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FedEx PPA Going Away
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<blockquote data-quote="Serf" data-source="post: 4270808" data-attributes="member: 50254"><p>"But at the same time, FedEx employees did not get a true 5% contribution in their cash balance plan, because that’s not how a defined benefit pension plan works. FedEx credited that amount to a notional account for recordkeeping purposes, but the money was not set aside in a real individual account for each employee like a 401(k). And rather than crediting the account with interest based on the plan’s investment earnings for the year, the plan credited each notional recordkeeping-only “account” with interest based on a U.S. Treasury bond index – according to <a href="http://s1.q4cdn.com/714383399/files/doc_financials/annual/2019/FedEx-Corporation-2019-Annual-Report.pdf?utm_source=InvestorRelations&utm_medium=Referral&utm_campaign=AnnualReport2018&utm_content=FinancialInformationAnnualReports" target="_blank">their most recent annual report</a> (p. 125), they assume that this crediting rate will work out to 4.0% over the long term, considerably less than the 6.75% they themselves expect to earn on their assets."</p><p></p><p>This excerpt hit me hard. "Notional Account." Also, when a company says it's not a cost saving initiative, you can bet your butt it's a cost saving initiative.</p></blockquote><p></p>
[QUOTE="Serf, post: 4270808, member: 50254"] "But at the same time, FedEx employees did not get a true 5% contribution in their cash balance plan, because that’s not how a defined benefit pension plan works. FedEx credited that amount to a notional account for recordkeeping purposes, but the money was not set aside in a real individual account for each employee like a 401(k). And rather than crediting the account with interest based on the plan’s investment earnings for the year, the plan credited each notional recordkeeping-only “account” with interest based on a U.S. Treasury bond index – according to [URL='http://s1.q4cdn.com/714383399/files/doc_financials/annual/2019/FedEx-Corporation-2019-Annual-Report.pdf?utm_source=InvestorRelations&utm_medium=Referral&utm_campaign=AnnualReport2018&utm_content=FinancialInformationAnnualReports']their most recent annual report[/URL] (p. 125), they assume that this crediting rate will work out to 4.0% over the long term, considerably less than the 6.75% they themselves expect to earn on their assets." This excerpt hit me hard. "Notional Account." Also, when a company says it's not a cost saving initiative, you can bet your butt it's a cost saving initiative. [/QUOTE]
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