Meme In Command

...nobody here is stopping from sharing your anecdotes if you've flown with FO's that don't know anything about the MBCBP. I mean, i literally just admitted to barely grasping it myself.

Now, out of all these wonderful identifiers you brought up for some odd reason, there's only one that qualifies for being relevant in the discussion towards MBCBP money allocation: Captain (ignoring the tiny handful of FO's that may work the system to make that much money because they are the exception, not the rule). I think it's well within reason for me to expect the one demographic that would be most immediately affected by this new tool to at least know of it's existence. And mind you, I already freely conceded to you that being an FO is no excuse to not being aware or at least try to better understand this stuff.
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Big E 757

That is funny, but probably very true. Here is my take, if anyone cares. But this has less to do with the mechanics of the plan, and more to do with what I think will happen in the future WRT this plan.

I’m 52, with almost 23 years in, and 13 to go. I feel like I’m borderline, in terms of whether I should just go ahead and participate. My 401K isn’t where I’d like it to be with as little time I have left, but I do have investments outside Delta accounts, so I’m not desperate either. My 401K is still down quite a bit from its high, pre Covid, but I still believe in where my money is at, I was just pretty aggressive in my brokerage link with single stock investments vs. index and mutual funds, and won’t sell and realize the loss, unless and until I lose faith in a particular stock.

If I’m not mistaken, we are the first group that has even been approved by the IRS to have an option to participate in this type of plan. The IRS made the stipulation that existing employees have a one time option, and new hires are forced into the plan. I wouldn’t be surprised if in a couple years, we may go back to the IRS, once our current plan has been up and running, and hopefully, other Airline groups, or any other big employee group from any industry with highish earners looking to shelter more income start plans like this, and ask for a yearly option. Maybe it becomes clear to the IRS that our group mostly benefits in their highest earning years, closest to retirement, where this plan truly benefits the most people. I know that was a crazy run-on sentence, but I expect in 4-5 years, there will be a yearly option to opt in. But I’m not betting my retirement security on it. I think I’m out for now though.

Back in the early 90’s, in Illinois, a group of investors approached the state with the idea of a riverboat casino. The first ever in the state, through much haggling and promises of huge tax revenue from the state, it was finally approved. In 1993, the first casino was approved and began operating, but the casino had to cruise up and down the river for 2-3 hour stretches, and gambling couldn’t occur while at the dock. They’d dock, offload, and reload and go out again. A year later, gaming was approved to continue at the dock (because the state was minting cash in the form of taxes) and this got dangerous because if you were on a heater, you might not realize you were docking and play right through the docking and now you’re stuck for another 3 hours, where you might promptly lose your winnings back. Then, another year later, the casino got approved, if the weather was bad, to stay at the dock, but they had to run the engines, and keep the full crew complement on staff, then they got more favorable treatment, every year. They just kept chipping away, year after year, and today, it is a full on casino, still on the riverbank, but you’d never know the casino proper, is built on a few barge hulls. It’s a permanent fixture with restaurants, a sports book, and casino. My point is, government is rigid, and tough to deal with, but once you get the first “yes”, you can keep making little asks,and more often than not, if it doesn’t hurt anyone, they’ll say yes. So mark my words, in 5 years we will have the ability to opt in yearly. I doubt you’ll be able to undue your participation, but if you say no now, in 5 or so years, we might be able to opt in….if DALPA asks, and keeps asking. Although the flip side is, the casino income benefited the state, whereas participation in this plan, keeps money out of the IRS’s hands, so they are diametrically opposed concepts.

Either way, I don’t want to participate now, and before the new contract, I was usually hitting the 415C limit in October or early November, and now it’ll be earlier, I have kids college to think about and am not ready to commit that money. If I’m wrong and the plan participation doesn’t become more lenient, I can invest that money somewhere, and it won’t be a big loss, if at all. Everyone’s situation is different. We are all doing pretty well, all things considered. If you hate paying taxes and ALPA dues now, it’ll probably make you feel better to participate. If you’re an investor of real estate, or a philanthropist, or collector or whatever, and like having extra cash in your check after maxing out the 401K, you’re probably better off opting out. Everyone has a right answer, it’s just not the right answer for everyone.

