Amy Robinson:
Today's SWAPA Number is 64%. That's percentage of Contract 2020 that will be effective on date of ratification. By the end of 2024, that number will rise to 84%.
Kurt Heidemann:
Today on the show we're going to talk with Jody Reven, Scott Plyler and Damian Jennette about the implementation of Contract 2020, why we agreed to the timelines in the implementation plan, and what happens if the Company doesn't meet them.
Amy Robinson:
I'm Amy Robinson.
Kurt Heidemann:
And I'm Kurt Heidemann. And here's our interview with Jody, Scott, and Damian.
Amy Robinson:
Let's start with the big question I think most pilots would ask and that is, what was it that took so long to get the AIP? And you mentioned that it was the implementation schedule. Can somebody explain that a little bit?
Jody Reven:
Yeah, I think last time we learned our lesson, Amy, in Valencia, where we had the breakthrough and it got a B fund or the NEC and a lot of things started happening really quickly. And we announced, we shout it from the rooftops, "We have an agreement." Then we came back to Dallas and started working on the implementation plan and that didn't go well. This time we got to that same level maybe just after San Antonio and we realized, "Oh, wow, we're close." But we have to guard this and make sure that this complete rewrite gets fleshed out in an implementation plan.
Kurt Heidemann:
Amy, I was part of these implementation talks that we've had in between the AIP and here. I'd like to open it up to Jody and Scott and Damian all to talk through that process of when we were all called into those meetings for two, three, four-hour blocks at the big table with all the different SWA people. Explain that to the listener because I think that sets the stage.
Jody Reven:
Yeah, I've never seen that level of involvement from the company. This was a different level of people too. These were IT folks and folks that were actually going to have to do the programming. I remember at one point, and I'll let Scott chime in, where we were trying to divide into smaller groups and go in and talk to these folks about what it meant that we negotiated.
And they weren't saying, "If we'll do this." They were saying, "Hey, we see the language. How do we do this? What does the interface need to look like?" And I remember Meagan Nelan texting us and saying, "There are 25 people in our room." And it wasn't Labor Relations folks. It was people with pads and pins out seriously trying to figure out what kind of IT they were going to have to put towards this endeavor.
Scott Plyler:
If I can add to that, we had actually started the scheduling folks since we have a lot of changes. We had actually started having meetings back in April going over various requirements with IT folks for the items that were already AIPed. But as you all probably know, we didn't really start getting things done with scheduling until October when schedule of planning and exchange in late October, additional flying in November. And our execution section didn't even get done and AIPed until December 7th.
There wasn't a whole lot of work that they were able to get done ahead of time. And then all of a sudden all of this massive rewrite and scheduling changes started falling into their lap. And we were having to have meetings, not just negotiations, but then the weeks we weren't in negotiations, we were spending two or three days with IT folks trying to explain to them what God agreed to.
And just like Jody said, these aren't folks that are trying to negotiate. They just wanted to understand what it was so they could get a better estimate of what it was going to take to make it happen.
Kurt Heidemann:
All right. Damian, starting out at the front, Jody and Scott mentioned what was going on over the work rule side of things, you and I we attended more of the benefits, expenses, leaves of absence meetings for implementation. What was going on in our room would you say?
Damian Jennette:
Yeah. Gosh, it was definitely an all hands on deck meeting because the company had obviously benefits, Benefitsolver, Workday, all the tech people behind that. It was rooms full of people, plus even Flight Ops was there to make sure that the transition worked right, even maybe it's on pull sheets. The chief was there talking about those issues. But it was all hands on deck, everybody trying to make sure that we could get as close to DOR as possible on each item, which that was really nice to see.
Scott Plyler:
Yeah. Definitely on the scheduling side, those last two weeks of implementation talks were all about, okay, this is what you say it's going to take based on your quick estimation of what it will take because we didn't agree to these items till the last minute here. And then, us having to go in and say, "Well, what can you do manually? This is how this works today. You can do that manually until the programming or SRC can help out with that."
That actually was part of the genesis for part of the SRC budget being paid for by the company, like they do with a lot of our safety things now is that we're going to have to do a lot of collaboration, not just to make sure they do it right, but just to help them along.
Our payroll audit obviously is pretty good right now. We already have LCO and pay multiples program because we costed it all out so we can really help them get ahead. And that's why they were able to agree to things being earlier in the implementation like February and March for LCO and paid multiples.
