Boyd Group's review and analysis of AA's bankruptcy

[WorldTraveler]

It's my understanding that when a DB plan is frozen the covered employees stop accruing benefits for more years of service. So someone who is 50 when the plan is frozen will get the benefit that retiring at 50 would give. Of course, the DC plan is supposed to make up some/all of the difference but the risk that it won't is entirely on the employee.

Likewise with terminated DB plans except the PBGC bases it's calculation of benefits on a hypothetical retirement 3 years prior to plan termination. So the 50 year old, whose DB pension was terminated, has his/her benefit calculated on "retiring" at 47. Once everyone's "retirement" benefit is calculated, there is the money in the DB plan and the PBGC maximum benefit tables to consider.

Jim

PS - there was a change in the law that affected PBGC paid benefits for pilots but I'm not sure it affected anyone else.

The age you were when the plan was frozen is irrelevant to the calculation of benefits. Your age only matters when you decide you want to start drawing benefits.... it will obviously be less if you start drawing earlier but many people have noted that the offset for starting withdrawals is not as large as they thought it would be.
The primary factors in determing the level of benefits you will receive are the years of service you had when the plan was frozen (which will be used to figure how close you were to full retirement years for the plan) and the age at which you commence benefits (which must be at least what the plan allowed if it were a frozen plan but the PBGC minimum for a terminated plan).

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and yes, Kev, the real pain from a frozen or terminated plan is that because you no longer accumulate benefits, your retirement benefits continue to erode with inflation. Fortunately, the US is in a low inflation period and the Fed has been able to keep it that way but unlike SS benefits which can be adjusted for inflation, frozen or terminated pension benefits will likely never be adjusted upward. If you were 30 when the plan was frozen, there will still be alot of inflation that will eat away at your benefits by the time you get a chance to start drawing them.

 

[Mr Red]

The age you were when the plan was frozen is irrelevant to the calculation of benefits. Your age only matters when you decide you want to start drawing benefits.... it will obviously be less if you start drawing earlier but many people have noted that the offset for starting withdrawals is not as large as they thought it would be.
The primary factors in determing the level of benefits you will receive are the years of service you had when the plan was frozen (which will be used to figure how close you were to full retirement years for the plan) and the age at which you commence benefits (which must be at least what the plan allowed if it were a frozen plan but the PBGC minimum for a terminated plan).

.
and yes, Kev, the real pain from a frozen or terminated plan is that because you no longer accumulate benefits, your retirement benefits continue to erode with inflation. Fortunately, the US is in a low inflation period and the Fed has been able to keep it that way but unlike SS benefits which can be adjusted for inflation, frozen or terminated pension benefits will likely never be adjusted upward. If you were 30 when the plan was frozen, there will still be alot of inflation that will eat away at your benefits by the time you get a chance to start drawing them.

Low inflation ...Have you been shopping lately,how about gas,Utilities,groceries,your kidding right !

 

[WorldTraveler]

Low inflation ...Have you been shopping lately,how about gas,Utilities,groceries,your kidding right !

The US inflation rate in 2011 was less than 3% with non-food/non-energy costs virtually flat.
http://www.bls.gov/news.release/cpi.nr0.htm
.
But again even 3% inflation over 20-30 years eats away a huge amount.
Someone who has a frozen or terminated pension will likely benefit from starting benefits as early as they can.

 

[Mr Red]

The US inflation rate in 2011 was less than 3% with non-food/non-energy costs virtually flat.
http://www.bls.gov/news.release/cpi.nr0.htm
.
But again even 3% inflation over 20-30 years eats away a huge amount.
Someone who has a frozen or terminated pension will likely benefit from starting benefits as early as they can.

Oh I get it ,don't count your largest Expenditures,The Fantasy land of the USA !!

 

[WorldTraveler]

Oh I get it ,don't count your largest Expenditures,The Fantasy land of the USA !!

for most people shelter and automobile transportation are the highest costs.
I understand your point but that is the way inflation is reported. BTW, energy doesn't count just gasoline (which did rise) but also included electricity and other utilities which were basically flat.
Also, food costs were driven by eat out food more than food purchased to be consumed at home.
.
The DOL press release above spells out pretty clearly where increases were... they release these statistics multiple times per year.

and speaking of food, AA's fleet changes have been minimal so far but they continue to drag out the process so it isn't possible to know yet how it will turn out....
it remains likely that AA is asking for steep cuts now and the ability to return leases in the short term - and they are likely not receiving much interest in those proposals... still, the leasing companies are better off not accepting a rejection from AA right now - so both parties probably benefit for dragging this process out....
but not being able to settle fleet decisions affects the timing of alot of other aspects of the BK.

 

[Mr Red]

for most people shelter and automobile transportation are the highest costs.
I understand your point but that is the way inflation is reported. BTW, energy doesn't count just gasoline (which did rise) but also included electricity and other utilities which were basically flat.
Also, food costs were driven by eat out food more than food purchased to be consumed at home.
.
The DOL press release above spells out pretty clearly where increases were... they release these statistics multiple times per year.

and speaking of food, AA's fleet changes have been minimal so far but they continue to drag out the process so it isn't possible to know yet how it will turn out....
it remains likely that AA is asking for steep cuts now and the ability to return leases in the short term - and they are likely not receiving much interest in those proposals... still, the leasing companies are better off not accepting a rejection from AA right now - so both parties probably benefit for dragging this process out....
but not being able to settle fleet decisions affects the timing of alot of other aspects of the BK.

Im shocked every time I go to grocery store,our water utility is trying to raise our rates by up to 66 %,elect utility wants 20% rate raise. Oil usage is at a 15 year low ,but their seems to be no benifit of the old supply and demand argument. Economic TREASON by the US Oil Cartels.Most people don't even know that Oil and Gas are the biggest US Export now !!