Alaska Pilot Retirement Plan
Your Retirement Benefits
Alaska Airlines Pilots who retire have a combination of sources for retirement income: a fixed benefit (pension) and a Lump Sum option from the Fixed Income Retirement Plan (“A-Plan”) and Lump Sum distribution options from the Pilots Investment and Savings Plan (“PISP/401k”).
Fixed Income Benefit (“A-Plan”)
The Alaska Airlines Fixed Income Retirement Plan like the plans offered by many large companies is a Defined Benefit Plan. It defines the benefit you receive when you retire. The plan is also often referred to as your pension plan or your A-Plan. Your benefit is calculated on a formula which includes your years of service and your historical earnings.
At retirement, you will have the option to receive your benefit in the form of a monthly annuity or half of your benefit in annuity and half in the form of a lump sum. You must make this irrevocable decision prior to retirement regarding your payout option. Retirement Advisors can help you select the best form of payment for you and your family based on your individual situation.
Fixed Benefit Calculation
In December of 2009, Alaska pilots were asked to choose one of three options concerning their defined benefit or “A” Plan. A pilot who was disabled did not have the choice and maintained Option 1, status Quo Formula. Any pilot who was on furlough or military leave as of December 31, 2009, who returns to active service will have the same options to choose from.
Option 1 continued your old benefit formula:
Final Average Compensation x 1.9% x Years of Credited Service.
Final Average Compensation is defined as the average of the highest consecutive 60 months of earnings out of the 120 months preceding your retirement. Your company provided PISP contributions continue at 3% of your 401(k) eligible compensation.
Option 2 is a rebalance formula:
The sum of 1.9% x your credited service through December 31, 2009, and 1.0% x your credited service on and after January 1, 2010: multiplied by your Final Average Compensation. Beginning January 1, 2010 your PISP company contributions were increased to between 8-11% based on years of credited service.
Option 3 is a voluntary soft freeze:
You kept the Retirement Plan benefit earned through December 31, 2009 but no longer earn additional credited service. Your benefit will be adjusted for any change in your Final Average Compensation. Age and years of service continue to accrue for purposes of
PISP company contributions were raised to 13.5% of your 401(k) compensation.
Death Benefit Account
If you elected Option 3 (Voluntary Soft Freeze) your Death Benefit Account under the Retirement Plan will no longer be credited with an amount equal to 6% of your previous annual earnings (subject to IRS limits) after December 31, 2009. Your Death Benefit Account will continue to be credited annually with interest. However, the Death Benefit Account for Pilots who elect Option 1 or Option 2 will continue to accrue benefits as currently provided by the Retirement Plan.
Partial Lump Sum Option
You may elect to take 50% of your Fixed Benefit in the form of a lump sum. Most retiring crewmembers elect this option in order to maximize control of retirement dollars and to reduce longer term risks associated with continued funding of your pension plan.
The lump sum factor is based on a factor determined by mortality tables and the prevailing interest rates on November 30th of the year prior to your retirement year. This factor is determined by rates prescribed by the Pension Protection Act of 2006. If you retire early, the factor will have to be adjusted to account for the actuarial equivalent of your normal retirement benefit.
Pilots Investment and Savings Plan (PISP/401k)
The PISP is a combination of the merging of the Pilots Defined Contribution Plan, formerly known as your B-Plan, and the Pilots 401(k) Plan. These plans were merged on April 1, 1990. This Plan is a defined contribution plan and employees have an opportunity to contribute their own money to it. Plan contributions are in your name and 100% vested.
The PISP, currently administered by Fidelity as record keeper, includes a large number of different investment options for you to choose from.
Company Contributions
The company contributes between 3% and 13.5% of your eligible monthly earnings into the plan up to a maximum annual limit allowed each year by the IRS. Earnings consist of flight pay, base pay, standby pay, overtime, flight bonuses, vacation and sick pay, training and incentive pay. All company contributions and earnings on the contributions remain tax deferred until distributions are taken.
Employee Pre-Tax Contributions
Your PISP allows you to contribute a portion of your earnings through payroll deductions each year on a tax deferred basis into the company’s plan. Your contributions and earnings are tax-deferred until you begin taking distributions. All of your contributions
and earnings are also eligible to be rolled over into an IRA at retirement.
Each year the IRS sets limitations on the maximum annual amount that you can contribute into your Plan. As of 2011, the limit is $16,500. Pilots over age 50 are eligible to make additional “catch-up” pre-tax contributions to the Plan. As of 2011, this limit is $5,500. The maximum total pre-tax employee contribution as of 2011 is $22,000.
Optional After Tax Contributions
You also have had the option to contribute after-tax dollars into the PISP. While contributions are made on an
after-tax basis, your earnings are tax deferred until taken as a distribution.
At retirement your tax-deferred earnings are eligible to roll over into an IRA while your after-tax distributions may be taken in the form of non taxable distribution.
Please contact us for more information.
