Retirement plans

[fam62c]

Remember that although SW may not have as high a company contribution as some of the legacy carriers their pay rates are higher so the lower percentage works off of a higher W2. 9.3% of 150K is better than 12% of 100K. It's the percentage times the salary that matters in the end and so far SW has stayed at or near the top of the salary pack in the recent past. This gap should start to close as legacy carriers start to (hopefully) get past the bankruptcy contracts and get better deals.

The group that took a hit was the AT pilots because they had a higher match (but lower incomes) and now they have the lower SW match but they don't have the higher SW pay. They get to participate in the SW profit sharing now but, again, that's a percentage of pay and the AT pilots have lower pay. Depending on what the SW profit sharing pays out and considering the time value of money (you don't get the 2012 amount until late 2013) the AT pilots may end up with a reduction in retirement compensation for 2012. The other nice thing about the old AT plan was that the company contribution was just that, a contribution not a match so if money was tight (especially for junior FO's who don't make that much) you would get the company portion even if you couldn't afford to contribute much or even any on your own. AT pilots could put in nothing and get 10.5% from the company (that would have risen to 11.5%) now they have to put in at least 10% to get 9.3 from SW.

 

[Cruncher]

Dan,

Sorry this isn't as in depth as I would have liked to explain. Brightscope is a third party and not affiliated with SWA, or any other corporations as far as I know.

Anyway, our high score is a BS ranking based on participant rate, company match, fees, fund options, .... The match percentages are well known, most pilots if not all hit the 402(g) federal limits ($17k in 2012).

Someone mentioned our Top Hat program. To further describe this plan: Our Top Hat program is a Rabbi Trust non-qualified compensation plan. Essentially, it allows us to set aside up to $50k per year (tax deferred), lowering our current taxable income. This money is not protected from unsecured creditors though, and can be taken back if SWA were to ever go through bankruptcy. The options are limited in this plan; I think the income limit is $135k to participate. You have two options upon departure (lump sum or paid evenly over 5 years). There are other details I'm not familiar with, as I don't participate in this program. Honestly, not positive if BS even considers the TH program.

Someone mentioned "high compensated" employees. This is a federal non-discrimination test. Prolly be Googled, but in essence, the feds limit high compensation employees (by definition, almost all SWA pilots; think it was $110k last year) to a maximum 401k deferral relative to the savings rate of the "non-high" compensation rate employees. For example, if the rampers on average save 4% of their income into the 401k, this limits pilots to 6% (I Googled it . We'd miss out on 3.3% match. Hope that is not confusing.


deleted, I started to get in the weeds a little too much Already getting too long, let me just try to summarize.

By contract, SWA caps all retirement plan matches to $25k annually.
Any amount over the 415(c) excess limit is cut as a check up to this $25k limit.
Our 401k provides access to a brokerage account. The PCRA (Personal Choice Retirement Account - Schwab), we can direct up to 95% of our 401k. From here, aside from the funds that are already in the Mutual Fund side of the account (& LUV), you can buy pretty much anything (well aside from high risk stuff - I think; again I don't this so not as familiar).
The fees are incredibly small. The S&P 500 index fund has a 0.025% expense ratio.
Schwab ETFs trade fee of charge, and ARE the lowest in the industry for the particular asset class.

We self manage the 401k options. Someone mentioned an annuity option coming up. I know John, he is hyper cost sensitive, so the annuity will probably be one of the best in the nation as well.

 

[HA25]

The southwest 401K might be the best in terms of quality of the program, and options available, but I'd take the Hawaiian 19.4% (15% for new hires) deposit every month (non match) any day .. that's a tax free deposit whether you put a dime in or not ... that is the current "Bar" in the industry today for retirements.

 

[Cruncher]

HA,

I agree! Your plan is my goal!

 

[Full of LUV]

Fair enough, I'm still trying to figure how it ranks as "best" when others contribute more towards retirement per dollar earned than SWA does.
For example, we have a brokerage account which has limitless options and plenty of no load funds to chose from. Every dollar put in goes towards the investment of your choice of which there is pretty much anything you want to invest in.
I think it's interesting that SWA (or the guy they got to write that article) seems to be claiming a superior retirement program when in fact it's not. Again, not bashing, just observing. Sounds a little self congratulatory to me. Perhaps some of that "warrior Spirit"?

Dan,
The legacies plans you refer to are mostly their "B" funds, and not just 401K's, so brightscope would not consider them in their rankings. Like someone else pointed out, this was done because the IRS limits are too low to capture the negotiated "b" fund contributions in a 401K.
Most of the legacies have a 401K open to all employees that are well run, but not nearly as generous, with only a 2-5% matching (I'm not sure what SWA's matching is at) but that would be what brightscope would be comparing to SWA's plan.

This year a DAL captain making $200K would get a company contribution of $28K into their selfdirected B fund and then they could get up to a $4000 match into their 401K account as well if they contributed. (the latter is all brightscope would be concerned with).

The BEST 401K in the world will never compete with our predecessors Defined Benefit (pension) plans in terms of generosity, but at least the B funds and 401K's are the pilots money and can never be lost in a BK or job change.
Aloha,
Luv

 

[ultrarunner]

Fair enough, I'm still trying to figure how it ranks as "best" when others contribute more towards retirement per dollar earned than SWA does....

I suspect because that wasn't a criteria for evaluation.

As a SWA'er just said, it's "best" rating is because of it's diversity in 'investment options', NOT necessarily on the return.

To each their own.

I care about ROI for my 401k. I don't give two crapola's about how the industry ranks it....

And the industry doesn't really care about 'little ole' me anyway'.

;-)

Sometimes it's all about "SPIN".

 

[HA25]

Dan,
The legacies plans you refer to are mostly their "B" funds, and not just 401K's, so brightscope would not consider them in their rankings. Like someone else pointed out, this was done because the IRS limits are too low to capture the negotiated "b" fund contributions in a 401K.
Most of the legacies have a 401K open to all employees that are well run, but not nearly as generous, with only a 2-5% matching (I'm not sure what SWA's matching is at) but that would be what brightscope would be comparing to SWA's plan.

This year a DAL captain making $200K would get a company contribution of $28K into their selfdirected B fund and then they could get up to a $4000 match into their 401K account as well if they contributed. (the latter is all brightscope would be concerned with).

The BEST 401K in the world will never compete with our predecessors Defined Benefit (pension) plans in terms of generosity, but at least the B funds and 401K's are the pilots money and can never be lost in a BK or job change.
Aloha,
Luv

the HAL plan depends on the seniority or hire date of the pilot but in a nutshell, it's a B plan and 401K for the most senior, a 19.4% deposit with some other forumla applied to make it match the B fund for the mid senior guys, and anyone after 2007 is a straight 15% deposit....