Peace, brothers and sisters!

Jughead135

Well, you’re providing evidence that there’s at least one captain who fits that bill…. 🙄

You’re the only one generalizing (either that, or you’re trying to pick a fight…). What’s he supposed to say: “The person or persons who occupy the seat to my left and who are, to the best of my knowledge, licensed pilots”?

TED74

And my anecdote…

My finance guy thinks I’d be crazy to pass on 40+% deferral of state and federal income tax plus ALPA dues for what will be a tiny percentage of my retirement portfolio. FWIW, I’m in my 40s, targeting age 60 retirement, have a spouse who works, healthy existing retirement savings, have never had any spill cash, do zero real estate/side gigs/income diversification, feel like we’ve got plenty of money and am happy to leave work at work when I’m not making the easy money at Delta.

The same guy (whose company sets up MBCBPs for many of their small business clients) thinks it’d be malpractice to imply there’s a single opt-in/opt-out answer about this Delta MBCBP. Like many of us, he’s floored that participation is based on a single decision point and that younger new hires will be forced in.

If I’m not mistaken (never having exploited it), our participation in the Fidelity 401k makes us eligible for free consultation at your local Fidelity office. Anyone chewing on this decision without someone to bounce ideas off (based on your own unique circumstances) might give some consideration to a chat with a financial professional - particularly if it’s free!

Jughead135

You guys appear to be disregarding the "optional" way to end up with excess: using the "401a" (i.e., after-tax contributions) to force the DC to excess by reaching the contribution limit early(-ier) in the year (as distinct from the income limit). I have no idea of actual numbers who are doing so, but anecdotally I know of many pilots (CA and FO) who have been receiving excess well before hitting the income limit.

Previously, my assumption has been that it's happened for one of two primary reasons: deliberately, in order to get more money out of the Fidelity account; or "accidentally," as when one is timing contributions to hit the max for the year, but then ends up making more than anticipated late in the year and "overshooting."

Going forward (under the MBCBP), there's a third reason: getting as much as possible into a tax-advantaged account.

Anyway, this is not a "captain's problem," it affects even the newest hire FOs....

notEnuf

We wanted more retirement money, we got it. We wanted tax advantaged treatment of that increased retirement money, we got it. The angst seems to be from people not intending to use RETIREMENT overages as retirement funds. The only difference is the protections and risk on the high end/last dollars of the retirement funds. I think this debate is good for those really wanting out because they have that option but the new hire should see it as a benefit in my opinion. Years of full 401k maximum contributions will result in years worth of principle contribution overages being guaranteed at retirement with an all in gain likely to be 6+%.

myrkridia

According to DALPA's podcast episode, somewhere close to 70% of the pilot group receives spill cash in one way or another. So even if you assume 100% of Captains that's not a tiny handful of FOs.

freezingflyboy

With current dues and income tax rates, my advisor calculated a 7.9% "tax equivalent yield". So basically every dollar that opts out of the MBCBP has to earn 7.9% before it starts "making money" over an MBCBP dollar. To have an advisor who is paid based on performance and assets under management tell me to put money in the MBCBP vs under their management (and therefore subject to their fees) I think is telling.

Meme In Command

Wow, that's a much higher number that I would've ever assumed. I need to take a step back and revaluate this whole thing. Lovely we only got a month and a half to make a life long decision on this very-not-easy to understand subject.

interceptorpilo

I still have not seen this definitively answered: If I put in a lot of my own money into the Company IRA and reach the yearly limit on my own say in August then if I continue to put in my own money by mistake or on purpose then would that money go into the MBCBP or only the Company portion that exceeds IRA limits?