AC Pension

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tbayav8er
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AC Pension

Post by tbayav8er »

I've read the contract, and read the forums here on the topic, but I'm still confused as to exactly how the pension works for a new hire. Can someone explain it in layman's terms?

So it's a DC pension basically? And if you were to decide to retire early, then all of the money that yourself and AC have contributed gets transferred out to a personal RRSP or something? Whereas if you keep working until retirement eligibility, you would be entitled to more money than if you retired early?

Also, who holds the money, and who is responsible for the investment? Is there some kind of 3rd party investment firm? Is the pension protected if the company ever files CCAA/bankruptcy?

Thanks!
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rudder
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Re: AC Pension

Post by rudder »

tbayav8er wrote: Mon Aug 15, 2022 5:46 am I've read the contract, and read the forums here on the topic, but I'm still confused as to exactly how the pension works for a new hire. Can someone explain it in layman's terms?

So it's a DC pension basically? And if you were to decide to retire early, then all of the money that yourself and AC have contributed gets transferred out to a personal RRSP or something? Whereas if you keep working until retirement eligibility, you would be entitled to more money than if you retired early?

Also, who holds the money, and who is responsible for the investment? Is there some kind of 3rd party investment firm? Is the pension protected if the company ever files CCAA/bankruptcy?

Thanks!
As I understand it, the answers are a little more nuanced than yes or no.

The easy ones - the money is yours and is protected in AC insolvency. It rests with a third party. All contributions are current so there is no contribution deficit.

The more complicated ones - you are part of a multi-employer pension plan. Terms are set. Conditions for withdrawal are set. Investment decisions rest with the third party.

The mechanics of the plan dictate your contribution level (and the employer contribution level) and offer a targeted annual benefit based on each years individual earnings. It is the sum of these annual earned benefits that equal your final retirement benefit. However, the earned benefit is subject to investment returns that can meet the actuarial obligation. If there are consistent poor returns, the earned benefit may be reduced.

By all appearances, the most recent incarnation of the plan is fairly lucrative. Earned benefit does not reach that of the DB Plan plus top-hat but far exceeds what might result from a straight DC matching plan that must be converted to an annuity on retirement and subject to the vagaries of interest rate fluctuations.
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tbayav8er
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Re: AC Pension

Post by tbayav8er »

Great, thanks for the info!
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rudder
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Re: AC Pension

Post by rudder »

Some good info here.

https://www.cwipp.ca/

Contribution and benefit levels contained in ACPA CBA.
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tbayav8er
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Re: AC Pension

Post by tbayav8er »

rudder wrote: Tue Aug 16, 2022 6:17 am Some good info here.

https://www.cwipp.ca/

Contribution and benefit levels contained in ACPA CBA.
Thank you!
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PilotZum
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Re: AC Pension

Post by PilotZum »

How does it compare with the rest of the industry offering RRSPs matching at 3-7%?
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200Above
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Re: AC Pension

Post by 200Above »

PilotZum wrote: Wed Aug 24, 2022 4:59 pm How does it compare with the rest of the industry offering RRSPs matching at 3-7%?
Not entirely sure what you're looking for, but this is the breakdown of contributions:

Employee Pays:
- 6% of salary (less than 2 years of service)
- 7.5% of salary (more than 2, less than 5 years of service)
- 7.5% of salary (5 years of service and above)

AC Pays:
- 6% of salary (less than 2 years of service)
- 8.25% of salary (more than 2, less than 5 years of service)
- 10.5% of salary (5 years of service and above)
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PilotZum
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Re: AC Pension

Post by PilotZum »

That's exactly what I was looking for, thank you.
200Above wrote: Wed Aug 24, 2022 5:21 pm
PilotZum wrote: Wed Aug 24, 2022 4:59 pm How does it compare with the rest of the industry offering RRSPs matching at 3-7%?
Not entirely sure what you're looking for, but this is the breakdown of contributions:

Employee Pays:
- 6% of salary (less than 2 years of service)
- 7.5% of salary (more than 2, less than 5 years of service)
- 7.5% of salary (5 years of service and above)

AC Pays:
- 6% of salary (less than 2 years of service)
- 8.25% of salary (more than 2, less than 5 years of service)
- 10.5% of salary (5 years of service and above)
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Ratherbe
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Re: AC Pension

Post by Ratherbe »

From the cwiip website:

“A combination-type plan with pre-set employer contribution formulas and target monthly pensions that plan members receive at retirement.

