50% (New STD/LTD Plans, Damian Jennette, Brent Weisner)

Today's SWAPA Number is 50%. That's the percentage of monthly base earnings a SWAPA pilot will receive while on disability under our new contract.  That benefit begins 60 days and lasts until FAA retirement age, if necessary. This major improvement from our old LOL plan was a key pillar of Contract 2020, but that begs the question, do we even need a SWAPA disability plan anymore? 

So today on the show we're talking with frequent guest and NC member Damian Jennette, along with Benefits chair Brent Weisner, who will tell us all about the new SWAPA STD and LTD plans, how they work with the new Southwest LOL plan, and what our pilots need to know as we get ready for the special open enrollment period coming up in April.

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Transcript

Kurt Heidemann:

Today's SWAPA number is 50%. That's the percentage of monthly base earnings a SWAPA pilot will receive while on disability under our new contract. That benefit begins 60 days and lasts until FAA retirement age, if necessary. This major improvement from our old LOL plan was a key pillar of contract Twenty-Twenty. But that begs the question, do we even need a SWAPA disability plan anymore?

Amy Robinson:

So today on the show, we're talking with frequent guest and NC member Damian Jenette, along with benefits chair Brent Weisner, who will tell us all about the new SWAPA STD and LTD plans, how they work with the new Southwest LOL plan, and what our pilots need to know as we get ready for the special open enrollment period coming up in April.

Kurt Heidemann:

I am Kurt Heidemann.

Amy Robinson:

And I'm Amy Robinson. And here's our interview with Damian and Brent. So I think first up we have to talk about our new LOL under the new contract. SWAPA used to offer STD and LTD because the LOL did not meet expectations, and I kind of thought we fixed that. So why aren't we just no longer having short-term disability, long-term disability?

Damian Jennette:

The biggest reason is gap coverage. So somebody may not have enough sick bank to get them through the sixty-day elimination period for loss of license. The other issue would be if somebody goes out on multiple occurrences, multiple disabilities, with also not having enough sick bank in there, there could be multiple issues of why they can't bridge themselves over. So that's why the STD plan. And then the LTD plan, in after-tax monies, you're looking for about 75% is what you're trying to get yourself back up to. We have that ability with the 50% loss of license. Now bringing that up with the sick bank, you can meter that up, but having some extra insurance in there to make sure that it carries through to age, that's why we have an additional LTD program.

Kurt Heidemann:

And before we get going into the details of these programs, when will the SWAPA STD and LTD take effect?

Damian Jennette:

Under today's plans, the STD and LTD, you'll be covered all the way up until May 1st. And on May 1st, these new provisions take place, the new STD plan, and the new LTD A and B plan, which I'm sure we're going to discuss in great detail.

Amy Robinson:

So how do you qualify for short-term or long-term disability? Is it the same as before or do we have problems with pilots getting approved for LTD, not LOL, that kind of thing?

Damian Jennette:

Well, with these new plans, what we're trying to do is marry them up to the loss of license plans. So they do add benefit on top of the loss of license plan.

Kurt Heidemann:

I think what Amy's asking is are the two tied together? In other words, if I qualify for LOL from the Company, will I automatically qualify for the new STD and LTD or are those two separate processes?

Damian Jennette:

Obviously, as we are the plan administrator for the STD, LTD. So you have to go through that process. But in theory, yes, if you are approved on a loss of license claim, then you should be approved for an STD or LTD claim as well. So they do marry themselves, but they are independently looked at by MetLife for us and then Harvey Watt through for the company.

Amy Robinson:

Let's go ahead and begin with short-term disability. What is the new plan coverage for STD?

Damian Jennette:

Under the new terms, it's going to be a fourteen-day elimination period. And the way we look at it is 50% of the weekly pre-disability earnings up to 2,500. Under the old plan, it paid up to 1,500 a week. So it's an extra thousand dollars benefit on a weekly basis. But it's obviously just covering a much shorter timeframe because a fourteen-day elimination period now, and then it pays out for basically 60 days all total.

Kurt Heidemann:

And so how does the new STD plan compare to our current or old STD A and B plans?

