JANUARY 2024
Manager’s Note With ALPA pilots leading the way, 2023 was the year of the defined benefit plan. The Market-Based Cash Balance Plan (MBCBP) negotiated by the Delta pilots became effective on October 1, 2023. In midDecember, it was estimated that the Delta MBCBP would have approximately $100M in assets by year end, after only three months of operation. United pilots ratified a new contract in September, which provides for the establishment of an MBCBP. Implementation steps on that MBCBP have already begun and negotiations on outstanding issues will soon begin, with the anticipated effective date of January 1, 2025. After the Alaska Master Executive Council (MEC) completed an education campaign for its members, discussions are underway at Alaska Airlines for an MBCBP. Additionally, the pilots at American and Southwest recently reached an agreement with their airlines to establish MBCBPs. With the Delta pilots’ plan now in operation and other new contracts establishing MBCBPs, pilots have been successful in resurrecting defined benefit plans when interest in such plans had been waning for decades on the national landscape. But with inflation, a volatile stock market, and high interest rates, employees are interested in defined benefit plans again and making job choices based on the availability of pensions. Last year many employers also began showing renewed interest in defined benefit plans. Recent articles in the New York Times, Wall Street Journal, Forbes, and Pensions & Investments, as well as white papers from leading actuarial firms, all champion the return of defined benefit plans. Financial institutions, like Fidelity, have also opined on MBCBPs. ALPA’s success may lead other employee groups and employers to explore an alternative to the traditional defined benefit, such as a MBCBP. While an MBCBP is a qualified defined benefit plan, it has many features of a defined contribution plan, such as individual accounts, portability, lump-sum distributions, and in-service distributions beginning at age 59½. The funding of an MBCBP is typically based on a flat dollar contribution or a percentage of wages and is designed to capture market upsides and protect against market downsides in a way that results in a fully funded plan less subject to the risk of a distress termination during an employer’s financial downturn. All these features made the MBCBP attractive to pilots and will continue to attract the interest of other employee groups and employers.
CONTENTS Manager’s Note . . . . . . . . . . . . . . . . . . . . 1
Canadian Update . . . . . . . . . . . . . . . . . . 12
R&I Spotlight . . . . . . . . . . . . . . . . . . . . . . 2
Membership Plans . . . . . . . . . . . . . . . . . 15
Legislative & Legal Updates . . . . . . . . . . . 3
R&I Fast Facts . . . . . . . . . . . . . . . . . . . . 16
Court Cases of Interest . . . . . . . . . . . . . . 6
Investing & Marketing Outlook . . . . . . . . 18
Spotlight on Investing . . . . . . . . . . . . . . . 11
R&I Contacts . . . . . . . . . . . . . . . . . . . . . 23
NOTE: Text in blue is a live link to referenced external PDF files. Click on the link to open the file.
Questions? Comments? Please click here or e-mail Celeste.Sweeney@alpa.org