Amy Robinson:
When you talk about the implementation schedule and you're talking about there's a lot of different timelines and things that are in that. How are you going to handle that ridge process from old things to new?
Jody Reven:
Well, that's a good point, Amy. And whenever you look at the implementation schedule and this worksheet and every single sentence in the contract has a date next to it. And when you look at that and you see a 2027, you think, "Oh, man, this has taken too long."
But because of the bridge process, many of those things start to take place manually. At DOR, I want to say it was 64%$ of the contract was implemented at DOR, 88% inside of 24 months. But the automation, the programming part is what we're waiting the longest for.
In this bridge process, you're either doing things the way we do them now until something can be programmed. That's very rare. You're implementing a manual process. Maybe a couple months down the line, so the scheduling or whoever the shareholders of the company can actually be trained so they do it right. Or sometimes you have to wait for implementation for programming like Scott talked about of the original footprint so that SkySolver knows what to look at, it knows what your preferences are as to whether you want to, Hey, do what you want with me and let me make a whole bunch more money with LCO. Or leave me alone and leave me on my same trip.
Some of those things are a little more important to program first. But most of the things by and large, we'll start to enjoy right away.
Amy Robinson:
I guess the next question would be the implementation schedule is pretty extensive and it's long. Why is that?
Jody Reven:
I think Scott touched on that a bit too. I mean the amount of programming in a rewrite and how much we're changing, it's a mountain of programming. But for the implementation from a pilot's perspective, you're not necessarily worried about when something gets programmed for automation, you're worried about when does that work role take effect.
And so, Scott and his team, were trying to show them so many ways, the SRC-III that we call them, show them so many ways that all of us really that you can implement something manually or it's just a little bit different than a current process so that we can get as many of those things at data ratification as we can. And then also, the things that aren't data ratification done at a reasonable time.
And then, they took from the start, "Tell us what your priorities are." And of course they had their priorities and then along the way that became a negotiation in and of itself and you could see where CodeTerminals was one that we said, "Hey, that needs to go at the end. And you can do it sooner but only if you finish all of these other things."
Kurt Heidemann:
Scott, I'll ask you this question because you're a little bit more into the technical side of things, but a common complaint that our pilots have voiced is, "Well, why don't they just hire more bodies? Why don't they just throw more IT guys at it, more money? Why don't they outsource?" Is that a solution for some of the things that we're asking for in work rules?
Scott Plyler:
That certainly is a solution that we brought up during negotiations. In fact, SWAPA, back in 2018, 2019, we actually did a request for proposals just to see if we could do the vacation bidding on our own and just have a API tuck into CWA in order to do it that way.
And so I actually have a proposal from a company to do that, but part of the problem is getting that API and making sure that they're pushing the right things. It actually, it isn't as simple as like, oh, somebody else does it and the company doesn't have to do anything. They still have to build out some IT infrastructure in order to make that work for them as well.
They also do want to do it right. I know some people don't think that maybe they're not the greatest at what they do. But a lot of the stuff specific to CWA and the process we do, it's all internal. And in order to teach somebody else how that all works, that also takes time and also takes time programming the interfaces. Ultimately, they said they were not interested in doing third party except for the current ones that do our monthly schedules.
Amy Robinson:
How long was the initial implementation proposal?
Jody Reven:
Initially when we got their first implementation schedule, there were dates all the way out to 2029. And they basically, they took the approach and they had a short amount of time to evaluate. The problem is they were actually given the implementation schedule tasking late from Labor Relations. And we just said, "Hey, that's just not going to be sufficient. That's not going to ratify the pilot group. Might as well vote this down."
I mean I've heard the argument before, "Hey, if you vote down an implementation schedule, you're just waiting longer." But when it goes out to 2029, that's not the case. We were able to go back in, refine that. Basically the day that we were supposed to get a deal in the company's mind, we walked away. We said, "Hey, this is just not sufficient."
And over the next week or so we were able to get 88% of the things implemented inside of 24 months. And then some of the things that are just a big IT push had to go out a little bit longer.
Amy Robinson:
And how did you make the determination of what were the things that were most important for SWAPA?
Jody Reven:
Well, Kurt and Greg Auld and we've been doing the SEP process all along, updating that as we went for the priorities for the pilot group. And you have to step back a couple of times when you start thinking I've been guilty of it, a training bid, it has to happen faster, it has to happen quicker.