Damian Jennette:

All right, so just to recap, the new plan, a fourteen-day elimination period, and it pays out between the elimination period and the actual payout period is 60 days. That's to bridge you to the new either loss of license or LTD plans, right? 60 days window is what you're looking for in the new plan. The old plan was doing the same thing. It was bridging you to the loss of license program, but it had a thirty-day elimination waiting period for the STD A plan. And then it would pay out the benefit for the 22 weeks to get you to that 180 days to get you on the loss of license in the old plan. So now we've just reconfigured all of this to marry it up with the needs of the pilots now under the current CBA.

Amy Robinson:

So some of the feedback that we're getting is that it is more expensive. Can you explain why that is?

Damian Jennette:

Yeah. It's significantly shorter elimination period. It's a fourteen-day elimination period. And also it is a higher amount. It's 2,500 a week versus the 1,500 a week that MetLife was having to pay before. From MetLife's point of view, from an insurance side of the house, they are taking some risk here because they are nervous that people will not be in an STD program, which in the law of averages, you need more people in that program to keep the cost down. So they're trying to find an equal balance and we're throwing this plan out mid-year, which is unusual, too. And they agreed to a lot of the provisions that we've requested and we'll talk about those in a bit, the offsets and all that they are willing to take all of these risks on. So that's part of the exchange there is a higher dollar premium.

Kurt Heidemann:

One issue that came up that we've gotten an email on was about CASD and the pilots out in California. Does this have any bearing on those pilots or have we taken a look at how this affects them?

Damian Jennette:

Great question. Yep. It does not impact anybody on California. Since this is offered through the association, there's no offset to that.

Kurt Heidemann:

All right. So let's move on to LTD, if that's STD. Now we have two options, LTD A and B. Let's start with A. What's that benefit option?

Damian Jennette:

Okay. LTD A, this is 10% of the first $25,000 a month gives you a max benefit of 2,500 a month. 10% of 25,000 is 2,500 a month. That's a maximum. The elimination period is 60 days or the exhaustion of the STD first. So that gives you roughly, if you're making $300,000 of income, that's giving you about $30,000 of extra tax-free disability benefit. On top of that loss of license that we have.

Amy Robinson:

Is that per year?

Damian Jennette:

The 30,000 per year. Yeah, because it's 2,500 a month is the maximum.

Kurt Heidemann:

Now why is it only paying 2,500 when our current LTD is paying 13 five? That's a huge reduction in benefit.

Damian Jennette:

Right. Looks that way on the surface. But let's dig in a little bit deeper to that one. So the new plan starting, we'll call it the 5/1 plan, the May 1st plan. Those new plans, they have no offsets to them. The current plan, the current LTD plan today does have offsets, and the number one offset is the loss of license offset. So when you receive your 50% loss of license today, under this plan, it would reduce that amount, your LTD amount, down to a thousand dollars actually is what it pays is the minimum benefit.

Kurt Heidemann:

So what you're saying though is even if the number says that it's 13,50 a pilot's only going to get a thousand because the LOL pays first and this just is a top up on top.

Damian Jennette:

Yeah. It pays 66 and two thirds up to 13,500 a month. So you run that calculation through. You also run the loss of license calculation through, and it will reduce that amount. If you receive that loss of license amount, it will reduce it down. Whereas a new plan has no offset to it, so it's just paid on top of.

Amy Robinson:

So are there any other offsets like Social Security disability, any other offsets that might be on this plan?

Damian Jennette:

So Social Security offset, SSDI as we call it. There's no offset to it. Vacation doesn't offset. And also the retirement funding does not offset. So as you know, we had an issue there with the loss of license, non-taxable. We couldn't get that money to go into the 401k plan, so it's going to be paid as cash. That cash payment is not an offset as well.

Kurt Heidemann:

And just to caveat that as we're recording this today, that's where we're at with that. It's going to be a cash payment for the non-taxable LOL. That's not a hundred percent settled. We're still exploring where that may go. Is that a fair way to say that?

Damian Jennette:

Yes, that's a fair way to look at it.

Kurt Heidemann:

As of today.

Damian Jennette:

Yes. As of today, yep.

Kurt Heidemann:

And so can I top up my LOL benefits with Sick Bank and LTD or STD? And if I do that, that could take me over a hundred percent of my pre-disability earnings or my monthly base earnings, right?

