenties.

This is also ALL retirement accounts, including Roth, 401K, IRA, company. And it is all your SPOUSES retirement accounts, combined with yours. Apparently they think all marriages will last forever, and all people will grow old in retirement together.

I don't have a huge problem with limiting tax preferred accounts. However, this is very complicated, and has a ton of potentially ugly surprises. Like losing your B plan contribution if you and your spouse combined have too much money in retirement accounts.

And yes, I suspect that combined, we will have that amount within the next few years unless the market tanks. There are many people who will, if two people make a good income and they've been investing for decades.

PurpleToolBox

Yes, if you make over $260,000 in 2014, or $265,000 in 2015, the company stops contributing to your B-fund by law.

The maximum Company contribution in any given year = 401(a)(17) limit X 7%.

From an ALPA Retirement Email ... (I know the formatting sucks, but you should be able to follow the math at the bottom.)

1. 414(q)- Highly Compensated Employee Definition Threshold
2014 = $115,000 2015 = $120,000
This defines the level of compensation at and above which the IRS considers you a highly compensated employee (HCE). By itself this limit has no effect, but it does change the application of certain plan provisions. This will be explained below, as applicable.

2. 401(a)(17)- Qualified Plan Compensation Limit
2014 = $260,000 2015 = $265,000
This limits the total amount of compensation that can be considered by our qualified plans. This affects our plans in two ways:

PMPPP- The Company's 7% contribution is based on your compensation up to this limit. You will not receive a Company contribution on compensation in excess of this limit. The maximum Company contribution in any given year = 401(a)(17) limit X 7%. So for a pilot earning at or above this limit, the max Company contribution is moving from $18,200 in 2014 to $18,550 in 2015. When a pilot's earnings exceed this limit the Company automatically ceases contributions to the pilot's PMPPP account. This often perplexes pilots the first time they earn above the limit.

PRSP- Here is our first look at the impact of the HCE threshold. For an HCE pilot, after-tax savings are limited to 5% of his or her compensation. The max after-tax contributions that an HCE pilot can make in any given year = 401(a)(17) limit X 5%. So for an HCE pilot earning at or above the 401(a)(17) limit, the max the pilot can contribute to his or her PRSP After-tax Account is moving from $13,000 in 2014 to $13,250 in 2015. For a non-HCE pilot, the 401(a)(17) limit doesn't come into play, but this report will show the differences in the after-tax space for comparison and education. A non-HCE pilot's after-tax savings are limited to 20% of his or her compensation. The max after-tax contributions that a non-HCE pilot can make in any given year = eligible earnings X 20%. So for a pilot earning one cent below the HCE threshold, the max the pilot can contribute to his or her PRSP After-tax Account is moving from approximately $23,000 in 2014 to approximately $24,000 in 2015.

3. 402(g)- Employee Pre-Tax Elective Deferral Limit
2014 = $17,500 2015 = $18,000
This limits the total amount a pilot can elect to defer into his or her PRSP Pre-tax/401(k) Account. A HCE and a non-HCE pilot may contribute a max of 15% and 50% of compensation, respectively, to the PRSP Pre-tax/401(k) Account, but the total dollars that can be contributed are subject to the same 402(g) limit.

4. 414(v)- Catch-Up Employee Pre-Tax Elective Deferral Limit
2014 = $5,500 2015 = $6,000
Pilots who are age 50 and older or who will turn age 50 within the calendar year are eligible for additional "catch-up" contributions into their PRSP Catch-up Account. The max catch-up contribution amount is moving from $5,500 in 2104 to $6,000 in 2015. Amounts deferred under this limit do not count against the 415(c) limit defined below.

5. 415(c)- Defined Contribution Plan Limit
2014 = $52,000 2015 = $53,000
This limits the total amount a pilot and the Company can, in aggregate, contribute to the pilot’s PRSP and PMPPP accounts. The contributions that count toward this limit are the pilot's pre-tax deferrals and after-tax contributions to the PRSP, the Company pre-tax match ($500) to the PRSP, the Company’s contributions to the PMPPP (7%), and the Company’s contributions to the PRSP associated with the end-of-year excess sick buyback. As noted in the section above, a pilot’s 414(v) catch-up contributions do not count against the 415(c) limit.


6. Scenarios (Note: We don’t feel that Excess Sick Buyback should be relied on for retirement savings due to the unpredictable nature of health. However, all scenarios assume a full Disability Sick and Regular Sick accounts to demonstrate the highest end of the benefit spectrum under the IRC limits.)

A. For a pilot who earns above the 401(a)(17) compensation limit, has the highest hourly pay rate under the CBA, and contributes the max in all areas, the scenario would look like this:

2014 2015
PMPPP (7%) $18,200 $18,550
Company Pre-tax Match ($500) $500 $500
Pilot's Pre-tax/401(k)Deferral $17,500 $18,000
Pilot's After-tax Contributions(HCE 5%) $13,000 $13,250
Excess Sick Buyback (72 CH x $260.s61) $18,763.92 $18,763.92
TOTAL $67,963.92 $69,063.92

Summary
Total Contributions to Both Plans $52,000 $53,000

Check cut to the pilot for excess sick buyback $15,963.92 $16,063.92

A pilot age 50 and above, or who will turn age 50 during the calendar year, may make a catch-up contribution of up to $5,500 in 2014 or $6,000 in 2015 without affecting the above scenario.