Pension relief coming..which is huge

[Cardinal]

I for one am a little sick of funding WELFARE AIRLINES with taxpayer money.

The taxpayer won't pay a cent if this legislation is passed - over. Read the article, or read the bill. It reduces the amount the corporations are obligated to contribute to their own pension plans in the near term. This has zilch to do with your taxes. You can be proud, however, that your taxes are paying into Daschle's pension plan.

http://www.foxnews.com/story/0,2933,109778,00.html

 

[Mugs]

If A-Funds survive it would be nice but I think it is unlikely down the road. Any pilot making something close to $100,000 a year that isn't maxing out their 401K right now needs to re-evaluate their spending habits. The days of counting on the company for retirement benefits are over.

Assume you get hired at age 35 with zero savings. If the 401K limit remained at the current limit of $13,000 (it will increase as time goes on) and it was maxed out each year of a 25 year career, that account would grow to about $1.2 million by retirement at an average rate of return. Not too bad for starting with nothing and doing nothing more than living on $13,000 less and contributing to a basic 410K over a 25 year career. Since that $13K a year is pretax, you really aren't missing as much as you think anyway. How many nearing retirement right now wish they had done this? Sadly, many younger pilots either don't get this or foolishly think that the company will be there for them when the time comes.

 

[Lear70]

What's the FV of $1.2 Million 25 years from now? For those of us who don't remember the econ courses, that's Future Value, meaning what it will be worth in today's dollars for real-life comparison?

 

[Mugs]

It would be a FV of about $750,000 assuming an annual 3% inflation rate for this example.

 

[typhoonpilot]

There have been some really ignorant comments on this thread. Thankfully some of the more intelligent posters have cleared up the fact that this legislation is just refining the funding rules so that pensions that are currently underfunded have a chance to recover before the PBGC is forced to take them over. What this actually means in the long run is that it saves the taxpayer money since it is the taxpayer that eventually funds the PBGC when it comes up short on it's pension obligations.

For instance, the PBGC, due to the past rules, was forced to take over the USAirways pilot's pension plan. There was over 1.2 Billion dollars ( yes that is Billion with a B ) in the fund at the time of termination. There was a chance that the fund could have recovered with the stock market and a revised level of required funding. Instead it will now be managed by inept government employees and the USAirways retirees will suffer with pennies on the dollar.

Delta and United's pensions are in similar straights. United being the worst off of the two. This legislation allows those funds time to recover, unlike the chance that USAirway's fund had. It is a little late for the USAirways guys, but it will do a world of good for the others who are in this fix.


Typhoonpilot

 

[P3-Adub]

Sorry for the rant. Just hate to see stupid opinions not challeneged with other stupid opinions. None of it really matters though. Gotta get by Mr. Bush to really happen anyway. I agree that legacy carriers can no longer afford traditional pensions. The 401K is all one can count on and like mentioned, one's own level of participation and some good timing are all too important. Hate to see the folks that worked their entire careers at an airline or another industry have it taken away. Also hate to see the "who cares about those people because it does not effect me" attitudes. You going to support your parents when their retirement is wiped out ? Of course it is their fault.

Now for the LCCs role in lowering the profession ? Guess I was getting carried away a bit however to not acknowledge the dropping of fares to gain market share, read fare wars and yes I admit everyone plays this game, and new entrants that have much lower cost models due to no longevity is a bit near sighted. One would assume from some of the attitudes that most pilots now would expect two or three 10 year careers at various airlines due to the continued cascading wage and benefit packages. I agree that 300K a year was a lot of $$$ to fly a 747 for whoever however it sure was a goal of a lot of pilots.

As for me running back to my airline when recalled, you assume a little too much. Believe it or not there is life ebyond the airlines. I am lucky, yes lucky, to have found another job, one that is actually a career job, allowing me to sit it out and see how ther recovery works out. One of the few good things to come out of this furlough is the ability to defere a recall for a period of time. Not in any big hurry to take a huge pay cut so I can put on a uniform and fly a Boeing again. I am also not placing UAL's woes on everyone else but United. Yes Management had created a huge mess and employees had gotten pretty comfortable with their contracts. Many changes for sure. I really don't wish any ill will on anyone or their employers. I actually applaud any airline than can make money on $49.00 fares, pure magic ! These great loss leader fares only do two things, help gain/retain market share and create a huge false impression from the paying public what it actually costs to do business in aviation. Can't have your cake and eat it too, at least for too long.