And then you pull up the polling data of what the pilot group says is most important and we use that as a gauge to reset us from time to time. And go, "Okay, I'm saying that here in the room, but as I look at the polling data, the training bid is a little less important than the work rules, a lot less important than the work rules." And the vacation changeover for the pilot group was not a high emphasis item, though obviously they voted that that has to take place.
Scott Plyler:
We definitely had to look at how all the pieces go together as well though because when you look at, you have to have the training bid in order to be able to move the timeline up that additional day to get monthly open time closed earlier and ELIT to open on the 23rd. We had to do some balancing there between priorities but also there's a sequence on what comes first here.
You can't figure out how to do footprint protection until the company has nailed down their original footprint programming, what you had originally. And again, that's something that we were able to move up because as part of our audit code programming over the last several years, we've really refined what that original pairing is and there's very few cases where we don't identify the correct one.
In part of our collaboration with the company for the implementation, we're going to be able to accelerate that process for them so they can get right to solving for the edge cases as opposed for just figuring how to do it in general.
Kurt Heidemann:
And Scott, along those lines, we've talked about the original footprint. And I've heard you talk at length about how that's foundational almost to all of the scheduling pieces. Can you explain that while we're on the subject?
Scott Plyler:
It's certainly a big part of the scheduling changes, one of many. It affects leg change override because now we're switching to anything that's different than what you originally had is eligible for leg change override with very limited exceptions.
You need to have that in place in order to do the programming on the payroll side to make it happen. We've agreed to help out with that. And that's why they were able to agree to doing LCO manually at least until they could get it programmed. That brought that up several months. But it also goes into the reassignment preferences, the footprint protection.
Currently SkySolver doesn't actually know what your original pairing was. It only knows what you have now and what it's changing you to. And that's what leads to all those cascading reassignments that you wind up doing something that's really ridiculous by the end of it because it's only looking at what you had before and trying to get you back to that. And then, the next iteration is just trying to get you back to the first change and then the next time and so on. You wind up drifting way far away from what your original actually was.
Getting that footprint, Swatech has to do that and then they have to pass that along to GE and their SkySolver team in order to reprogram how SkySolver looks towards original pairing. You can see the dependencies there, that one team has to do something, then another team and then you can come back in with the footprint protections. And then that it also involves scheduler training as well, which they've committed for us to be a part of as well as part of that collaboration. We'll be helping out with the scheduler training so that we're all on the same page.
And then on the flip side we'll have them help us with the rewrite of the scheduling handbook, so hopefully the internal policies and our comm all match up. And that was kind of the whole purpose of the rewrite to begin with. You can see just in this one case, the original footprint, it reaches a lot of different places. And we can certainly help out with that as well.
Amy Robinson:
Okay. Scott, so can you go ahead and talk us through some of the major scheduling items and how did some of that implementation plan come together?
Scott Plyler:
Like we mentioned earlier, we started doing some of this implementation work with the IT folks back in April. And in August we were going line by line over AIP die zones, but since we didn't close anything out as a major scheduling sections until October and we didn't actually finish execution until December 7th, it was hard for them to get there.
We've just talked about original pairing and reassignment preferences, the footprint protection, LCO, but we have a host of other new overrides as well. And that's something that we can also continue to help them out to do manually until they get it programmed. A lot of the work in reserve, whether it's the 12-hour contact ability, no more than 60-minute adjustment, released to check-in, proffering, reserve EDT, red-eye reserve, all those things do also need to get programmed as well. And it makes sense to roll them out roughly at the same time.
Release the check-in. I know that everybody wants that to happen very quickly and right now it's scheduled for first quarter of 2025. Well, the way we had envisioned that working is that when you go to release the check-in, it completely drops your wrap off altogether. You are now a line holder, but we do have to have programming that makes sure you get credit for your reserve utilization even if you don't have an underlying wrap that needs to.
A lot of that kind of programming still needs to take place instead of doing that all completely manually. There's too many points of failure there to mess up the RCO that that needed all happen together. Also with the reserve proffering, we have to discount the reserve wrap even being part of that when you're doing the open time alerts, so there's touches within open time alerts as well as the reserves actually being able to send their bids or their proffers back in.
How do you set up the interface for proffering online as well? We envision it will look a lot like the current OTA system and the current open time bidding system, but it is separate. It does have separate legality checks that have to be done and also scheduler training as well. When if it ever happens to go down they would be able to do it themselves.
