FedEx Pilots Reject 2023 Tentative Agreement

FedEx MEC Negotiating Committee

Financial Summary of the 2023 Rejected Tentative Agreement

By: Wayne Worthington, CFA, CFP®

Print White Paper

On July 24, 2023, FedEx pilots rejected the proposed tentative agreement with 57% voting against and 43% voting in favor. Smith Anglin will continue to follow these negotiations. If you would like to discuss how the potential FedEx pilot contract changes might affect your financial situation, please schedule a call with Wayne today.

Three Major Changes:

1. Increase pilot compensation by 14% immediately and 30% over the next 3 ½ years.

2. Increase the Legacy Defined Benefit Pension Plan maximum from $130,000/year to $169,000/year, gradually over 4 years.

3. FedEx gives the pilot a retirement plan choice (late 2024) to either take the legacy increased pension, -or- reduced pension plus a retirement savings plan (MBCBP)that the company contributes up to $36,300 annually.

Compensation - Top Pay Scale Proposed (Hourly):

• Immediate pay rate increase of 14%. Pay will increase a total of 30% compounded over the next 3 ½ years.

• Pay rate increases will be compressed from 15 years to 12 years. This applies to pilots hired in 2009 or later.

Maximum Legacy Pension Proposed (Plan A):

1. The Pension will increase 30% from the current $130,000 per year to $169,000 per year.

2. Current Pension: Final Average Earnings (FAE) max is $260,000.

3. The Legacy Pension will freeze at the years of service earned when the MBCBP is elected.

4. Proposed: FAE will increase as follows:

Market Based Cash Balance Plan (MBCBP)

Proposed New Pension Offer:

• FedEx will start a New Cash Balance Retirement savings account for the pilot.

• FedEx will contribute 11% of the pilot’s compensation annually (Up to a max $330,000 pay, indexed for inflation).

• The pilot will receive $36,300 per year, growing at an estimated rate of 6.5%.

• The MBCBP can be paid out as a lump sum or as an annuity.

Pension Election Decision

The Pilot Will Need to Make His/her Pension Election in Late 2024

THE PILOT WILL CHOOSE TO EITHER:
Elect the new, increased Pension Plan, increasing the max pension from $130,000 to $169,000 per year

OR

Elect to lock in the pension at years of service (max $145,000 per year), plus add the Market Based Cash Balance Plan. The MBCBP is the Fed Ex contribution of $36,300 into a savings account (11% of pay/$330,000 annual max, indexed for inflation).

The trade-off between the two choices boils down to:
Would the pilot rather have an increased pension or lock in a lower pension and be given a retirement savings account?

Print White Paper