Question About A & B Plan
 

I'm hoping someone on here knows the answer because I'm not sure and I'm looking for clarification.

What happens if an individual, goes on long term disability? Do they still accrue longevity towards their A plan? And does the company continue to contribute towards that A plan? "Example someone who already have their high five but doesn't have 25yrs"

How about the B Plan "would the company still contribute to your B plan while on LTD"

Answer
 

Yes, a pilot continues to accrue "Years of Service" until they hit mandatory retirement age but they do not continue to accrue any additional defined contribution money.

I don't know for sure about the Company contributions to the A Plan for a pilot on LTD...that's covered by the FASB which defines how and when the Company must contribute to that plan. That being said, I think they do need to contribute up until the time the pilot retires from the Company. The pilots earnings have nothing to do with the amount the Company contributes, so it doesn't matter if the pilot has earned their "high 5".

The reason I ask, is that I've heard a lot of different views on A & B plan. Some are in favor of an all B plan. But based on your answer, this could be another downside to an all B plan. If a pilot get sick, the company don't have to keep contributing to the B plan. Where as on the A plan, if a pilot get sick he will still get some form of retirement if he retires while out on LTD.

Anyone that is in favor of all B plan is a fool. Why does management have the A plan? Why do Congressman have the A plan? Why do Senators have the A plan? Why does Jeb Bush have the A plan?https://www.washingtonpost.com/polit...ce1_story.html
When you hear a pilot say he prefers an all B plan it explains why people say never fly with a doctor or invest with a pilot . How do you make a pilot a millionaire? Give him a Billion dollars.:D:D

Question 1 A Plan. Yes you will continue to accrue 2% a year until you have 25 YOS or you hit 65 whichever comes first. When you retire you HIGH 5 will be calculated on when you went on LTD but you will at least have a 50% pension of your high 5.

Question 2. B plan. Once on LTD all your B plan contributions STOP. So does your 401K contributions.... Yeap they both stop forever unless you come back off LTD.

Now lets assume under your scenario that you had an active 15 years and then went on LTD. Lets say that you had just upgraded from NB Captain to WB Captain 1 year ago. Your High 5 is in the ball park of $260K, $248K, 240K 235K and 200K ( I'll say the last year was a WB FO. Your High 5 is 237K. So you will have whatever you had in your 401K and B plan I'll estimate (600K). For the next 10 years (Lets say you are 55) you will earn 150K on LTD maybe more if you have Alpa LTD supplemental. You will get no 401K or B plan contributions. but when you retire you will get 119K in your pension and you have 600K in you 401K and B plan. The above numbers are merely estimates and assumptions. YMMV, but I would bet under a LTD issue, everyone wants to have an A plan along with a B plan. B plan only...not so much.

Thanks for breaking it down, with that being said why are so much people willing to give up their A plan for a larger B plan. Are they not aware of risk involved, such as get sick and going out on LTD

Starclipper it is not a matter of giving anything up. The A Plan was worth a max of $130K in 1996. It is worth a max of $130k today. When today's new hires retire in 2045 it will be worth $130k in per year retirement benefits. because of the change in the law ALPA says it will cost us about $4 in Benefits elsewhere to gain $1 in A Plan increase. There are all sorts of trade offs in the A Plan B Plan scales, for instance it is likely today's new hire could max out his high 5 in 2030, the next 10 years he will be working to add 2% per year. His last 5 years he will gain no advantage.

Mathematically at some point our "capped" A plan value will relatively decrease enough that a cash over cap B Fund will be more valuable. Some of us think that point is rapidly approaching. This assumes some measure of inflation and increases in yearly pay for FDX pilots.

At least they will have that 130k, but putting all eggs in a one basket B fund seems to have a lot more downside to it. For example what if someone get sick, and goes out on LTD, the A plan will still be funded while the B plan won't. It looks like the only downside to to the A plan is the it's expensive to fund. $4.6B cash offer for TNT plus the cost of clearing out some of the debt, and they A plan is too expensive plz. Even with cash over cap, the amount you would pay in taxes on that cash over cap still isn't worth giving up any A plan. The other Airlines gave theirs up in bankruptcy not to a company that's posting record profits.

For many, many reasons having both the A plan & the B plan is the most prudent --- especially in a time of very low interest rates/fixed income returns

I am not advocating elimination of the A fund, even for new hires

I am advocating a much larger B fund bump then what's included in the current TA

Over time, we could move to a much more hybrid system then we have today --- where the expected distributions from the A fund & the B fund were more equal

However, that does not mean the A fund show go away completely

As the A fund $260K cap starts to represent the limit of a lower pay scale level (perhaps, Max WB FO pay in about 10 years), I don't think the company can continue to argue it's impossible to afford

This argument will also lose ground if/when interest rates & fixed income returns normalize

However, we should act now to develop a proper path for B fund increases, which I believe is a 5-6% increase over the next 6 years

Add 1% each year for the length of the TA

The current 7% would grow to 8%, 9%, 10%, 11%, 12% and finally 13%

Then let's negotiate again in 2021 with more current market information

Also Remember, UPS pilots already get 12%

Well said,