FedEx Pilots Reject 2023 Tentative Agreement

fedex mec negotiating committee

Highlights of the 2023 Tentative Agreement

By: Wayne Worthington, CFA, CFP®

On July 24, 2023, FedEx pilots rejected the proposed 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 contract changes might affect your financial situation, please schedule a call with Wayne today.

Request a Personal Consultation with Wayne Worthington.

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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.
PILOT TYPE
Widebody Captain
Widebody First Officer
Narrowbody Captain
Narrowbody First Officer
Aug 2023 Top Pay
$382.53 / hour
$271.19 / hour
$329.75 / hour
$238.60 / hour
Increase
14%
14%
14%
14%
Feb 2027 Top Pay
$434.71 / hour
$308.17 / hour
$374.72 / hour
$271.13 / hour
Increase
30%
30%
30%
30%

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:
EFFECTIVE DATE
Current
Aug 2023
Jan 2025
Jan 2027
FAE
$260,000
$325,000
$330,000
$338,000
%
50%
50%
50%
50%
Max Pension
$130,000
$162.500
$165,000
$169,000

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?

Wayne Worthington brings over 30 years of experience to Smith Anglin Financial. He regularly meets with prospective clients and counsels existing clients, with a primary focus working with FedEx and United pilots. Wayne earned the Chartered Financial Analyst (CFA) designation and is a CERTIFIED FINANCIAL PLANNERTM professional. He holds an MBA from Boston University and an engineering degree from Iowa State University. Wayne has also enjoyed being an adjunct professor of Corporate Finance at the university level.
Smith Anglin Financial specializes in Fed Ex benefits and retirement planning. We would like an opportunity to discuss our recommendations for your potential FedEx retirement decision and to construct a retirement plan for you.

The information contained in this white paper is provided for general informational purposes only and does not constitute legal, financial, or investment advice. The content is based on our understanding of retirement benefits and election options offered in the upcoming contract. Smith Anglin Financial, LLC is not affiliated with ALPA or Fed Ex. While we have made every effort to ensure the accuracy of the information provided, we make no representations or warranties of any kind, express or implied, about the accuracy, reliability, suitability, or availability, with respect to the content contained herein. Any reliance you place on such information is strictly at your own risk. Furthermore, this white paper does not create a client relationship between the reader and our organization. We strongly recommend consulting with your financial professional, before making any decisions or taking any actions based on the information presented in this white paper.

It is important to note that the retirement benefits and election options discussed in this white paper may be subject to change. Regulations and policies can vary by jurisdiction and are subject to updates, amendments, or revocations. We do not guarantee the continued accuracy or applicability of the information provided in this white paper in the future. This white paper is not an offering or solicitation of securities or investment products. By accessing and reading this white paper, you acknowledge and agree that our organization and its representatives shall not be held liable for any direct, indirect, or consequential damages arising out of the use or reliance upon the information provided. You further agree to release our organization from any and all claims, liabilities, or losses that may arise directly or indirectly from your use of or reliance on the content in this white paper.

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