How does American Financial Advisors assist their Pilot-Clients?
Which A Plan/PBGC Annuity Option should I select at retirement?
AA Pilot 401(K) Investment Options
Does AFA provide 401(k) investment guidance for all AA employees?
What do I have to do to receive individualized 401(k) asset allocations from AFA?
How much can I contribute to my AA 401(k) plan?
Can I transfer my 401(k) to an IRA?
How does American Financial Advisors assist AFA Pilot-Clients?
American Financial Advisors’ Financial Planning Team provides the following assistance to AFA pilot-clients.
- Pre-retirement planning including analysis of A Plan/PBGC options.
- Retirement planning including Social Security, Retiree Medical, Medicare, Medigap, SMP, Tricare, IRMAA and more.
- Regular Investment updates focused on pilot-specific financial planning topics
- Assistance with retirement process and forms.
- Assistance with rollover of 401(k) funds.
- Developing a written Investment Policy Statement based on client’s objectives.
- Establishing asset allocation and rebalancing of investment accounts.
- Money management of investment portfolios using low-cost asset class funds.
- Monthly account statements and quarterly performance reports.
- Access to AFA’s Financial Planning Team including Certified Financial Planner™, MBA, Chartered Financial Analyst (CFA), Certified Divorce Financial Analyst® (CDFA), Social Security Analyzer Certified Advisor, and PAHM® professionals.
- AAL “Equity Distribution” analysis.
- Survivor assistance.
AFA Pilot-Clients receive financial planning advice which includes but is not limited to:
- Estate/Legacy Planning.
- Tax reporting – realized/unrealized gain/loss statements, etc.
- Survivorship planning.
- Social Security Analysis.
- Insurance Planning
- Retiree Medical Insurance options.
In addition to the monthly Schwab statements our clients receive, we provide clients access to AFA’s web portal which allows access to weekly account updates and detailed quarterly reports. These reports are very informative and show returns compared to relative benchmarks, along with up-to-date asset allocation.
AFA conducts quarterly client-only webinars. These webinars cover investment account details and salient financial topics. For clients whose schedules do not afford them the ability to attend the live webinars, we provide instructions to listen to a replay of the webinar when their schedule permits.
AFA Pilot-Clients receive a comprehensive Financial Flight Plan (FFP). This document is uploaded to our systems and kept up to date with financial and other changes. The FFP is a true “go to” document for you and your family. The FFP becomes a Survivor Plan for loved ones after death of the Pilot-Client.
AFA Pilot-Clients have constant access to AFA’s financial planning and investment team. This access includes Certified Financial Planner™, MBA, Chartered Financial Analyst (CFA), Certified Divorce Financial Analyst® (CDFA), Social Security Analyzer Certified Advisor, and PAHM® professionals. With access to a Financial Flight Plan, we are ready to assist clients with financial, retirement, and estate planning questions. AFA clients can call our Chartered Financial Analyst (CFA) who heads up the investment team with any investment questions they may have. All of us can be reached by simply calling our toll-free phone number. Our entire team is also available to respond to email questions.
AFA’s Certified Financial Planner™ professionals can assist you with your financial planning needs. Feel free to contact us if you have questions or concerns. AFA’s Financial Planning team can be reached at 888-679-9779 at the following extensions and email addresses:
Joan Morales, PAHM®: Ext 6 or jmorales@AFAdvisors.com
Matt Boyce, CFP®: Ext 2 or mboyce@AFAdvisors.com
Bill Mertes, CFA: Ext 5 or wmertes@AFAdvisors.com
Markus Bras, CFP®, CDFA®, MBA: Ext 3 or mbras@AFAdvisors.com
Jim Cable: Ext 8 or jcable@AFAdvisors.com
Alex Bras: Ext 4 or abras@AFAdvisors.com
Andrew Bras: Ext. 3 or ambras@afadvisors.com
Karen Torres: Ext. 0 or ktorres@afadvisors.com
Which A Plan/PBGC Annuity Option should I select at retirement?
