Gunfighter

Our entire paycheck, including DC, payroll taxes and the employer paid portion of medical is company funded. What I take issue with is that we currently receive DPSP Cash funds as gross pay under the current plan. The proposal to redirect DPSP Cash into a DB plan is redirection of gross pay. Furthermore the redirection of DPSP Cash devalues the Roth 401k feature in our current plan. It also devalues the 401a Mega Back Door Roth feature.

If the DPSP Cash were redirected ONLY AFTER 275K of earnings it would have a better reception, because it doesn't hamstring the Roth feature of the current plan. Even better would be no redirection of funds until the company has paid 55K or future 415C limits in DC funds to the pilot. It still devalues the current plan by forcing Gross Pay into a DB plan with miserable returns, but at least that is a smaller downside. It doesn't devalue the Roth features we already have, just the self directed investments we make outside of the plan.

Falcon20

As a 401a guy I agree about the devaluation of the mega back door Roth.

I think you may be onto something with the 415c limit being the trigger for the redirection of funds. If combined with an increase in the DC percentage I think the majority of pilots would be supportive.

notEnuf

This could have my support at the 415c limit. 20% DC with DPSP cash above the company contribution limit. The cash is only excess if your contribution is 0.

Gunfighter

Same. This would eliminate redirection of individual contributions that generate DPSP Cash. That is the crux of the issue as it was presented at the roadshows. The R&I Webinar made no mention of DPSP Cash as the funding source for the DB plan.

1234

I believe this is exactly what they are talking about at the roadshows. No contribution to a new plan until your 401k hits the IRS limit.

Gunfighter

There is a very specific distinction between hitting the IRS limits vs the individual pilot receiving the limit from the company. Personal contributions can trigger the IRS limit before reaching 275K in earnings. This needs to be made very clear that the individual pilot is in control of COMPANY contributions up to the IRS max, BEFORE any is DPSP Cash is re directed.

JamesBond

Can you guys help me out and explain to me why you think this mega backdoor ROTH is such a great idea?

Falcon20

1) Your company contributions and 401k contributions don’t add up to $55k so this allows you to add personal 401a $ to reach that limit.

2) You can redirect $$$ that would be taxed in retirement to money that would be tax free in retirement. This would reduce the $$ that you will have to take out as part of a required mandatory distribution.

JamesBond

My 401a has had significant gains to date. THOSE are taxable, and must be converted in ratio to the number of post tax dollars. It is not a good deal in my case, and I would guess anyone that has been around awhile it isn't either.


I'll pay the taxes later, at a lower rate.

Falcon20

I can see that, however, if you haven’t had significant gains on the 401a portion and/or are just starting out you can call and transfer those 401a funds to your Roth IRA before any significant gains are made. If you stay on top of it (after each pay deposit) it is a great way to improve your tax advantage situation.