The assets in the plan are pooled and professionally managed and longevity risks are pooled across plan members and shared collectively.

Contributions rates do not vary based on plan funding – they can, however, change through bargaining.

The plan does not provide a benefit-level guarantee. Pensions are paid for life but the amount could change – up or down – depending on plan funding.”

The DB plan has a formula that “defines” a fixed monthly payment for life of the employee and/or survivor. The TB has a “targeted” monthly payment for life that depends on how well the pooled investments perform. A DC plan has no formula or target -just risk. (Imagine having to retire, or go off medically, during a stock market crash!)

A DB plan is considered the Cadillac but one could outlive the company that funds the pension plan. Also the payout is fixed as soon as you retire, so inflation post retirement is a big risk. It was based on annual 4% increases but that has to be negotiated every time the CA is up for renewal. A TB plan such as the CWIIP survives on its own. The contribution rates are negotiable so it would make sense to demand higher company contributions. A DC plan might dry up while you and/or your survivor are still alive. Contribution rates are also negotiable too but we have upgraded to the CWIIP which is a much superior retirement plan than a DC.

Hopefully in 2023, the pilots can rally behind improving our two pension plans. The DB needs the 4% annual increase plus more security and the TB plan needs less pilot and more company contributions.

Hope that helps?
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negative_g
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Re: AC Pension

Post by negative_g »

As much as I'd love a DB, I doubt we'll see it happen.

One of two things needs to happen.

1) CWIPP company match needs to increase, and the benefit factor needs to increase. And coupled with a pay raise, the CWIPP will actually be a pretty solid pension.

2) A similar 16-18% COMPANY paid DC pension. Into a fund that's under our own name, just like Delta, United etc. Also coupled with a pay raise.

I'd be happy with either of those. But the current CWIPP with the pilot match and the continual degradation of our wages is not going to work for any of us. I hope the younger/newer pilots wake up to this now instead of when it's too late in 20 years.

Number 2 is a good option as it allows mobility, and the money is yours when you retire. No survivor benefits etc. The money is in your estate to do with as you please. 3 million in a DC over 25-30 years when you retire, with 5-8% yearly returns on your investments and taking out 10% a year (300K) to live will last you a very very long time.
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Protonpilot
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Re: AC Pension

Post by Protonpilot »

negative_g wrote: Thu Sep 08, 2022 12:07 pm One of two things needs to happen.

1) CWIPP company match needs to increase, and the benefit factor needs to increase. And coupled with a pay raise, the CWIPP will actually be a pretty solid pension.
If you look at the CWIPP booklet or your annual statement, the contribution rate after 5 years is 18%, which is most of your career. This is the maximum allowed under tax law as was explained to me by a committee member. The benefit factor is tied directly to that contribution rate and is based on a bunch of assumptions, the most important one is the expected investment return of the plan. I'm not really sure how that benefit factor can be improved, they only assume a 6% return over the long term (shown on the website). If it does better than that, then previously accrued pension credit can be bumped up. They've already done that twice over the last three years.

Increasing the company portion is a great idea. After we get a pay raise!
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Protonpilot
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Re: AC Pension

Post by Protonpilot »

negative_g wrote: Thu Sep 08, 2022 12:07 pm

2) A similar 16-18% COMPANY paid DC pension. Into a fund that's under our own name, just like Delta, United etc. Also coupled with a pay raise.

I'd be happy with either of those. But the current CWIPP with the pilot match and the continual degradation of our wages is not going to work for any of us. I hope the younger/newer pilots wake up to this now instead of when it's too late in 20 years.

Number 2 is a good option as it allows mobility, and the money is yours when you retire. No survivor benefits etc. The money is in your estate to do with as you please. 3 million in a DC over 25-30 years when you retire, with 5-8% yearly returns on your investments and taking out 10% a year (300K) to live will last you a very very long time.
"... to do with as you please". I wish.

If you leave for greener pastures mid-career, you can't access the money in your DC plan. Pilots are federally regulated, so your DC plan would go into a locked in retirement account (LIRA) which you can't touch until you're 55. Ask any Jazz pilot. You'd eventually have to convert it to a life income fund (LIF), and you can only withdraw about 5% per year at age 55, gradually increasing over the years. The withdrawal limit doesn't hit 10% until age 79.

I agree. 16-18% from the Company would be great. :-)
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