There are a lot of not just tech touches, but there's training touches. And then we also have to train and educate pilots on how this all works as well.
Kurt Heidemann:
A question I had during the implementation talks was the concern about some of the things that are scheduling policies aren't DOR. The example that we talked about in the room was two days after this thing ratifies and a pilot today has to wait to be released from a deadhead 12 hours prior. In 2020 it moves to 24 hours.
A pilot 15 hours prior calls in and says, "I'd like to be released," but according to the implementation timeline, that doesn't happen for the first, I believe it's 60 days or so. Why is that and how are we going to affect or how do we handle that?
Scott Plyler:
Well, that goes right back into the scheduler training part of this is we have so many changes going on within contract 2020 that you can't just expect them to get a 20, 30-page read before fly with all the changes involved and the very next day that's what they're doing.
We scoffed it having training via read before fly during negotiations, and it's the same way here. They just need some time to be able to walk through this with the schedulers. A month or two or three in some cases we prioritize which things we wanted first.
They'll have a couple of different classes where they have to rotate all the schedulers in and just to make sure everybody's on the same page at the same time. That way we don't play dial a scheduler. If you don't get the answer you like, you just call again or you have to talk to a supervisor. We just wanted to make sure that when the rollout happened that everybody was all on the same page.
Kurt Heidemann:
I think that contract compliance is a key factor on that. And I'm sure we'll talk a little bit more about that when we get into the joint implementation committee. But I think that you bring up a good point about you want to make sure that it's consistent and standardized for the application of the contract.
Scott Plyler:
Yeah. At other carriers, they had change in their scheduling and they were able to implement them relatively quickly. Just remember this is a complete rewrite. We are not just changing the contract, we're trying to wipe out literally decades of scheduling policy and reset everything.
If you want it, there's a lot of change management that's going to be happening over the next two years, honestly. And we really need to make sure we manage that correctly, otherwise it'll turn into a lot of chaos about what's new, what's implemented, what isn't implemented.
We want to make sure this is done in a more logical manner. That way it gets done correctly and cuts down on the misunderstandings and miscommunications between pilots and schedulers.
Amy Robinson:
Scott, what's the end pieces of your sections that are going to be the latest to be implemented?
Scott Plyler:
Certainly some of the last things to be implemented would be reserve ELIT, that's towards the end of 2025, the training bid as well towards the end of 2025. And then there's the vacation improvements.
And I know the vacation bid is a big one and that one got pushed out quite away. Just realized that a lot of the other vacation improvements like being able to shift your vacation up to three days, that's data ratification. The distribution of vacation weeks, that'll be for in September for 2025 vacation.
Also the extra weeks going into vacation trade to prime the pump for that, that'll be for the next September for the 2025 vacation. We did try to layer these out where we could, but the tech timelines on some of these just prevents everything from being done all at once.
Kurt Heidemann:
When can we expect to see some of the initial compensation asks implemented? Specifically LCO, some of the other overrides, the four-minute overfly, when do those go away?
Scott Plyler:
Well, the first one would be they would retroactively pay the holiday pay override for January 1st. That's a 6.5 TFP as an override for any flying or reserve performed on January 1st. That would be done manually, but that would be the very first thing that you would see.
After that leg change override would start up and the pay multiples start February 1st. All pairing starting February 1st of 2024. Those would start pretty quickly again. Those are probably going to get implemented manually, so you might not see them on your payroll report right away, but they would get trued up. For pairing starting February 1st you would see that trued up by the time you got your payment on March 20th.
Other things that we'll see that four-minute overfly, not getting paid for those first four minutes, that goes away in on March 1st. Pairing starting March 1st. Ground time override, late return override, reserve, release override, and most of the rest of the overrides start taking place on March 1st. And then that voluntary double time we would see by the end of June for 2024.
I will say a lot of those things are going to require a little bit of a SWAPA help. And we'll certainly be double checking their work, but the idea is they agreed to get it done sooner manually knowing that we would definitely be checking. And we're going to have to have a little bit of grace if they do make some mistakes before they automate it, but we'll definitely be checking.
Kurt Heidemann:
Damian, that's a lot from Scott on scheduling. While we've got you here, let's talk about benefits and retirement. Let's start with benefits and loss of license. When is the loss of license plan or the new plan, what's the implementation on that?
