What is B fund??

[BOHICAgain]

When it states the company offers a b or c fund, What does that mean?

 

[StaySeated]

A Fund = defined benefit plan = pension = basically non-existent in the industry today. Most have been abolished during the last round of bk's. AA still has theirs. I think CAL might, pretty sure the cargo studs still have theirs. Basically anyone that still supports Age 60 still has their A fund and everyone that wants to fly to Age 100 lost their A fund.

B Fund = defined contribution plan= works like a 401k match but you don't have to contribute. A fixed percentage of your pay goes into your fund and it is completely portable. The money is yours the second it hits your account with each paycheck.

C Fund = don't know, haven't heard of that one.

 

[ToThePain]

A B-fund is a defined CONTRIBUTION plan (an amount given to you each payroll period as a percentage of your income), versus an A-fund or a defined BENEFIT plan (traditional pension that guarantees a benefit, regardless of amount invested during your employment).

The difference is in the word in CAPS above. Defined CONTRIBUTION means they are guaranteed to contribute a certain percentage of your income into your plan account each payroll period. This keeps them from robbing the kitty, so to speak, as the money is out of their control every pay period (twice per month for us), and into OUR account and no longer theirs to touch.

How is the B-fund contributed and how does it affect your tax liability year by year? That is a critical thing to understand, as your tax liability might very well be lower in the future than it is now... or it might be the exact other way around.

Each B-fund at each airline is a little different. The financial accounting rules it's administered under all have their pros and cons, as previously mentioned. You have to figure out what airline you're talking about specifically.

Here at CAL, it's 12.75% and it's put into your Schwabb account, our 401k account is also at Schwabb but they are kept separate for tax purposes, you can manage both any way you see fit. You are fully vested in the beginning, and you can control the investment mix just like you would your own individual contribution which makes it an EXCELLENT plan - I like a little control over my investment mix as I can plan a little more aggressively than my older coworkers closer to retirement.

The downside is that there are caps on 401k contributions each year (as a function of a percentage of your income). So if you're a "max out my 401k" kind of guy, the company's 7, 8, 10, or whatever percent counts against your own desire to contribute the maximum of your paycheck into your 401k, IF their B-fund is a 401k rule fund. this amount varies, I believe it was a max total combined (401k contributions and B-Plan contributions) 40k last year unless you are over 50 then goes up to 50k per year.

The up-side to this whole equation is that even if your company goes bankrupt, they can't rob your 401k (ever) or B-fund monies (in most cases), even if the company liquidates, like they did with the A-fund (traditional defined BENEFIT pensions).

 

[optimater]

b-plan

http://airlinepilotcentral.com/prof...ot_retirement_plans_|_part_1_20070609235.html

 

[optimater]

A-plan

http://airlinepilotcentral.com/prof...ot_retirement_plans_|_part_2_20070616236.html

 

[lineflyer1]

Lets simplify it.

A Fund = Great retirement plan for Airline pilots but
can be destroyed if your airline goes broke.

B Fund = OK retirement fund. Your money take it
wherever you want. Company funded. But it
is invested in the stock market and we are
about to see another depression that will
make the last one look like a recession.
Broke again.

 

[BOHICAgain]

Thanks for the info. Great stuff, is the B fund like a 401K..

Can you borrow money from yourself if you need it?

 

[Freight Dog]

C-plan is kinda like a B-plan, but it's "targeted contribution" instead of just a defined contribution.

In our case (Aloha), C-plan is meant to offset the actual losses and replace the A-plan. Older/more senior guys get more money than younger/junior pilots because their actual losses from A-plan termination are higher than the younger junior pilots'.

Clear as mud?

 

[ASA]

Lets simplify it.

A Fund = Great retirement plan for Airline pilots but
can be destroyed if your airline goes broke.

B Fund = OK retirement fund. Your money take it
wherever you want. Company funded. But it
is invested in the stock market and we are
about to see another depression that will
make the last one look like a recession.
Broke again.

If you think the stock market will fall, you can move some or all of your B-Fund money into a Money Market account, Bonds instead of Stocks, or other options. That's what I like about B-Fund: you can be as risk-prone or risk-adverse as you like. It's YOUR ~ 10% per paycheck, and there are many options for you, unless your company limits you to stocks only? I would hope that isn't the case.

 

[AV80R]

Stay Seated - love your avatar - the best charity out there! That's why all my contributions are going this year!

Sorry for hijacking the thread…