Denny Crane

Today I attended the R&I roadshow on Enhanced Retirement and, before I make any other comment, I want to encourage everyone to attend one of these roadshows. It will be well worth your time. It doesn't matter whether you are young or old, a brand new hire or a 30+ year employee.

The following is a synopsis of the meeting. Much more was discussed but I wanted to throw this out there. First they started out by saying any type of enhanced retirement needs to be equitable for everyone. Then they discussed the two types of "Qualified," meaning pretax, retirement plans, DC & DB. A DC has a maximum contribution of $18,500 this year. It doesn't matter what kind or how many DC plans you have, the max you can defer is $18,500/year and the max that can go into a DC is $55,000 including contributions by the company. Any excess DC is paid out as DPSP CSH.

The roadshow was essentially about how to protect this DPSP CSH from being taxed. The only way to do this is to have some sort of DB. Now I know everyone out there thinks "DB" is a dirty word. If you think so, you really need to go to one of these briefings. Modern DB's are nothing like the old, traditional DB. They talked about an option called a "Market Based Cash Balance Plan." Pros: This plan is always 100% funded and assets remain in a pilots estate if s/he dies before retirement. It is also safe from the company in case of a bankruptcy. There are more than 23,000 of this type of plan out there. Cons: Participation is not voluntary and it is not self-directable.

Here is an analogy. Think of all our money in the plan as many individual bubble within one big bubble. Each individual bubble be a pilot and his particular contributions. The plan would be targeted conservatively to make an average 5% return/year. The contributions would come from DPSP CSH. This would avoid the taxes and Alpa dues.

Establishing this type of DB plan would more than likely not be difficult to negotiate with the company and here is why. Right now Delta pays more than $132 million a year in DPSP CSH. Since this is paid as ordinary income it is ALSO subject to the payroll tax paid by Delta. This payroll tax money now being paid could go towards establishing and maintaining the plan.

Well, that's all I'm going to write now and I will try and answer any questions anyone has. There was so much information given that I cannot do it justice.

Denny

Denny Crane

They talked about other forms of enhanced retirement such as a variable annuity plan in the qualified retirement arena. They also talked about non-qualified ways such as deferred compensation.

One thing I forgot to say about the plan talked about in my first post. You are always 100% vested in it. When you retire/leave the company you would rollover your entire balance into an IRA.

Denny

Ray Red

Did they say how someone would be treated for a 64 year old who put DPSP monies in for a month or two before retirement? Doesn’t sound good for the “deadzoners”

Sounds similar to a deferred comp program but the money that is deferred should at least earn some returns.

Denny Crane

This roadshow was strictly looking at enhanced retirement options for the entire group. Nothing was talked about or discussed regarding any type of plus up for the deadzoner group.

Denny

Ray Red

I can imagine they would want to wait till the last possible moment to light that fuse

3 green

When the retirement age was raised from 60 to 65 that gave all pilots, including deadzoners, at least another 1.5 million of income...Everyone should have plenty for retirement, but I'm all for getting more money.

tunes

Denny, while I agree that it could be a benefit...at the end of the day it's still your money that's contributing right? It's not company money. It's nice in the aspect of it forces you to "save" and saves on some taxes and dues but it's still your money just going from one hand to the other. I'd much rather see something company funded.


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Peoloto

Ding ding ding

notEnuf

Everything we get monetarily is company funded. This is just a single tax exemption strategy. If it’s optional and useful for those close to retirement I don’t see anything wrong with it but it has to be a 0 in both ledgers of the terms sheet. This literally costs both sides nothing. As always though the details of the plan rules matter.

tunes

He already said they said at the brief it wasn't optional...


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