Damian Jennette:
With the new loss of license plan, it's basically DOR plus 60 days. That's pretty much everything, even social security offset, things of that nature. One thing that everybody needs to remember is the old loss of license plan is going to be the new plan just with enhancements. Nobody has to transition necessarily into the new plan. That's the biggest part to remember is the current plan today, it's been codified with all of the MBE, monthly base earnings, all those things just carrying forward.
Kurt Heidemann:
You're talking about guys that are currently on loss of license. What about guys that become disabled are in the elimination period now or during the ratification period or the implementation period? What happens to them? Do they have to go through the six months like we have today or will it be less?
Damian Jennette:
Under the new rules it would be less, it'd be 60 days, but there'll be some people that are caught in the middle. Because you have some people that still are trying to satisfy the six months elimination period will transition to this and it'll be DOR plus 60 days, which just happens to align with 60 days as a new elimination period. Some people may actually satisfy that elimination period prior to the 60-day mark, so they would be following under the old plan. They'd get 60% up to the 11,500 a month.
And then when they recomputate or recalculate the 50% on MBE, if that benefit's greater, then they'll go ahead and start receiving that. But if it was still higher under the 60%, 11,500, they'll retain that piece.
Kurt Heidemann:
And you've mentioned 11,500 is the cap. We've gotten a lot of emails from our membership that talks about the cap being 13,500. Can you explain that?
Damian Jennette:
Yeah, a lot of confusion there. Of course, we have the loss of license, which is provided by the company. It's paid by the company. Under today's construct is 60% up to 11,500. And then you have the SWAPA LTD plan, which technically there are two different ones. One is 66 and two thirds up to 12,500 and the other one's 66 and two thirds up to 13,500. But they overlay on top of the loss of license.
The current SWAPA LTD plans, if you are currently receiving those benefits, they'll continue on because we're currently in negotiations with MetLife. But the CBA has to be ratified prior to us changing any of the agreements. But those that are currently receiving benefits, they'll continue to receive those benefits through MetLife.
But that's where the confusion comes in between the 13,500, the 11,500. It's you just got to remember in your head that the company provides one plan and SWAPA provides another one. And so, they do overlay each other, but you do have to keep that in consideration.
Kurt Heidemann:
You're bringing up the SWAPA LTD and I know it's not part of the implementation, but can you give anybody just a hint as to what SWAPA might be doing if this new plan is ratified? Will we be eliminating the LTD? Will we be providing it or is it too soon to tell?
Damian Jennette:
Yeah, there are a handful of guys that will just be receiving the LTD through the SWAPA LTD. If they're not receiving loss of license anymore, then no, they will not receive anything new.
Kurt Heidemann:
Are we able to do anything for them? What about their medical benefits? Do they get any coverage for that?
Damian Jennette:
Yeah, if they're on the sub-med plan today or if they're in the SWAPA VBA, all of those individuals will be transferred to the new plan going forward. They definitely have the medical coverage that they need.
Kurt Heidemann:
All right. And I know you've talked a lot about income replacement, medical replacement and retirement replacement. Do we do anything for those guys at all?
Damian Jennette:
We did identify thirty-one individuals that between 9.1 of 20 through DOR that actually lost benefit due to the time exhaustion that you talked about before. We did grandfather those people in, so they'll receive the full NEC and market-based cash balance plan. They'll start receiving that retirement replacement on their previous MBE, so they will receive that as well.
Kurt Heidemann:
Damian, that's implementing disability. Let's talk about implementing retirement and start with the market-based cash balance plan. I know that we're going to start receiving the 1% immediately, but it takes a while for the plan to take effect. Can you explain what that is and what happens?
Damian Jennette:
Yeah. The company wants to pursue a DLR determination letter through the IRS since this is a new program that Southwest has never run a defined benefit plan before. They went the approval for that.
The company will start accruing and stocking away 1% of your wages in its own account until we get that DLR determination letter approval. And then they'll automatically start putting that money into market-based cash balance plan. We need that DLR first from the IRS before that starts.
There is a... We do have a stopgap that if the DLR, if it comes back and we don't think that it's favorable for the association, the association makes the determination, okay, we don't want the market-based cash balance plan anymore. What the company will do is pay out that money as a one-time cash payment. You get NEC on it. That's in essence your interest payment if you will. And also the NECs will increase 1%.
