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<blockquote data-quote="Ricochet1a" data-source="post: 574661" data-attributes="member: 22880"><p>Under the PPP, FedEx is only "contributing" 5% of annual gross to the balance each year. Under the conversion from the DBPP, there was a large lump sum contribution made to an employees balance based upon years of service and annual pay. This was deliberately scaled to keep the differences between monthly pensions between those that retired before May 31, 2008 and after relatively close. However... the disparity between the DBPP will slowly increase the longer an employee works under the PPP.</p><p> </p><p>For an employee hired in on June 1, 2008 planning to retire May 31, 2033, the difference between the two plans will be amazing. I created an Excel Sheet with the following assumptions (this makes the BIG assumption that FedEx continues to operate the same for the next 25 years as it has for the last, yes I know, faulty assumption):</p><p> </p><p>1) Starting wage of $15/hr hires in at age 25.</p><p> </p><p>2) Average pay increase of 5.5% (don't laugh) until top out. Top out will occur in 2025 at $37.19/hr</p><p> </p><p>3) 3% Annual Inflation rate</p><p> </p><p>4) Retirement in 2033 at $47.11/hr, age 50. Sounds like a lot now, but the inflation index then will be 2.09, so divide $47.11 in 2033 dollars by 2.09 to get 2009 dollars, which is a $22.54/hr pay rate (I just proved that when a Courier tops out, so does their standard of living, it is a dead end job). </p><p> </p><p>5) 2084 Regular hours worked in a year, and an assumption of 10% additional pay due to overtime</p><p> </p><p>6) 4% earnings on annual contributions of FedEx.</p><p> </p><p>The balance in the PPP on May 31, 2033 for this employee would be $138,188.55. Assuming the balance keeps on earning interest at the astounding rate of 4%, on May 31, 2043 (age 60) the balance would be $205,500. Sounds like a lot, it isn't. First remember these are 2043 dollars. Divide by the inflation index of 2.81 to get 2009 dollars, which is $72,657. This is what a 25 year career gets the employee under the PPP, a 2009 dollar amount of $72,657. </p><p> </p><p>The annual gross for this employee for 2032-33 would be $108,000 in "then" dollars ($51,674 in 2009 dollars). So once an employee tops out, standard of living tops out too, there is no further growth in real income. </p><p> </p><p>So, under the PPP an employee would retire with $66,119 2009 dollars in their account. If the employee starts drawing at age 60, there would be $72,657 in 2009 dollars in the balance. Say you manage to hold on till age 75, the monthly pension payment would be $537.43 in 2009 dollars. </p><p> </p><p>Let's compare this to the old DBPP.</p><p> </p><p>Average of high 3 (or 5) times years of service (max of 25) times 2% for annual pension, divided by 12 for monthly payment.</p><p> </p><p>The average would be $101,884. In 2043 this equals $36,257 in 2009 dollars. Take this times 25 times 2% and divide by 12 to get monthly pension. I get $1,510.70 a month. Compare this to the PPP amount of $537.43 (all in 2009 dollars).</p><p> </p><p>The new hire lost TWO-THIRDS of their pension!!!!</p></blockquote><p></p>
[QUOTE="Ricochet1a, post: 574661, member: 22880"] Under the PPP, FedEx is only "contributing" 5% of annual gross to the balance each year. Under the conversion from the DBPP, there was a large lump sum contribution made to an employees balance based upon years of service and annual pay. This was deliberately scaled to keep the differences between monthly pensions between those that retired before May 31, 2008 and after relatively close. However... the disparity between the DBPP will slowly increase the longer an employee works under the PPP. For an employee hired in on June 1, 2008 planning to retire May 31, 2033, the difference between the two plans will be amazing. I created an Excel Sheet with the following assumptions (this makes the BIG assumption that FedEx continues to operate the same for the next 25 years as it has for the last, yes I know, faulty assumption): 1) Starting wage of $15/hr hires in at age 25. 2) Average pay increase of 5.5% (don't laugh) until top out. Top out will occur in 2025 at $37.19/hr 3) 3% Annual Inflation rate 4) Retirement in 2033 at $47.11/hr, age 50. Sounds like a lot now, but the inflation index then will be 2.09, so divide $47.11 in 2033 dollars by 2.09 to get 2009 dollars, which is a $22.54/hr pay rate (I just proved that when a Courier tops out, so does their standard of living, it is a dead end job). 5) 2084 Regular hours worked in a year, and an assumption of 10% additional pay due to overtime 6) 4% earnings on annual contributions of FedEx. The balance in the PPP on May 31, 2033 for this employee would be $138,188.55. Assuming the balance keeps on earning interest at the astounding rate of 4%, on May 31, 2043 (age 60) the balance would be $205,500. Sounds like a lot, it isn't. First remember these are 2043 dollars. Divide by the inflation index of 2.81 to get 2009 dollars, which is $72,657. This is what a 25 year career gets the employee under the PPP, a 2009 dollar amount of $72,657. The annual gross for this employee for 2032-33 would be $108,000 in "then" dollars ($51,674 in 2009 dollars). So once an employee tops out, standard of living tops out too, there is no further growth in real income. So, under the PPP an employee would retire with $66,119 2009 dollars in their account. If the employee starts drawing at age 60, there would be $72,657 in 2009 dollars in the balance. Say you manage to hold on till age 75, the monthly pension payment would be $537.43 in 2009 dollars. Let's compare this to the old DBPP. Average of high 3 (or 5) times years of service (max of 25) times 2% for annual pension, divided by 12 for monthly payment. The average would be $101,884. In 2043 this equals $36,257 in 2009 dollars. Take this times 25 times 2% and divide by 12 to get monthly pension. I get $1,510.70 a month. Compare this to the PPP amount of $537.43 (all in 2009 dollars). The new hire lost TWO-THIRDS of their pension!!!! [/QUOTE]
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