The LAA A Plan offers a variety of annuity options to be selected at retirement. A Plan benefits can only commence following AA retirement. The Normal Form of Payment is the default payment, the form that will be used if you do not choose a payment option. Monthly annuity payments can be payable as early as the Benefit Commencement Date. Pilots who want to receive an optional form of payment must submit a Pension Benefit Election Form (PBEF) prior to their Retirement date. Married pilots must have their spouse's written agreement to select any form of payment other than a Joint and Survivor Annuity with the current spouse as the joint annuitant. As of 1/1/2023, the A Plan selection will be made online.
American Financial Advisors uses a proprietary A Plan Analyzer to provide AFA Pilot-Clients with A Plan guidance and recommendations. AFA’s A Plan Analyzer includes the Level Income options to determine a “Breakeven Age” between Basic and Level Income A Plan options. The A Plan Analyzer also determines a Basic Accumulation as of A Plan start date.
Normal (Default) Form of Payment for married pilots is a 50% Qualified Joint and Survivor Annuity. For single pilots it is the Lifetime (Single Life) Annuity. In addition to the Normal Forms of Payment, the A Plan offers the following optional forms of payment:
- Qualified Optional Survivor Annuity (married pilots only)
- Joint and Survivor Annuity (50%, 66.7%, 75%, and 100% annuity options)
- Guaranteed Period Option
- Single Life Annuity (married pilots only)
- Level Income Annuity Option
- Straight (Single) Life Annuity
- Joint & 50%/75%/100% Survivor Annuity
- Joint & 50% Survivor “Pop-up” Annuity
- 5/10/15 year Certain and Continuous
- 401(k) (limit of $22,500 for 2023)
- 401(k) Catch Up (limit of $7,500 for 2023)
- Are at least age 59.5, or
- Retire, or
- Made After-Tax (AT) 401(k) contributions (gains on AT 401(k) contributions are not tax free if these AT contributions stay in the 401(k)), or
- Rolled-over assets to the AA 401(k) Plan, or
- Are on AA LTD status for at least 6 months.
- Restrictions in AA 401(k) death benefits for surviving spouse and/or children. Inheriting an IRA provides your loved ones with options which not available in the AA 401(k) Plan.
- Do you want your surviving spouse and/or family to determine what to do with their inherited 401(k) funds? Do they know the limitations of inheriting 401(k) funds?
- The investment options in the regular AA 401(k) are not Mutual Funds, but “Collective Investment Trusts - CITs”, which do not have the same regulatory oversight and cash requirements as the Mutual Funds in an AFA managed IRA.
- The investment options in the regular AA 401(k) provide limited opportunities to diversify a portfolio. You will have access to additional asset classes in an AFA managed IRA, which are not available in the regular AA 401(k).
- Restrictions in naming 401(k) beneficiaries. There are no restrictions in who you can name as the beneficiary of your IRA. All 401(k) sources must have the same beneficiaries.
- All 401(k) sources of funds must be invested with the same asset allocation. This is not required in IRAs.
- Differences in Death Benefits between the 401(k) and an IRA. Tax consequences of withdrawals from account following death of pilot.
- Ease in transferring account following death of pilot.
- Regulatory oversight of available investment options in the 401(k) vs. IRA.
- Cost and complexity of 401(k) QDRO in case of divorce. How are accounts transferred following a divorce? 401(k) assets require a QDRO. An IRA does not.
- Investment options, fees, and expenses.
- ERISA protection of assets. Liability and Bankruptcy protection of 401(k) assets vs. IRA.
- Ease of Rebalancing 401(k) vs. IRA investments.
- Access to funds (401(k) Loans vs. IRA withdrawals).
- Tax consequences of After-Tax 401(k) assets (if applicable). Gains on After-Tax 401(k) assets are not tax free.
- Access to 401(k) after retirement. 401(k) account will be “locked” for at least 30 days following retirement.