Damian Jennette:

That's correct. That's correct. And with vacation, especially if let's say you had four vacations a year, that vacation on top of that technically would be taking you over a hundred percent every quarter if you're doing it every quarter, let's say.

Amy Robinson:

Okay, so then what is the premium for this option for option A?

Damian Jennette:

So option A is a 1.25 per 100 of your monthly payroll. So in this case, if you made at least $25,000 a month, you take that divided by a hundred times a 1.25, it gives you $312 and 50 cents. So that's per month. On an annual basis, $3,750.

Amy Robinson:

Is that more or less than our current LTD plan?

Damian Jennette:

It is slightly more, but like I said, if you take in consideration the loss of license offset, which technically could compress that down to a thousand dollars. A thousand dollars a month is $12,000 a year. So you're paying under today's plan $3,547 for today's metric, but you will probably only receive about $12,000 a year. Whereas this new plan, you'd be getting $30,000 a year. Because 2,500 a month times 12 gets you roughly $30,000 of extra disability income.

Kurt Heidemann:

So that's Plan A. Let's talk about Plan B now. How is that different from Plan A?

Damian Jennette:

All right. The way to look at this one is it has the same elimination period. It's a 60-day elimination period, or you have to exhaust STD first. And then it pays out the first months pay out just like the plan A. So it's 10% on the first $25,000. So the maximum is 2,500 a month for those months. Where it changes is in month seven. In month seven it goes 15% up of the first $42,000 of income. So that gives you, if you do 15% of 42,000, that gets you $6,300 a month. So that's a maximum benefit that would sit on top of your loss of license with no offsets, but it would be an extra 6,300 a month.

Amy Robinson:

Okay. And what is the cost for that benefit?

Damian Jennette:

So the cost for the LTD Plan B, it's a 1.59 per $100 of wages. So let's say you make the maximum that we talked about a minute ago was the $42,000 a month. That's what we're covering in insurance on this. So $42,000 divided by a hundred times a dollar 59 is $667 and 80 cents per month. So that means the maximum that we would collect in premium on this individual would be $8,013.60. So that's the maximum. So if you do not make $42,000 a month, which is $504,000 a year, maybe you make $300,000 a year, then your premium will only be collected on that $300,000. So you won't be paying the full $8,000 annually if you only make $300,000.

Amy Robinson:

Is this calculated on your last year's wages?

Damian Jennette:

It's calculated the month that you receive your wages for that month. It's calculated on that same month.

Kurt Heidemann:

So it varies month to month? Correct. And what you're talking about with a reduced amount, if you don't hit the limit, that would apply to all of the premiums. STD LTD A and B. If you're a new pilot that's making a hundred thousand, it's that percentage.

Damian Jennette:

Right. Right. Those guys probably won't hit the max percentages, so they'll just be paying the percentage, but it won't go to the maximum. And once again, just to reiterate, LTDA is only looking at the first $300,000 of income where LTDB is looking at the first $504,000 of income.

Kurt Heidemann:

And then the offsets are the same between the two?

Damian Jennette:

Correct. No offsets on any of those.

Amy Robinson:

And why is there a step-up on LTDB at month seven?

Damian Jennette:

It's just how it was designed and negotiated between SWAPA and MetLife. The mass majority of people, when you look at the claims data, they typically come back within six months. And so if you go longer than six months, historically speaking, they will stay on much more longer term. It does give MetLife a little bit of a comfort window, if you will because they are taking on some risks there as well. And so that's why we had that bridge in there.

Amy Robinson:

So Brett, why would someone choose to be on the short-term disability plan?

Brent Weisner:

A lot of people think that the loss of license benefit of 50% of your monthly base earnings with the 60-day elimination period is all they need. But they don't take into account the first 60 days, how much sick time do they have, what's their age and how much sick time are they willing to burn and then come back to work and not have. So that's why the short-term disability plan that only has a 14-day elimination period is ideal for folks that have a smaller sick bank or are younger and don't want to use all their sick bank.

Kurt Heidemann:

Brent, same question for LTD. What about A and B? What would be the use cases for those?

Brent Weisner:

So when you look at long-term disability and you stack that on top of loss of license, we had a lot of pilots call us earlier this week when we sent out the initial blast about the long-term disability plans. And they said, well, why do I need this? And it's totally up to you. It's not mandatory, it's voluntary. The long-term disability Plan A stacks on top of your 50% of your monthly base earnings from loss of license, whether that's taxed or non-taxed. The LTD is obviously non-taxed.

