Improvement to AWA 401K Plan -- 7% XTRA

[MK82Man]

FYI for guys/gals who are trying to decide what company to go with – might make a difference to some. Effective Jan 1 2005, AWA made an improvement with respect to company 401K contributions as a result of the contract that was implemented on December 2003/Jan 2004. Now the company will kick in an extra 7% of your compensation directly into your 401K (each month) above and beyond anything you contribute. Because it is your 401K, it is always your money. This additional 7% begins the first of the month following 90 days of service. This 7% is not subject to the basic vesting rules below and it is always yours. So basically it is a “B Plan” type retirement fund that you always control and direct the investments as you wish.

The basic rules on the 401K are:
Eligibility - First of the month following 90 days of employment
Salary Deferral - 50% of compensation, up to a max of $14K in 2005
Company Match - 50 cents on the dollar up to 6% of your deferred salary. Company Match only starts 1 year after employment
Vesting - 20% after two years, 40% after 3 years, 60% after 4 years, 100% after 5 years.
You can make “catch up contributions” if you are over 50

If you saved 6% of your salary, you’d see the company match .50 cents on the dollar for that 6% and effectively you’d get an additional 3% 401K savings for free (of course you don’t own all of that 3% until you are fully vested (five years). Now the company kicks in 7% every month for free and so 6% + 3% + 7% = 16% of 401K savings every year. Of course, I’m sure there was a trade off in basic compensation during the negotiations to get this 7% 401K contribution so hard to say it is “free.”

It isn’t a guaranteed company pension, but at least it is all yours. 7% extra compensation into your 401K every month no matter what. Is not as generous in terms of matching and vesting as my wife’s company (they operate under SAFE HARBOR matching and offer better matching and are fully vested from day one) but some guys might see this as a good benefit – I do. Of course it isn’t the pension plan of our father’s carriers, but in today’s environment it might be attractive to some. I'd like us to work the vesting issue with the next contract. Just an FYI if you didn't know.

 

[semperfido]

you are right. it isn't the pension plan of years gone by. but it is better than most and by todays new standards nothing to sneeze at. 7% above what you already had is a good thing. i'd take it and run.

 

[JetMonkey]

I'm only allowed to put 14k in my plan every year? that means a top paid capt. can only put in 10% (15 yr. capt. pay- 138,000 x 10%= $14,000). I don't like having the same "hard" number for everyone, it cheats us out the more senior we get. I think they should let us keep the maximum 50% allowable contribution which means you mathamatically increase the "dollar" amount every year.

 

[fracflyer]

the 14K limit is the same for everyone in the country. It's a federal rule, not AWA. Next year (2006) it goes to 15k.

Some plans allow you to make post-tax contributions past the 15K up to 25% of income.

 

[GoABX]

The $14,000 cap is YOUR limit, not the company's.

 

[JetMonkey]

ahhhh gotcha.

 

[lostplnetairman]

EGTRRA (the Economic Growth and Tax Reform Reconciliation Act of 2001) set the limits for contributions to ERISA plans. In 2005, the maximum limit of participant contributions is $14,000 or 100% of your salary, whichever is less. The maximum limit for both employee and employer contributions is $42,000. The wage limit is capped at $210,000 for contribution purposes. Those who will be 50 or over in 2005 may contribute an additional $4,000 in catch-up contributions--that means they must be contributing the maximum participant contribution first in order to be eligible to also contribute catch-up contributions. So they can contribute $18,000 in 2005.

The limits increase to $15,000/$5,000 catch-up in 2006.

HR Diva

 

[PositiveRate]

so in jetmonkey's example, if he maxed his 14k contribution, that has no effect on the companies contributions right?

if someone making 140k puts in 10%, they max, but their total for the year would include the match (3%) + the retirement contribution (7%) for a total of 20% or roughly $28,000.

Am I understanding this correctly?

 

[lostplnetairman]

Yes, that is correct.

HR Diva

 

[TWA Dude]

If and when you find your salary so great that you hit the 14k (or whatever it goes up to later) 401(k) limit than just open a Roth IRA and put some $$ in there. There's lots of options these days. I have a traditional IRA with money from my previous employers.