DLax85

Spot on --- automatic "No" Vote!!

(...and I think our Union leadership already knows this)

Tuck

This isn't how I understand it. The B fund is the Pilot Money Purchase Pension Plan - not a defined benefit and nothing to do with the $195K cap. That cap is like 49,000 or something.

Knightflyer wrote something earlier quoting IRS limits - those are limits for tax deductions affecting the company. Current max ANNUAL COMPENSATION LIMIT for tax deductions is $245,000 - clearly our CBA covers us up to $260,000 - that add'l DB fund is not paid out of the "FEDEX PENSION PLAN" but out of the "NON-QUALIFIED COMPENSATION LIMIT PLAN" - in other words we have the potential to already go beyond the IRS limits.

Furthermore the $195,000 is the MAXIMUM RETIREMENT BENEFIT for IRS. Clearly very few of any Fedex pilots will draw a pension of over $195,000 but it is possible and hence the company has the NON-QUALIFIED 415 LIMIT PLAN to cover that.

There's nothing preventing further negotiations to increase the pension formula but I don't see it happening when every other carrier has a much worse pension. There are, however, several people that have pensions that exceed even the $195,000 by using different accounting techniques - lost take a look at the Bell, CA pension and salary scandal to read more.

Please correct me if I'm not reading this correctly.

RedeyeAV8r

First I ain't no R&I expert but I did stay at a Holiday inn last night.

The IRS Defined Benefit Plan (our A Plan) limit for 2010 is 245,000 That is the qualified money. Our Contract limit is $260,000 so the $15,000 is unqualified dollar.
So in the IRS eyes the max you can get in an A plan pension (assuming 25 years = 50% is 1/2 of $245,000 = $122,500. Now our contract limit for the A plan is 1/2 of $260,000 which is $130,000. So the extra $7,500 above the IRS limit is "Unqualified" which as I understand it means different tax deduction for FedEx. Realize actual take home Retirement pay is approx 12-15% less than the formula due to Joint survivor benefits. So the $13,0000 would be more like $119,500. Not bad mind you but less than $130,000 thats the formula indicates you would get.

Now the IRS Defined Contribution DC ( B fund $+ 401K $+ Sick buy back$)
is $49,000 max contribution per year for 2010.

So no matter how much you make (Assuming WB Capt who like to fly extra) can only put away $49,000 in his B fund and 401K. This means that if he maxs out his 401k of 16,500 his B plan Contributions stop at 32,500
(49,000 - 16,500 = 32,500) If he has 72 hours of Sick Buy back
72 x $245/hr = $17,640 than the max that can go into a B plan is $14,860
(32,500-17,640 = 14,860) If the pilot puts NO money in his 401K and has NO sick buy back than the max that can be put into his B fund is $49,000.

This generally works out OK for most of our WB Capt's with our 7% B
Fund. In other words they are right at or below the 49,000 Cap. A few go above it but not to many. But this is one of the Arguments against Pilots who are proponents of abandoning our A plan for a large B fund (say 15%)
Under the IRS caps, a 15% B fund is not really a 15% B fund once you are a WB capt.

SeeDub

My understanding of how the IRS max contribution works is that once you exceed the max for the year, then you will no longer be able to make 401K contributions plus additional B fund and sick buy back contributions go directly to you as taxable income. The main point being that defined contributions over the IRS limit isn't simply lost money but rather taxable income you are free to spend or invest as you see fit.

I don't care to abandon the A plan but a larger B plan isn't necessarily a bad thing when considering the A plan isn't indexed to inflation. That $130K maxed out A plan payout is awesome by today's standard but $130K in 25 to 50 years ain't gonna look so good any more.

RedeyeAV8r

No argument there but.......Not lost money but not retirement sheltered either.

The IRS caps are indexed for inflation. When the Congress put the caps in place in 1993 (OBRA 93) the DB limit was $150,000. This is what started the UNION Drive at FedEx. Our A plan was seriously cut back then. $75,000 was the max pension. In 2008 the DB Cap was $230,000. 2010 it is $245,000.

You are right once the DC (B fund/401K) CAP is hit, the remainder is paid in cash and like you said, it is taxed. A good A plan with a B plan (like we have) is a very good mix. Who wouldn't want our B fund % to increase?

I just don't like to hear all this talk about abandoning the A plan for a BIG B plan. Those that say this do not seem to understand the CAP limits and what they really mean.

Busboy

The $49,000 limit for the DC plans include: B-Plan + Pre-tax(RSP) + After-tax(OSP) + Emplyr Match + Sick Bank Buyback contributions. Any eligible 401k Catch-up contributions do not count towards that limit.

The "B-plan" is 7% of up to $245,000, the IRS 401(a)(17) limit. Or, $17,150/yr, for 2010 and 2011.

So, if you max out the 401K($16,500) and make $245,000...You'll have contributed 16,500(pretax) + 17,150(B-plan) + 500(Comp Match)= $34,150. Leaving almost $15,000 to contribute through SickBank Buyback(61hrs) or After-tax contributions.

Tuck

Thanks to all for the clarifications.

GreaseA6

My only contribution to you amazing R&I knowledgeable gurus is that you did not include the catch up provision of an additional $5500 per year for over 50 age group. I know its generic but $$ is $$.

MD11Fr8Dog

What I'd like to see is our A plan at least follow the indexed caps once they reach $260,000 and beyond.

RedeyeAV8r

Who wouldn't............