- Ease of access and tax withholding of withdrawals in retirement.
- AA 401(k) can only be invested with one Asset Allocation. IRA and Roth IRAs can be invested in different allocations.
For AFA Pilot-Clients with a PBGC annuity (TWA and LUS pilots), we provide a proprietary PBGC Analyzer which determines a Present Value for the following PBGC annuity options:
PBGC annuities don’t have Level Income options and no Basic Accumulation.
AA Pilot 401(k) Investment Options
One of AFA’s financial planning services is to provide AFA Pilot-Clients with semi-annual 401(k) rebalance instructions..
AFA’s recommended investments are based on several factors including internal costs and correlation between selected asset classes. Most recommended investment options are selected from Tier 2, complemented by some Tier 3 investment options.
The following funds are used in AFA’s recommended 401(k) asset allocations. The percentage allocated to each fund will vary based on each client’s personalized Investment Policy Statement (IPS).
--% Stock/--% Bond (--/--) AA 401(k) Portfolio
| US Bond Index Fund | --% |
| US Large Cap Growth Stock Index Fund | --% |
| US Large Cap Value Stock Index Fund | --% |
| US Small Cap Growth Stock Index Fund | --% |
| US Small Cap Value Stock Index Fund | --% |
| International Developed Markets Stock Index Fund | --% |
| Emerging Markets Stock Index Fund | --% |
| Diversified Bond Fund | --% |
| Inflation Protection Fund | --% |
Does AFA provide 401(k) investment guidance for all AA employees?
Yes. AFA provides 401(k) asset allocation advice to all AA employee groups. The procedures are very similar to the checklist used by AFA’s Pilot-Clients. AFA’s recommended 401(k) funds for AA employees, other than AA Pilots, are indicated below. The percentage allocated to each fund will vary based on the customized and recommended asset allocation.
--% Stock/--% Bond (--/--) AA 401(k) Portfolio
| US Bond Index Fund | --% |
| US Large Cap Growth Stock Index Fund | --% |
| US Large Cap Value Stock Index Fund | --% |
| US Small Cap Growth Stock Index Fund | --% |
| US Small Cap Value Stock Index Fund | --% |
| International Developed Markets Stock Index Fund | --% |
| Emerging Markets Stock Index Fund | --% |
| Diversified Bond Fund | --% |
| Inflation Protection Fund | --% |
How do I receive individualized 401(k) asset allocations from AFA?
The process is very easy. Start with AFA’s online Risk Questionnaire. Using checklists, AFA’s Financial Planning Team will guide you through the process.
For AA Pilots go to: http://www.afadvisors.com/pilots/ips
For all other AA employees go to: http://www.afadvisors.com/personal/ips
How much can I contribute to my 401(k) plan?
401(k) contribution limits change annually. Below are the limits for 2023.
2023 Contribution Limits for the AA 401(k) Pilot Plan
Markus Bras, CFP®, CDFA®, Social Security Analyzer Certified Advisor, MBA; American Financial Advisors
The IRS has updated the 401(k) contribution limits for 2023. For detailed IRS information, go to: https://www.irs.gov/newsroom.
There are numerous 401(k) contribution limitations which could apply in 2023: $22,500, $7,500, $30,000, $66,000, $73,500, and $330,000. We hope the information below will clarify these limitations.
There is an annual personal contribution limit on total Pre-Tax or Roth salary deferrals into all 401(k) Plans, including the AA 401(k) Plan. This elective deferral limit is $22,500 for 2023 (was $20,500 for 2022). For pilots age 50 or older, this limit is increased by an additional $7,500 for 2023 (Catch-up contributions; was $6,500 for 2021). After-Tax 401(k) contributions are not included in this limit. Generally, elective deferrals made to multiple 401(k) plans in which you participate (in case you participate in a 401(k) plan other than the AA 401(k) plan) must be considered to determine contribution limits.
