ALPA sent a letter today to the House and Senate today supporting a resolution to protect individual retirement savings in the midst of the fiscal cliff debate. The “Fiscal Cliff” refers to the combination of tax hikes and budget cuts that will take place on January 1, 2013, if Congress does not act.
In a search for revenue to avoid going over the cliff, lawmakers are considering lowering the amount workers can contribute to defined benefit retirement plans such as 401(k)’s and IRA’s. ALPA strongly opposes these proposals. In the past decade, many airlines having received bankruptcy protection, terminated defined benefit plans, costing pilots more than $5.5 billion in earned benefits and countless amounts in future expected benefit accruals. Pilots at these same airlines took major pay cuts, were stripped of retiree medical provisions in their working agreements and had their careers significantly thrown off course. For nearly all ALPA pilots today, a 401(k) type defined contribution plan is their primary employer-sponsored retirement plan and pilots are required by law to retire at age 65, regardless of their financial situation.
In addition, applying more restrictive limitations to one’s ability to provide a meaningful income replacement at retirement does not produce long-term savings for the federal government; it is just a short-term budget gimmick that will have long-term negative consequences for retirees. That is because while retirement plan contributions are tax deferred at the outset, everyone must pay taxes on their retirement savings when they are paid out in retirement.