We're supposed to have 17% NEC. If the market-based cash balance plan fails and we decide that it fails, then it goes up to 18%. Whereas in 2026, the NEC should be 18% and the market base goes the 2%. Part of that failure, if we decided to fail in 2026, then we would get 20% NEC. We have stopgaps that are already in place there, but we feel very confident that this is going to pass the internal revenue code for the determination letter.
Kurt Heidemann:
You mentioned the determination letter and that's for the 1%, but then there's another process to get the spill cash. What is that and when can we expect that to go through?
Damian Jennette:
Yeah. That's the private letter ruling and that's another letter we have to get from the IRS. We call that the PLR. But the PLR, it can take 12 months to really up to 24 months. It depends on the IRS because we do need the IRS to bless this plan to have that excess at 415c NEC excess to be able to go into the market-based cash balance plan. Our expectation is about six months after we submit that.
But the other issue is because we have non-qual plan trust already in effect, we can't actually institute that until the next year after we receive it. Let's just say we send it off and it comes back and IRS says, "In 2024, you're good to go. You can start this." We couldn't actually start it until one of 25. And that's the shortest timeframe that we see.
We probably actually won't receive that back until 2025, which means it would be at 2026 before that spill cash can go into that mechanism. But that's a little bit of the delays that we'll have in the implementation for the market base.
Kurt Heidemann:
And just to be clear, with the 1% we're going to get immediately, the company's going to start funding that. And then the spill cash really isn't a loss of money per se, it's just a loss of opportunity of moving your money into the qualified account. The delay there shouldn't cost our pilots measurable money, I guess.
Damian Jennette:
That's correct. Yeah, you're just losing the opportunity, like you said, to go into the qualified plan. But worst case scenario, if the IRS says, "No, you can't do this spill cash," then just everything stays status quo with all of our systems. We just have a new 1%, 2% in the market base. And then you have that additional excess on over the wage limit that we've talked about before. But worst case scenario is just status quo.
Kurt Heidemann:
that's the market base. As long as we're talking about the NEC, when is that going to change? Because it's on DOR, it's 15% and then it goes to 17% later. When is that and why?
Damian Jennette:
Yeah. That's a functionality of Workday. Workday, the company has said that they need, the NEC can't change until the second fifth paycheck. If we sign this, let's just say January 22nd, it actually passes and becomes a CBA. That means that March 5th is the first time that the NEC can be changed within Workday to compensate for the... Or start receiving the 17% NEC. It's really just a Workday issue more than anything.
Kurt Heidemann:
And so, if I get my bonus payment on the... I think you said that's scheduled on the 20th of February. That's the plan right now for the ratification bonus?
Damian Jennette:
Correct. Yeah.
Kurt Heidemann:
That'll be under the 15% NEC, correct?
Damian Jennette:
Correct, correct. And it's a little bit of a fail-safe. Another guardrail that we put in there is if the company fails to pay us on February 20th and it goes into March, they've already said that it's got to be the 5th or the 20th that they can pay us the ratification bonus. If it goes past March 1st, we'll say then they have to apply the 17% NEC because that's already part of the contract. We do have that fail-safe mechanism put in place.
Kurt Heidemann:
You mentioned that Workday has to pay on the 5th to the 20th, and I know that this has been a very hot topic. Can you explain why that is and what are we doing about that?
Damian Jennette:
Yeah. According to the company that they can't do off cycle payments anymore, especially when it comes into bulk payments like this. They have to pay either the 5th or the 20th. And when they do that, they apply ordinary tax withholdings on that.
In years past, we used to have certain payments paid to us off cycle, so maybe it was the last day of the month or even the 15th of the month. The company could apply supplemental tax withholdings on that. It's 22% I believe for 2024. But under the current Workday system, they say that it's going to be the ordinary tax withholding.
Kurt Heidemann:
I think we have to spend just a moment here for the pilots that haven't had to go through this before. I always find it very confusing. Help explain it to the listeners, the tax withholding rate versus your taxable rate, and is there any real meaningful difference there?
Damian Jennette:
Yeah. Good question. We've gotten quite a few emails on this one. Your tax withholding, when you have your taxes withheld, either they're supplemental or they're ordinary, they all come out in a wash when you actually file your tax returns at next year for this current year's tax returns.