The Internal Revenue Code (IRC) also limits the total contributions (AA’s 16% and personal) to the AA 401(k) plan. The 2023 “Total Contribution” limit is $66,000 (vs. $61,000 for 2022). This limit does not apply to “Catch up” contributions resulting in a maximum 2023 “Total Contribution” limit of $73,500 for pilots age 50 or older (vs. $67,500 for 2022).
If you are older than age 50 and max out your personal contributions to the 401(k) ($30,000) prior to reaching other maximum contribution limits, you would reach the “Total Contribution” limit once you exceed $271,875 in earnings. AA will then pay 16% of your earnings above $271,875 to you as taxable income.
The 2023 maximum income limit in calculating contributions to the AA 401(k) plan is $330,000 (vs. $305,000 in 2022). Above this limit all 401(k) contributions (AA’s 16% and personal) will stop for the remainder of the year. Reaching the annual income limit will result in AA’s 16% contribution to be paid as taxable income.
401k Catch-Up Contributions
If you reach age 50 during the year, you can make extra contributions to the 401(k), called "Catch-up" contributions. You must designate these “Catch-up” contributions in the “Catch-up contribution amount” block of the 401(k) website (on AA 401(k) webpage go to “Contribution Amount” > “Contribution Amount and Catch-up Contributions”). If you do not designate a percentage in this block, you will not make catch-up contributions. The maximum you can contribute in catch-up contributions is $7,500 (2023 limit; The 2022 limit was $6,500). Catch-up contributions can be made to the Before-Tax and/or Roth 401(k) accounts. It is not possible to make catch-up contributions to the After-Tax 401(k) account. When making 401(k) Catch-up contributions, the amount you elect is deducted from your pay, until you reach the catch-up annual limit.
Sources: www.irs.gov; www.netbenefits.com/aa. Disclaimer: Posted information is subject to change. In case of conflict with posted information, official plan documents govern. The information above may not apply to all situations and does not constitute tax advice. Additional information for the AA 401(k) Plan can be found in the Summary Plan Description (SPD).
401(k) Contributions on Paycheck
401(k) Contributions can be found in various places on the monthly pay-statement. Regular and Catch-up 401(k) contributions are indicated under the title “PRE TAX DEDUCTIONS” or “AFTER TAX DEDUCTIONS” as follows:
AA’s 16% contributions (until reaching an IRC limit) can be found under “Additional Information” as “401(k) Company Contrib.”.
AA’s 16% contributions (after reaching an IRC limit; these contributions are taxable income) can be found under “Earnings” as “Excess Co Contributions”.
Sources: www.irs.gov; www.netbenefits.com/aa.
Disclaimer: Posted information is subject to change. In case of conflict with posted information, official plan documents govern.
What is “C Excess CO Cont”?
We often receive questions regarding the “C Excess CO Cont” line on the monthly paycheck.
AA’s 16% 401(k) contributions become taxable income once you reach an IRC contribution and/or income limit. The dollar value after “Excess Co Contributions” represents AA’s 16% contribution rate paid to you as taxable income in lieu of 401(k) contributions, once IRC and/or income limits are reached during the calendar year.
Can I transfer my 401(k) to an IRA?
Eligible pilots are allowed to transfer 401(k) funds to an IRA. You are eligible to transfer assets out of the AA 401(k) Plan if you:
There are many differences between the AA 401(k) and AFA managed IRAs. Our main concerns with the AA 401(k) Plan are:
Pilots considering a transfer of 401(k) assets to an IRA should base their decision on factors such as:
The above-mentioned factors may or may not apply to each pilot. Individual factors determine if one should transfer 401(k) assets to an IRA or leave them in the 401(k). If 401(k) assets are transferred to an existing AFA managed IRA, we will simultaneously re-balance the portfolio and invest the transferred 401(k) assets.
Connect
1936 Lee Road - Suite 270
Winter Park, FL 32789
Toll Free: 888-679-9779
Office: 407-207-9006
Fax: 407-207-0106