But if you can't live off of 50% of your monthly base earnings, whether it's your bills or your boats or your airplanes or whatever else you're spending money on, then that's why that long-term disability Plan A is there. It's to plus up your money coming in the door and get you closer to your pre-disability earning, your monthly base earnings. And when you start comparing before tax money and after tax money, this gets you really close to a hundred percent. And then if you add a little sick time or you add a little vacation, you're at a hundred percent of your monthly base earnings.

Kurt Heidemann:

Damien, one thing that Brent just said, he said obviously the LTD is non-taxable. I'm not sure it's obvious to a lot of people. Why is that? Explain that because we do have that choice when it comes to LOL.

Damian Jennette:

Yeah. So this is mainly because you're paying the premiums on this one in after tax money. So that's why the LTD and STD are both non-taxed.

Kurt Heidemann:

The government's getting their taxes on the premiums basically. So the benefit isn't.

Damian Jennette:

Right.

Amy Robinson:

So then how long do the LTD benefits last? And are there any differences between A and B in terms of duration?

Damian Jennette:

Duration is the same. It's to age 65 or FAA retirement age, but obviously that's age 65 today, so that's a max duration for both A and B. A slight change between A and B on the mental alcohol and substance abuse. So LTDA has a 24-month payout window for, once again, mental alcohol or substance abuse. Where LTDB has a 48-month payout window. Of course, the loss of license, if you go out on mental, there is no maximum. And same for alcohol and substance abuse if you're in the HILMS program. If you're not in the HILMS program, then there's a 24-month maximum window. But we do have those added features for both of these plans.

Kurt Heidemann:

I'll ask you both this question, the Peterson VLOL, is that something that we will continue and is that something that works well with these LTD, STD plans or is that something that we're also negotiating?

Brent Weisner:

I think the pilots that have the Peterson voluntary loss of license plan are the high time flyers, the big income earners, and they're looking for a bump to get them closer to a hundred percent of their monthly base earnings that are current long-term disability plan and loss of license plan didn't do. So if you look at the new long-term disability Plan B, that benefit is significantly higher than the long-term disability Plan A. And it will pay out until FAA retirement age. A.

Nd we certainly would never tell anyone to cancel an insurance policy that they have because if they did go out, they might be really happy that they have it. But the voluntary loss of license plan, as everyone knows, those premiums have increased exponentially, the benefit has decreased exponentially and it only goes four or five years and then it stops. And the difference between the LTD Plan B and that VLOL is that LTD Plan B will pay until FAA retirement age, and even if you're over 60, it'll continue to pay you until FAA retirement age versus the VLOL that might have maybe only a two-year payout depending on what your policy says.

Damian Jennette:

Let me dovetail a little bit with what Brent just said. So when these plans were designed, we were trying to come up with an idea of some kind of substitution for the VLOL or replacement, almost. Like I said, you can have it on top of, so it's an individual policy, but when you look at the Peterson premium payments, they're age banded. So the older you get, the higher the cost is. If you notice that our plan, we talked about the cost earlier, the premium cost, they're level. So somebody age 25 is paying the same amount of premium, dollar premium value, as somebody that's 60. And so we spread that risk through the entire pool of pilots. Whereas that Peterson plan, like I just said, is a much higher premium for somebody that's older. So that's something else that we did in these plans to bring the cost down for pilots.

Amy Robinson:

That leads me to the question, what happens to pilots who are currently on SWAPA long-term disability? Will they just move to the new plan?

Damian Jennette:

No. So you have to file a new claim after 5/1 for all of these provisions to take place. So those pilots that are currently on claim, we did negotiate a couple of new terms into it. So in the very beginning I told you that the offset right at 66 and two-thirds for the LTD up to 13,500, and then it's reduced down to a thousand. MetLife did agree that on any claim after 1/1 of '22, that the minimum payout would be $2,000 because we renegotiated those terms, back in the day. We went from 66 and two-thirds maximum of 12,500 up to 13,500.