There is an opportunity now so that if it's at the ordinary tax rate, you may have, let's call it an excess of withholding. The company would be withholding in an excess amount of what really should be withheld because of this ordinary versus the supplemental flat rate. On average, just to give you some context and numbers, we were looking at this just the other day, that 2020 paycheck, let's assume that your paycheck is going to be $30,500 or higher. It could be anywhere between 27 to 37% withholdings.
And so that could be a big amount, but like I said, when you file your taxes at the end of the year, that's when you get the true up back because you overpaid or had an over withholding. You would actually get that money back later. But I do understand the people, there's many people out there that don't want to give anybody a free loan, completely understand that. We have reached out to the company about having this paid because it's being paid as a bonus, and you can see that in your 401(k) deduction. Because there's a bonus contribution piece on the Schwab website that you have to fill out if you went in that pilot contribution withheld.
We know it's a special bonus payment and we know that Workday can do it. It's just that the company at this point, I'm not going to say they're not willing to, it's just they don't necessarily have the best version of Workday to do this. We've reached out to them. Most of them are currently on PTO because we're between Christmas and the end of the year. We've reached out to them numerous times to see if we can't work out something on this issue.
But as of right now, the letter, the LOA specifically just says that they will pay it to us. And so, that's the main frame that you will receive to pay. It's just will you have some excessive withholdings on it as possible.
Kurt Heidemann:
And so just to put those numbers in context, what you were saying. If a guy's high-earning income or high-income earner is making a $200,000 ratification bonus, pretty high end there. Let's say he's in the 37% tax bracket. Instead of withholding 22%, that's 15% more over 200,000, he's going to have an extra $30,000 withheld from his taxes or withheld in taxes on that ratification bonus. But regardless of whether it's withheld in February or March or not, it'll all get evened out when he files his taxes at the end of the year. Is that a safe way of saying it?
Damian Jennette:
Yeah, that's a very fair statement of how you portray that. Absolutely it is.
Amy Robinson:
Okay. We've covered a lot of material. Let's look at the forward-looking aspects. Jody, what is the joint implementation committee?
Jody Reven:
A good question, Amy. It's basically subject matter experts for whatever provision is being implemented. And so, like we've run the negotiation, where if we make sure we have the right subject matter experts in the room for what we're negotiating at any given time, we'll do the same thing with the Joint Implementation committee. It doesn't require extra funding. It's the subject matter experts we currently have from each tier one committee.
If there's an implementation schedule going up, for instance with benefits, it would be Kurt and Damian, or myself and Damian that would go over the company to talk about a specific issue. If it were scheduling related, which much of this is the SRC will be working with the company both in their training of their schedulers and the training of our contract admin in the implementation itself of what needs to take place.
Should they run into any snags we would have the ability to expedite a grievance to determine if they're not going to meet a deadline. And that's a 30-day answer. And then another grievance process. If there are damages or anything like that to talk about. If they're going to be four or five days late, then of course the 30-day grievance doesn't make much sense. But it's just a committee that works hand in hand with the company to avoid missing any deadlines.
In the SRC's case, it would provide additional support. The company agreed, as Scott said earlier, to pay for the SRC chair's budget because a lot of the products that the SRC provides both are beneficial to both the company and the pilot group. The SRC, the idea would be to go over and talk through and continue to make sure that we're shareholders in the platforms and how they're built and the implementation of the work rules so that they're accurate. And it's across the entire tier one organization.
Kurt Heidemann:
Jody, a common complaint that I've seen on social media and even emails to the NEC is why haven't we imposed financial penalties for missing implementation dates?
Jody Reven:
Yeah. I think financial penalties sounds good. And that could actually take place in the SBOA process, but we have an entire rewrite. And for the company to take on that level of risk, of course that's their argument. Hey, we can't just settle for blanket financial penalties. And I don't necessarily disagree. We talk a lot about if you turn the chess board around and consider it from your opponent's point of view.
I will say, however, with an expedited SBOA process, we would determine quickly if a deadline has been met or missed. And then for instance, let's say it was a pay issue, we still have the SBOA process that could award damages. And ultimately our goal is to make sure that the pilot group is paid correctly, not to put more money in, SWAPA's coffers. If a group of pilots were affected, those are the group of pilots that should get whatever the financial penalty is that comes out of SBOA.
Scott Plyler:
I will say the implementation timelines are part of the negotiations. And when you add monetary hard monetary penalties, then you make it a lot harder for the company to agree to earlier implementation dates. It goes hand in hand. If you want the penalties, you probably would've had a longer implementation plan to begin with.
