Originally Posted by Nightflyer

So the union is using scare tactics to justify their pancake plan.

Originally Posted by DR K

Perhaps the company sees these tactics and associated potential lawsuits concerning fiduciary responsibility and doesn't want any part of this scheme because of the legal risks in the future.

I don't even believe the statement "the company really likes knowing its expenses every year" as a major justification for this POS, because the company seems to be enjoying not having to contribute to the current A fund for a couple years and in hundreds of other examples likes to pay $$$ for flexibility. Even the most basic justifications provided for this radical experiment with our retirement are sketchy to me.

And I'm waiting for kronan or someone else to answer why the current A plan is superior to the VB/PSPP. The VB/PSPP pays out almost triple in retirement compared to the current A plan according to the consultants we paid to produce it and you think that's inferior!!

Does the superiority of the current A plan, WITH REGARDS YOUR OPINION STATED ON THIS WEBSITE, deal with protections it enjoys by laws like the 2006 PPA or other regulations from the IRS etc? Because if the new VB/PSPP is equally protected by laws and regulations but pays out up to 300% more than the current A plan without requiring the same BURDENSOME funding levels required at this very moment (which provoke an attitude of intransigence by the company), then the proposed VB/PSPP should be vastly superior to the dinosaur A plan we have, right???

Surely it is an easy question that could be answered in one sentence and I thank you kindly for hopefully finally addressing this topic.

If there is different reason the current A plan is superior to the VB/PSPP in your opinion, please state it so we can understand all sides of this investigation. Dr K.

Originally Posted by USMCFDX

300% more - lmao - I’ll have some of what you are smoking

Originally Posted by FastBurner

Here you go, some union discussion regarding underfunding.

In answer to your question - Yes, the company could enter a form of bankruptcy but not just due to pension payments. Post 2006 - we are now 100% funded, the company has stated they have ample funds. The company could enter bankruptcy due to worldwide recession for many years, high debt load (buying 100 777s outright and no cash left), fill in the blank. The Pension assets are in a trust, untouchable by creditors, and have 103% more cash to pay all obligations. Keep in mind, all those "unvested" participants (under 5 years) get nothing.

1) Union Statement:
Podcast 3And that variable amount depends upon the funding level within the defined benefit plan, and that funding level varies year to year based on congressional mandates and current interest rates in the market. If you look at our current retirement mailing that we get every year that tells us how our retirement plan is doing, there are a couple different numbers on there if you look at it. And the difference between those two numbers has to do with the IRS requirements for funding versus the Pension Benefit Guaranty requirements for funding. One of them will show you 100% funded right now. The other one shows 80% funded. And that difference is very important to us because the Pension Benefit Guaranty variable rates apply to that 80%, which means FedEx still owes a lot of money, both in terms of fully funding the retirement and in terms of those variable rates for the Pension Benefit Guaranty Corporation. If the Company were to go bankrupt, that's when the Pension Benefit Guaranty Corporation would take over the retirement plan and then the Pension Benefit Guaranty limits would apply, which are far lower than our $130,000 a year maximum now.
2020 Annual Report page 77 at investors.fedex.com:
For 2021, we do not anticipate making voluntary contributions to our U.S. Pension Plans. As noted in our discussion of critical accounting estimates, we do not anticipate contributions to our U.S. Pension Plans will be required for the foreseeable future based on our funded status and the fact we have a credit balance related to our cumulative excess voluntary pension contributions over those required that exceeds $3 billion. The credit balance is subtracted from plan assets to determine the minimum funding requirements. Therefore, we could eliminate all required contributions to our principal U.S. Pension Plans for several years if we were to choose to waive part of that credit balance in any given year. Our U.S. Pension Plans have ample funds to meet expected benefit payments.

My Statement:
Discount rates (as averaged over 25 years) and mortality tables affect dollars required. PBGC premiums are based off unfunded "vested" benefits. The company explains all this in the annual reports. The union can't state any more clearly than the above that if the company declared bankruptcy tomorrow, the PBGC would "take over" with a distressed termination and pay significantly lower amounts. Also, PSPP is a defined benefit, with the SAME PBGC funding premiums - so saying the company would alleviate having to pay premiums would be false.

2) Union Statement
Podcast 4
When you talk about all things risk, bankruptcy risks are one of those things that you need to discuss. And so, the risk of the termination of the plan or the plan being frozen during bankruptcy risk is something that is quite real. And they happen during acute or prolonged downturns in the market where the company may not have the ability through either lines of credit or excessive cash or income to fulfill those obligations to the plan. So this could lead to bankruptcy and the company may not survive unless the plan is terminated. Now, that's an extreme case. FedEx has been a good steward of our plan. However, without congressional action, the plan would currently be underfunded.

My Statement: False. SEC documents, DOL/ERISA Documents state otherwise.

But here is what REALLY happens post 2006 PPA - American Airlines DID enter Bankruptcy in 2011 and froze their pension. The pension had 100% funding - meaning PBGC does NOT take over per se. It became a Standard Termination (one of 3 options for PBGC). The assets will fund ALL the promised defined benefit to vested participants without a deduction.