Obviously the loss of license was 11,500, so there's a $2,000 gap there. The spirit of that was to try to capture that $2,000 difference there. Now that we have new terms and the loss of license, obviously that changed all the dynamics. So they agreed to that. They also agreed to not have the ratification bonus being offset. And also the other piece to that too is anybody that had the wages earned in 2023 MetLife agreed to marry the same thing that Southwest did in our agreement with bumping up the 23% for any wages in 2023, they agreed to the same terms in the plan as well. So

Kurt Heidemann:

You mentioned that the ratification bonus would not count as an offset. Does it count towards the monthly base earnings? If I go out in the next year, will I have that bump of that ratification bonus in my?

Damian Jennette:

For the loss of license, no. But that's been excluded for the loss of license. But also from the LTD as well.

Kurt Heidemann:

And LTD both. Yeah. Okay.

Amy Robinson:

Let's talk about open enrollment. When is this going to happen?

Brent Weisner:

April 1st through April 12th.

Amy Robinson:

And what happens if I don't fill out any forms or do anything by April 12th?

Brent Weisner:

All pilots are automatically enrolled in the new short-term disability plan and LTD Plan A. If you want to elect LTD Plan B, you need to do that via the electronic form that we will send out. And on the same token, if you want to disenroll in STD and/or LTD, you need to do that those first two weeks in April via the electronic form that we will send out.

Kurt Heidemann:

Brent, are we running a risk of having pilots sign up for benefits that they otherwise wouldn't want? Why can't we just say, if you're not enrolled today, you're automatically not enrolled for the new plans?

Brent Weisner:

We have taken this as an opportunity to automatically enroll a large group of pilots that in the past have decided to drop out of short-term disability or long-term disability. And since COVID, for one reason or another, they've wanted back in either or both short-term and long-term disability. And MetLife has historically not let anyone back in because of the risk of taking them back on the plan.

So this is a great opportunity for us as an organization to bring a hundred percent of our pilots back into the plans to cover those that would never be able to get coverage. And then if people want to elect, we figured we'd take the blast from them having to fill out the form rather than having pilots go out on disability and not having any income coming in.

Amy Robinson:

So what happens if I don't fill out the forms and I do get enrolled? When can I change that again?

Brent Weisner:

You can change that during the open enrollment that we will have the first couple weeks in October that then would take effect the 1st of January of 2025.

Kurt Heidemann:

And are there any other risks associated with not opting in? If I opt out, am I good to opt in come the fall election?

Brent Weisner:

You can opt in in the fall election if you opt out now in April, but you will have to do a statement of health. So you'll need that statement of health if you opt out of short-term disability now and want back in. Or if you do not elect LTD Plan B during this open enrollment and you want in LTD Plan B down the road, you'll need to fill out a statement of health to get into that.

Kurt Heidemann:

And what does that look like? What's a statement of health? Is it just a form or do I have to go see a doc?

Brent Weisner:

It starts out as a form provided by MetLife that pretty much looks at your medical history, prescriptions, doctor's appointments, and they look at your general health. And if they want more information, then they will ask for it. But usually, they make a decision off of the medical history. And like I said, since COVID, it's been very hard to get back into plans just because they see it as a higher risk on taking pilots into the plan that have already opted out.

Amy Robinson:

Okay. So walk us through what happens from today until May 1st for a pilot.

Brent Weisner:

So currently, if a pilot goes out on a disability, you're unable to fly because you're sick or injured. Between now and May 1st, you'll remain on the current short-term and long-term disability plans as well as the new contracts loss of license plan through Harvey Watt. And then if you work in May, then you're automatically enrolled in the short-term and long-term disability plan like we talked about. And if you were to go out on a medical, then you would fall onto these new plans that we have here, as well as the Company's new loss of license plan.

Amy Robinson:

Thank you to Damien and Brent for joining us on the podcast today.

Kurt Heidemann:

We really need to get them a t-shirt or a plaque or something as often as they come on this podcast.

Amy Robinson:

So anyway, if you have any feedback for us or ideas for a podcast, please drop us a line at comm@swapa.org. We really do want to hear your feedback.

Kurt Heidemann:

And finally, today's bonus number is one in four. That's the commonly accepted ratio of employees who will experience a disability lasting a year or more from age 20 until reaching retirement age. It's easy to ignore the need for disability protection, but please take time to consider the options SWAPA is providing to protect you and your family.