 

[General Lee]

US Senate Wednesday passed a pension funding reform bill that would permit cash-strapped Major airlines as well as steel companies to defer large cash obligations into the future. The Pension Funding Equity Act, which passed 86-9, dramatically reduces the level of catchup payments, known as deficit reduction contribution payments, that airlines must make to their underfunded defined benefit pension plans. The Senate bill reduces DRC payments by 80% in 2004 and 60% in 2005, according to Fitch Ratings. A House bill passed last Oct. authorizes DRC payment reductions of 80% in both years. The legislation must be reconciled before it can be sent to the White House for signature. The bill also temporarily replaces "the discontinued 30-year Treasury bond interest rate used to calculate contribution levels of defined benefit plans with a rate based on a composite of long-term corporate bonds," according to the Air Line Pilots Assn., which welcomed passage of the legislation. ALPA expressed disappointment that the bill did not "include restoration of the US Airways pilots' plan. Nevertheless, we are pleased with the action taken by the Senate on DRC relief." But Fitch warned that the proposed rule changes pose "long-term credit risks by pushing out required pension plan contributions for those carriers with the most seriously underfunded employee plans--in particular, United, Northwest, American and Delta." Fitch estimated US Major airline pension plans have an aggregate underfunded liability in excess of $20 billion.--Perry Flint (from Air Transport World daily)(atwonline.com)


Bye Bye--General Lee

 

[skykid]

typhoonpilot - well said. Obviously none of these guys who don't understand the legislation are going to admit that. If you are not going to research the topic before running your cakehole, at least read the articles in the post!

 

[CitationLover]

why are people happy about this? all they did was delay the pensions from being funded. congress should have had the guts to change the interest rates that pensions are funded (this stupid RPA '94 lookback, 4 year weighted average nonsense means low interest rates are here for FOUR more years).

all those who say you need to invest your own pension money, that is want management wants! they'd love to swap those pensions (which on average are worth a lot more than 401k's) for 401k's.

also, getting a lump sum does not immunize you from the pbgc. they can go back and reclaim some prior disbursements if they take over the plan. i'm not sure about the timing, but i think it might be a year or so (i'll post the exact answer later).

 

[typhoonpilot]

People are happy about this, especially United pilots, because it will make it more difficult for management to terminate the pension plans.

The answer to the PBGC take back is three years. My answer to that would be to get the money out of the States and then disappear for awhile. Show the government the big finger, so to speak.

Typhoonpilot

 

[B1900DFO]

P3-adub


What is wrong with a 747 captain making 300k+/year? Airline pilots have traditionally made good money. I would imagine there are many thousands of lawyers making well over 300k/year. If you are responsible for a 250 million dollar aircraft, 400 lives, and the potential of hundreds of millions to billions in lawsuits if you screw up and bury one in the ground then I would argue that a 300k salary is definitely not out of line.

 

[CitationLover]

People are happy about this, especially United pilots, because it will make it more difficult for management to terminate the pension plans.

typhoonpilot,

please understand that MANAGEMENT can terminate a plan WHENEVER they want to (it can be fully funded or not funded at all it doesn't matter). this legislation may hampen the PBGC from forcing terminations, however the legislation only appears to address the DRC on the funding side and not the applicable PBGC IRC regulations.

i'm still checking on the pbgc take back (3 years sounds right if memory serves me correct). there is also some benefit improvements that they phase in over a five year period they could cut. PBGC is a four letter word for a reason.

all this bs would be averted by just changing the very low PBGC interest rates and the low RPA current liability rates that the DRC is based on. simple. but alas congress, in their typical dc fashion, like to just put another bucket under the leaking one rather than patch the holes.

 

[FDJ2]

typhoonpilot,

please understand that MANAGEMENT can terminate a plan WHENEVER they want to (it can be fully funded or not funded at all it doesn't matter).

CitationLover, depending on the contract language, management can not terminate a contractual obligation, such as a defined benefit plan, whenever it wants to, anymore than it can change a contractual pay rate or work rule. If on the other hand an employee does not have a contract, than management has more options, but there are still some restrictions.

 

[CitationLover]

fdj2,

you are correct that contractual language must be adhered to, however notwithstanding that what i said was true. this legislation does nothing to change that.

 

[typhoonpilot]

CitationLover, depending on the contract language, management can not terminate a contractual obligation, such as a defined benefit plan, whenever it wants to, anymore than it can change a contractual pay rate or work rule. If on the other hand an employee does not have a contract, than management has more options, but there are still some restrictions.

Thanks FDJ2, you beat me to it, but that is what I would have said in reply.

all this bs would be averted by just changing the very low PBGC interest rates and the low RPA current liability rates that the DRC is based on. simple. but alas congress, in their typical dc fashion, like to just put another bucket under the leaking one rather than patch the holes.

Yes, this is true, but the near sighted management that donate millions to re-elect these clowns aren't in favor of such legislation since it would mean that they had to contribute more money into the pension plan.

My English friends were aghast when I told them my pension had been terminated, they couldn't understand how that could happen since the laws in the U.K. make it necesary for pensions to have very solid funding levels.

Typhoonpilot

 

[CitationLover]

typhoon,

in england they are allowed to opt out of social security in lieu of an er sponsored pension. wish we could. gwb wants this to happen.

also, changing the interest rates would allow them to contribute LESS to the plan. the pension "underfunding" is due to artificially low interest rates. it'll be interesting to see how well they recover after the market stock returns of last year.

i agree mgmt should be held accountable also. these idiots reward themselves and usually have no worries against them. their greed is basically why i left the pension industry.