Jody Reven:
That's a really good point. One of the things they said all along was, "This is a short timeline to figure out what things cost. And so, we're averse to taking any risk. We're trying to pad this." When you put financial penalties, to Scott's points, you make that even tougher. We push the company to their comfort level to take as much risk in what they could get done and have multiple things being worked on while you're under the hood. And that would've been tougher to get them to buy off on with financial penalties.
Kurt Heidemann:
I'd also add there are some financial penalties hidden in the implementation. Take for example, the ratification bonus. As Damian mentioned, if it's late by 10 days, well, then they're going to pay extra NEC on it. They have a desire to get co-terminals. Well, that's coming at the end. The longer they push back the other sections, then that's the longer they have to wait for co-terminals. I guess maybe could say there are some penalties in there, they're just not X number of dollars for this or that.
Scott Plyler:
Yeah. Certainly the longer it takes for them to get the footprint protection programmed and the solver, that means more pilots potentially are getting 100% LCO for reassignments that don't take that into account.
Amy Robinson:
I guess the final question I want to ask is, the one that we do hear a lot is what would you say to someone who wants to vote no purely based on the implementation schedule?
Jody Reven:
Well, I guess everybody's got their pet thing, I guess. And when it comes down to time to vote, you have to decide whether the value of this contract for you and your family offsets that thing that you like least.
The implementation's a funny one because we've pressed the company to the limit of what they can do. We've explained, I think on this podcast, the moving parts of what has to take place and the huge hill that this is for the company to take in IT.
To vote no in an idea that you would get something quicker seems a little bit counterintuitive. If you believe that we've spread the IT where it is, then voting no because it takes a long time to program a rewrite is a little bit nonsensical because you're just going to delay when that gets done.
Scott Plyler:
As part of getting all these pay items, data ratification, February 1st, March 1st, that stuff does require programming to get it automated. But all of those things would be lost in the interim. Waiting for another contract, whether it takes three months or six months, nine months, whatever it takes a lot of those additional pay items. Six, seven additional overrides, pay multiples. Paying not just on the daily, paying on the daily rigs, not just on the legs. All those things could potentially be lost until the next data ratification.
And it may not actually push up the implementation of any of the IT just simply because of the amount of work they have to do. Yes, potentially you could get them to degree to something faster because there'll be a couple more months down the road of figuring out how much quicker they can do things. If they can get stuff done sooner than this implementation timeline, they certainly will because they want to free up their resources to do things that they want.
Jody Reven:
I'd also add that right now the company's doing a full court press with all of the IT folks that we talked about, all hands on deck trying to get these things done as quickly as possible. And they're taking some risk with that as well. And they're currently working on something that hasn't been ratified. If we were to vote no, just because of the implementation schedule, it's hard to imagine they would continue that level of effort to put that kind of work and cost towards something that's uncertain.
Scott Plyler:
I talked earlier about change management. There is a lot of change in this. Some of it's subtle, whether it's just changing your rest requirements by additional 30 minutes. Or large things, like changes to reserve proffering and release the check-in. But there is a potential for this to be a little bit messy, but if we didn't want everything right away or pushed up earlier, we could wait till the automation. But because we're not waiting for automation, we're doing things manually. We are all going to have to have a little bit of patience with the process a little.
And that joint implementation committee is going to have to communicate effectively, whether it's weekly, during these first few months. And then monthly on what has changed when it's changing, what it's going to, whether it's going to be manual until automated. Will you see it reflected on your pairing or in your payroll? Or will it be audited later? Just a lot of those things we need to have very clear communication about and we're already anticipating having to do those things.
Kurt Heidemann:
We want to thank Jody, Scott and Damian for walking through implementation with us. Like we said at the top, in a perfect role, we wouldn't need much of an implementation plan at all. We would just start everything on date of ratification.
Amy Robinson:
As always, we do want to hear from you. If there are any topics that we have not already covered or subject matter experts you'd like to hear from, please drop us a line at [email protected].
Kurt Heidemann:
And finally, today's bonus number is 53%. Overall, the rewrite caused 53% of our CBA to change in process or technology. That's a massive amount of work required, and we should all want the company to take the appropriate amount of time to get it right so we can start mending the strained relationship that our current contract has caused.