Our new Contract contains a
Letter of Agreement regarding our $5,000 cash Signing Bonus. The recently negotiated cash Signing Bonus will be issued within 30 days of ratification and will be paid in a manner completely different from our Contractual Profit Sharing. This cash Signing Bonus will be paid in the form of a check or electronic deposit subject to taxes and the individually determined 401(k) election that comes from your regular paycheck. The cash Signing Bonus will be treated like regular pay for the purpose of 401(k) company paid direct and matching contributions. AFA’s advocacy has been for the company to make this payment as soon as possible. The company is listening to our advocacy and is working to put distribution of the Signing Bonus on the fast track.
In the today’s Flight Attendant Negotiations Network (FANN) Newsletter and on our website, we have included information about the cash Signing Bonus as well as optional savings strategies* for Members who wish to direct some or all of their cash bonus into their 401(k) or UK Stakeholder Plans.
Key Points on the Signing Bonus:
- The Signing Bonus is not entirely deferrable into the 401 (k) or U.K. Stakeholder Plans.
- Flight Attendants may not make a separate deferral election for the Signing Bonus and therefore, it cannot be entirely deferred into the 401(k) or UK Stakeholder plans.
- Flight Attendants may defer a portion of the Signing Bonus into their 401(k) or UK Stakeholder Plans account consistent with their deferral election on file with Fidelity Investments on the date the Signing Bonus is paid.
- These 401(k) deferrals from the Signing Bonus are considered to be employee contributions and not employer contributions
- All normal annual maximum contribution limits apply. Currently, the annual maximum deferral is $17,000. For those individuals over 50, an additional deferral of $5,500 is permissible.
- While the IRS treats an amount paid to an employee in connection with the ratification of a Contract as taxable compensation subject to federal & state income tax and FICA withholding, a flat 25% tax rate is normally applied. However, United has confirmed they will utilize a method whereby the withholding will be similar to that of a “regular” wage payment, which will, in most cases, result in a lower federal income tax withholding.
- The Signing Bonus will be treated like regular pay for purposes of 401(k) company paid direct and matching contributions.
- The Signing Bonus will count for purposes of calculating Considered Earnings for each Flight Attendant. This Signing Bonus, paid in 2012, will count toward Profit Sharing payable in 2013.
Savings Strategies* for the 401(k) and UK Stakeholder Plans:
AFA’s advocacy has been for the company to make this payment as soon as possible. The company is listening to our advocacy and is working to put distribution of the Signing Bonus on the fast track. This will likely make it difficult to immediately defer as much of the $5,000 Signing Bonus by making changes to your deferral election.
Another possible strategy to defer (make an employee contribution) an amount that mirrors the Signing Bonus is to increase the deferral election for several pay cycles. In doing so, you can control the amount deferred from your regular pay checks making it equal to that portion of the signing bonus you wish to set aside for retirement. By utilizing this strategy, the deferred amount goes into your 401(k) on a dollar cost average basis versus a one time, large investment.
Remember, since these amounts are considered employee deferrals and the standard maximum deferral limitations apply, increasing your deferral election percentage may cause you to reach the maximum deferral limit earlier in the year than you may have anticipated. This is standard and should not be an unexpected outcome as this currently occurs for Flight Attendants who, in preparation for retirement, are deferring the maximum amount permitted under the law.
These deferral elections to the 401(k) account will all qualify for the company paid direct and matching contributions.
*AFA does not provide tax or legal advice. This material is provided for informational purposes only. Please consult your tax and/or legal advisors regarding your particular set of circumstances. Consider this information carefully and contact Fidelity directly at (800) 245-9034 before making any changes to your deferrals. The timing of any change made to your deferral cannot be guaranteed to be effective for the Signing Bonus. Once effective, these elections remain in place for subsequent paycheck(s) until such time as you make a further modification to your deferral elections.
While the Agreement provides that the Signing Bonus would be paid in US Dollars, management has agreed to the following:
Internationally Based Flight Attendants who are Regularly Paid in Pounds, Euros, Yen or H.K. Dollars:
- The Signing Bonus will be paid in the currency of their regular pay.
- The Exchange Rates Side Letter will not apply to the signing bonus. Currency conversion will be at market exchange rates.
- Flight Attendants will receive signing bonus as a live check or electronic deposit consistent with how they receive their regular pay, (i.e., if one receives regular pay as an electronic deposit, that’s how United will pay the Signing Bonus).
Internationally Based Flight Attendants who are Regularly Paid in U.S. Dollars:
- Signing Bonus will be paid in U.S. Dollars.
- Flight Attendants will receive Signing Bonus as a live check or electronic deposit consistent with how they receive their regular pay.
Flight Attendants on Leaves of Absence and Voluntary Furlough:
- Signing Bonus will be paid pursuant to whatever pay instruction each person has on file.
- If an attempted electronic deposit is rejected by the receiving financial institution (perhaps because the Flight Attendant has changed banking arrangements during their time away from work and not yet notified the company) the company will mail a paper check to the address of record.