3) Union Statement:
Podcast 6So one other benefit here has to do with the bankruptcy protection. FedEx announced in its recent quarterly earnings report that they are not going to fund the pension this upcoming fiscal year. They wouldn't have that option in the current plan design. In fact, they have to fund this plan design year over year based off of the pilots’ earnings. So what that does is if FedEx started getting into trouble financially and we were approaching, say, a termination or distressed termination in the current plan, FedEx can turn off their contributions there, whereas this plan continues to be funded. And because it's constantly matching its assets and liabilities, you're going into a bankruptcy potentially with a fully funded or nearly fully funded PSPP, unlike the current pension plan, which could be vastly underfunded at that point.
My Statement:
They aren't funding because they don't NEED to as stated MANY times in the Annual/Quarterly Reports (they have voluntarily put $ in as well). The point is driven home that not only is the union saying the current pension is underfunded, they are saying the PSPP would always be funded.

There are many more examples - I picked three to provide a sample of their exact words per your request.

Hope this answers the questions.

Cheers

Originally Posted by FXLAX

Thanks for going through the trouble of finding all that. Here is what I’m saying. The union seems to be talking in absolutes. Where as many here seem to be talking in more of a nuanced manner, which isn’t a bad thing. But what I’m trying to convey is that the union isn’t necessarily wrong. We can disagree in the tactic on messaging. So for example, in the first and second transcript you highlight two statements that seem to be true. The PBGC has a funding requirement that shows the pension at 80% (underfunded by 20%). And they say that that is the number that would be used to calculate lower payments, not the IRS number.

THOSE ARE the false statements. PBGC does not use that number. The comedy in this is that you receive an annual funding statement (required by law). The company can’t tell you it’s funded at 103% but really mean it’s 80%. It’s an actual sad statement if the union rep believes this. The only “messaging” problem is the union telling you (and you now believing) that the pension is funded at 80% and PBGC would take over with reduced payments.

As for the third statement, it seems that they are saying that the company can stop funding the pension and eventually go into BK with an underfunded pension.

Which is also false. They can no more disregard the law in keeping the funding level at 100% than simply not pay you for your trip. The other part is that the current assets of 24 billion’ish are producing more in returns than payouts and that is why they do not need to “fund” the pension yearly.

Where as the PSPP, they would be required to keep funding it, just as they would be required to keep funding the B fund.

Actually no, another part of lie. If they can “stop” funding current pension (our CBA and “required” by law) they can pretty much stop paying anything they desire. The company is “required” to fund our current pension at 100%. The PPA 2006 specifically says that to keep PBGC solvent. The idea that the company would somehow fund one DB (PSPP) and not another (current) is laughable. If they are in trouble, which could happen, they could stop paying for anything. The “fully funded” PSPP is an accounting gimmick - every year, the balance sheet is reconciled. In theory, year 1 (without a stabilization clause), the “fund assets” could decline from a decline in market. Future Benefits would then decline to match. Voila - fully funded. Even with a stabilization clause, in a post Nikkei 225 1989 event, several years of declines would absolutely result in lower future benefits, but, it would be “fully funded” for lower benefits.

I don’t have any problem in criticizing the union. But I’d like it to be based on facts. And so far, I haven’t seen them outright lie about funding, BK scenarios, etc. There is a lot of information they put out there so I’ve probably missed some of it that does prove them lying. So far I haven’t seen it. And this is coming from someone who has personally decided against the PSPP because there are better ways to alleviate the concerns the union is pointing out.

Originally Posted by FastBurner

Originally Posted by FXLAX

Maybe you can show me evidence of a lie that I missed, and I’m not talking about interpretations of what they say, as you seem to be doing.

Originally Posted by DR K

1. Major League Baseball has a Variable Benefit Plan pension like ours will be.

2. Other “high wage earners” like you pilots have the variable benefit plan.

Those are two whoppers off the top of my head that are demonstrably false. More to follow when I have more time, but if you can’t see that this is a sales job it’s because you don’t want to. DR K

Originally Posted by FXLAX

Is it a lie to say the IRS formula is different but the PBGC funding formula is used to calculate payments?

Yes, because that is untrue. PBGC requires premiums, insurance type, based on single or multi employer plans. Flat rate of 83/individual for 2020 at a cost of 16 million (at the most for 185,000), and a variable rate of $4.50 / $1,000 of unfunded vested benefits. The company issued bonds at 2.3% to specifically avoid the 4.5% PBGC rate. The company states everywhere that no additional contributions are needed. Ergo, fully funded. All of this is readily available and viewable.

Then, is it a lie to say that the PBGC’s funding formula computed the pension at 80%, or whatever percentage they say it is?

Yes, because the PBGCs funding formula is 103%.

Lastly, is it a lie to say that it’s conceivable that on the path to bankruptcy, the pension can be turned over to the PBGC at a reduced funding than now?

Yes, because even with zero contributions by company for the foreseeable future, the pension assets will pay 100% of vested benefits. The company can deteriorate and shed cash, or lose a big lawsuit, or whatever, the pension assets are separate and not “tied” to the solvency of the company. Years ago, when assets were below 100%, then yes, PBGC would have taken over and paid lower amounts. But not now.

I think we are all smart enough to weigh the different risks and the likelihood of those risks happening. We can calculate the magnitude of a given risk and the likelihood in order to make a sound decision. For me, it’s not worth it right now because there are better ways to mitigate some of those risks and the other remaining risks are just not that great. But I don’t see the union putting the information out as fear mongering. I just see them outlining the risks and coming to a different conclusion than I.

I’m not going to impugne the character of the MEC or NC solely because I disagree with them. Obviously, they want the same thing as us, the best pension we can get. Maybe you can show me evidence of a lie that I missed, and I’m not talking about interpretations of what they say, as you seem to be doing. If so, I would change my mind on them. Either way, it won’t make a difference to me on how I feel about the PSPP at this time.