MD-80 Parked

[whlinder]

My $8000 RT in J to France from last year jumped up to $10K this month. But it's not going to work forever -- I chose to fly in Y instead... That's been the trend with other directors in my company, and I suspect it will be the case with other companies. A full Y fare is just as flexible and I already get club access, so paying 2x or even 3x just to get the bigger seat and a little more food isn't gonna happen with a lot of folks. If I'm hungry, I'll schlep some Whataburger and a bag of trail mix onboard with me and piss off those sitting around me who didn't think that far ahead...

Yeah I'm waiting for that shoe to drop at my company too, changing the travel policy to take away J on international longhauls. It would be nice to be able to have enough plans in place to purchase the 50-day advance purchase Z/I fares that run $3500 RT to Europe but that rarely happens.

 

[TechBoy]

Agreed. As I have posted numerous times, AMR's $9 billion plus pension fund helps keep its pension costs low. For the last few years and for now, AMR's annual contributions are much cheaper than the alternative (defined contribution plans).

At some point, that probably changes.

Maybe, maybe not. If AA has another significant furlough which seems inevitable, then it would also signficantly reduce its future liability for the pension fund.

 

[jimntx]

Maybe, maybe not. If AA has another significant furlough which seems inevitable, then it would also signficantly reduce its future liability for the pension fund.

Not necessarily. There aren't that many employees any more who have less than 5 years on the payroll. Because we have a defined benefit plan, under Federal law, an employee is vested in the plan at 5 years (actually, I think in reality it is 6 because the first year doesn't count). Even if you furlough or fire that employee after they are vested, they will always be eligible for a pension once they reach retirement age. It may not be much, but they will always be eligible to draw whatever pension they earned before leaving.

 

[TechBoy]

Not necessarily. There aren't that many employees any more who have less than 5 years on the payroll. Because we have a defined benefit plan, under Federal law, an employee is vested in the plan at 5 years (actually, I think in reality it is 6 because the first year doesn't count). Even if you furlough or fire that employee after they are vested, they will always be eligible for a pension once they reach retirement age. It may not be much, but they will always be eligible to draw whatever pension they earned before leaving.

Yes, but they will be getting no additional years of service, which is what really creates most of the liability.

 

[jimntx]

Yes, but they will be getting no additional years of service, which is what really creates most of the liability.

Well, I'm not sure how the other departments' pensions work, but for f/as it doesn't matter how many years you worked once you are vested. Your pension payment is calculated from your best 4 of your last 10 years whether you had 5 years or 50 years. If you only have 5 years, your pension is calculated from the best 4 of those. If you have 50 years, it's the best 4 of the last 10. Even if you had fabulous earnings 15 or 20 years ago, it's the last 10 that count.

 

[Bob Owens]

Well, I'm not sure how the other departments' pensions work, but for f/as it doesn't matter how many years you worked once you are vested. Your pension payment is calculated from your best 4 of your last 10 years whether you had 5 years or 50 years. If you only have 5 years, your pension is calculated from the best 4 of those.

Pay is only part of the formula for determining your pension. I've been told that the best 4 out of 10 no longer applies due to ERISA rule changes, its now your best regardless of whether or not it falls within the last 10.

 

[jimntx]

I would need to see that in writing. At f/a retirement seminars they are still telling people that it is the best 4 of the last 10.

 

[FA Mikey]

Final average compensation is determined by taking the average of the highest paid 48 consecutive calendar months of the last 120 consecutive calendar months in the plan participation.

 

[jimntx]

Final average compensation is determined by taking the average of the highest paid 48 consecutive calendar months of the last 120 consecutive calendar months in the plan participation.

Oh, okay. I think that is what Bob is talking about. The "best 4 years" can be made up of any 48 of the last 120 months. Doesn't have to be actual contiguous months.

 

[BigBangTheory]

Oh, okay. I think that is what Bob is talking about. The "best 4 years" can be made up of any 48 of the last 120 months. Doesn't have to be actual contiguous months.

No, they don't have to contiguous months.

 

[TechBoy]

I would need to see that in writing. At f/a retirement seminars they are still telling people that it is the best 4 of the last 10.

Yes, but that is just to get the "average salary" that is then multiplied by some percentage to determine the amount of the pension. The percentage is almost always determined by number of years of service. So there is a huge difference between 5 years and 50 years (although most plans have a ceiling beyond which no new credit is earned -- typically 30 years).

I don't know AA's plans nor your contract, but unless I slept all the way through pension law, the system as you describe it would not pass muster under ERISA. And logically, wouldn't everyone just retire after 5 years and move on to another job and collect another pension? But maybe there is something at AA that is extremely unusual, so I may not be right . . .

 

[jimntx]

Oh, I wasn't implying that a pension for 5 years of service would be anything other than minuscule, but I had read into your original post that laying off people would reduce the pension liability substantially. Remember that AMR's pension fund is, unlike a lot of airlines, 95% funded. The company has already paid the current liabilities into the fund and can't get the money back.

It would make no sense for the company to dump a fully-funded pension plan on the PBGC (though they would love that for once) despite what some United employees like 767jetz keep hoping they will do. The United people seem really bitter about the fact that we still have our pensions and they don't. :unsure:

 

[TechBoy]

Oh, I wasn't implying that a pension for 5 years of service would be anything other than minuscule, but I had read into your original post that laying off people would reduce the pension liability substantially. Remember that AMR's pension fund is, unlike a lot of airlines, 95% funded. The company has already paid the current liabilities into the fund and can't get the money back.

It would make no sense for the company to dump a fully-funded pension plan on the PBGC

Oh, I wasn't suggesting that AA dump its pension. In fact, that would make no financial sense for the company. I was replying to FWAAA's suggestion that AA's pension costs to maintain the DB plans is LESS than what they would have to spend to fund defined contribution plans that other carriers use.

I was merely suggesting that with a nearly fully funded plan and more layoffs coming (which will decrease the overall liability significant -- it's just hard to calculate how much exactly), that AA's pension costs will decrease in a meaningful way.