AviatPsy03 wrote:altiplano wrote:DB= Defined Benefit pension
- Defined pension payout for life after retirement based on a formula of years of service and highest average earnings
- the pension Air Canada Pilots had before Lisa Raitt and the Harper Conservatives illegally allowed the corporation to close it in 2012... Pilots hired today don't have that plan.
TBP/MEPP/CWIPP= Target Benefit Plan/Multi Employer Pension Plan/Canada Wide Industrial Pension Plan
- TBP is the type of plan, the specific one we got for our members is CWIPP... and it's a MEPP...
- basically it allows you to save in a registered, pooled plan beyond current ITA limits
- there are ups and downs of the plan vs. DC/RRSP savings some loss of flexibility and control with your money, you pay more due no ITA limit, the payout can vary, if you leave AC you would do better with your money in a well managed portfolio,... but for those that don't want to think about it and come out the the other end of this career with a payout for life... there you go.
Thank you for this info Altiplano, very useful! So, all pilots from after 2012 don't have this DB plan? DB would have been certainly great, let say if you would have been captain on a 777, it would have been a considerable amount. I guess I will see the MEPP soon or later in my career but I will definitely take a look on all the posibilities.
To add some important details comparing the DB to the TBP:
Under the DB, once you have completed the years of service required to have an unreduced pension (25 years), the amount of benefit you collect in retirement has nothing to do with your career average earnings, but rather your "best 5" years of service. Example: some one who was a 777 captain from day 1 to retirement at 25 years vs someone who was an RP for 20 years and then held 777 captain for the last 5 years, both would receive identical pensions.
Under the TBP, your benefit collected in retirement is a target based on a number of factors, the but importantly it is calculated based on average career earnings. So the example given above would produce different pensions since pilot #1 earned far more over his/her career. This type of pension has the side effect of encouraging maximum earnings over the entire career. Or interpreted differently, bidding junior positions your whole career.
Another important distinction is that a DB cuts off contributions at a specific YOS (also 25 years I believe?). Meaning a pilot hired young can actually do better in retirement under the TBP since there is no maximum contributions (in percentage of income yes, but not dollar amount or number of years of contributions).
It is far more complicated than anyone can spell out here, but in essence the younger a pilot is hired and the more he/she earns in their career, the difference in benefit between the two pensions is quickly erased. Keep in mind though, more years contributing to a TBP is more you are not getting in pocket during that time.
One final note about the TBP. Many would have you believe that being a Target Benefit Plan, the amount you will receive in benefit is always in limbo and any fluctuations in market return/interest rates/member contribution etc will throw your retirement plans on shaky ground. The fact is the CWIPP has been operating for over 30 years and has only reduced benefit twice (benefits are reduced group specifically; meaning one company's shortfall in contribution affects those members only, not all CWIPP members) and those were for employee groups of less than 20 people. ACPA pilots will be the largest employee group to join CWIPP (over 800 members already) and bring by far the most stability, through amount of money being contributed, and volume of members contributing. And that number will only increase over the decades (as DBers retire and TBPers are hired).
Yes the TBP has inferior qualities to the DB plan. But don't let anyone tell you it's a slightly better DC plan.