FEDEX VS. UPS: HOW DO THEIR LONG-TERM DISABILITY BENEFITS COMPARE?

Tim:[00:01:03]Well guys, welcome back. To another episode of Pilot’s Portfolio, Timothy P.
Pope here, certified Financial Planner and Principal at 360 Aviation Advisors, where we
focus on the financial planning needs of the professional pilot. And if you’re new here to
Pilot’s portfolio, welcome. This is the podcast where we focus on all aspects of personal
finance for the professional pilot. Yes, we talk about investments, 401ks, retirements, NECs
from time to time. I mean, we talk about real estate, side businesses and taxes, right? So we
talk about all those things, but personal finance is so broad. Now we find this show kind of
zigs and zags to, you know, just all the areas that is on your guys’ mind.

[00:01:50]And so thus, it’s on our mind Right? Now I will say today’s episode is a direct
feedback from listeners that we got. We got some emails, and so we’ve put together today’s
episode to respond, and so we’ll talk about that in a moment. Do wanna make a quick note
here as we get close to the end of year, you guys remember a few episodes ago that
Beacon Relocation, they are the real estate team that helps pilots move across country and
save money.

[00:02:21]When you guys move by using their realtors now they put out a deal. Throughout
the end of 2025, it says, Hey, if you just reach out to Beacon Relocation and let them know
that you’re thinking about moving in 2026, then you will still capture the increased discount
for being a pilot’s portfolio listener. So the info is in the show notes, but if you’re thinking
about moving in 2026, reach out to ’em. Say, Hey, thinking about moving, you’ll get the
increased discount for listening to pilot’s portfolio. So I wanted to throw that out there. Also,
another announcement we’re planning for season three of pilot’s portfolio. I’m gonna spice it
up a little bit. So not in this episode, but the next episode, keep an eye out or an ear out,
rather for an announcement, we’ll do an all call.

[00:03:09]I think that’s gonna be pretty fun. So keep an ear out for that. Now, in today’s
episode, we are talking about UPS and FedEx, long-term disability insurance, how it stacks
up against each other, how it stacks up compared to the rest of the industry. One listener
wrote in a little while ago and said, Hey, the cargo side of the house has long been a
destination for pilots with leading contracts, but in this most recent cycle, the passenger
carriers it seems have leapfrogs, at least on the compensation side and probably some of
the work rules as well.

[00:03:24]I am not. As well versed in you guys’ work rules. I’ll say I’m well versed in, in your
money and the benefits and all of that. But some of the work rules, I am not, I will say this as
I went to go put this episode together I realize that I may not have the latest and greatest
union info on your supplement toll insurance, so I’m gonna focus on your core plans. I’ll
acknowledge and mention some of the union stuff, but I realize that I may not have the latest
and greatest, but focusing on the core plans, I mean, I think that’s important because both
UPS and FedEx are negotiating new contracts right now. As your union representatives that
are negotiating these things for you or thinking about what they want in the contract for your
long-term disability plans. I think it’s important for them to keep in mind what the rest of the
industry has, and no doubt they will be keeping that in mind. Matter of fact, I did take a look
at the FedEx 2023 TA that I’ve got to see. I just wonder, and I’m like, hey, I wonder what
information is in here about your long-term disability plan so we can kind of see where your
negotiator’s minds were, and what you might have coming down the pike.

[00:04:47]And I was surprised. I got a 288 page document. Doesn’t mention the long-term
disability. So,let’s start with UPS. Okay. So with UPS, you guys, if you lose your medical for
illness reasons you will get 66 and two thirds of a percent of your pre-disability earnings for a
maximum of 20 pay periods. 20 pay periods, that’s 10 months. Okay. That’s not great. Most
of the coredisability offerings now go out to retirement age. So 65, so we’re thinking about
65, not a 10 month period. You also got a six month waiting period, which is like, whoa, you
definitely are going to need an emergency fund there. Because a short term disability is not
doing it, it’s like it’s a couple hundred dollars per pay period. It’s just that the short term
disability is not great. So. You got this really long six month waiting period. We need an
emergency fund. Industry standard these days is like a 60 day waiting period before you can
tap into the company’s loss of medical.

[00:05:49]Alright, so then we’re thinking about that. Now you do have some union benefits
you can buy. You’ve got a two year option, a five year option, and you can select up to 60%
of your monthly income. But there’s a cap with it. Okay? So the cap is at $7,500 a month.
And so you can put ’em together, but, I don’t get excited about these benefits here. Now the
benefit of the union benefits is that they are tax free. so you’ll be paying those dollars with
after tax dollars. So if you go on disability, then you will not have to pay any taxes on the
union plus up benefits. Okay, so, that’s what we’ve got for the UPS on the FedEx.

[00:06:29]Let’s take a look at FedEx a little bit more to go off of on FedEx here, and so
FedEx has a core plan. Then you guys have a supplemental disability plan, and then you’ve
got your union plans that you can choose. Now with the core plan, you get 60% of your
pre-disability earnings, but it’s subject to a limit, which is the IRS section 401 a 17 limit.
Okay? So for 2026, that limit is gonna be $360,000 of compensation. So that means
effectively that your core plan, you guys could receive 60% of that. So that’s about $216,000.
So effectively that’s about $18,000 a month right? Now, here’s the thing. The way that FedEx
looks at pre-disability earnings is they do your highest 12 consecutive months in the last 36
months right before your disability.

[00:07:24]We like that. You guys have heard the show, you know that I love the look back
period. You could have been killing it. And then you slowed down maybe by your choice, just
maybe there’s changes in the industry and FedEx has slowed down, you know, slowed your
flying down. Right? And so we like that 36 month look back period. Now, the core plan we
get 60%, but the 60% only lasts for 24 months. And so, again, as I was just talking about
UPS. The industry standard is till age 65. Now, that’s where your supplemental disability
benefits come in because after the first 24 months, if you’re still on disability, your
supplemental disability benefits kick in and it’s gonna reduce your disability benefit from 60%
of your pre disability earnings down to 50%.

[00:08:14]And you get that reduction down to 50%, but it does go out till age 65. You are still
limited at that cap. The IRS 401 a 17 limit, and as we are just comparing it to passenger
carriers, United is the only one with a cap. Everybody of the ones that I’ve covered in the
past, like Southwest, American, and Delta. So United is the only other major with a cap. You
guys have the 401 a 17 limit there. So when you think about the first two years and then the
remainder, if you could get rid of that cap, that would be standout, right? I mean, ’cause 60%
of your income. For the first two years, and then 50 percent after that, everybody else starts
at 50 and then just goes.

[00:10:01]Now there are, you know, you got your usual suspects in here about exclusions.
So, hey, you know, don’t go commit a crime and become disabled committing the crime, your
policy’s not gonna pay out. But also you wanna be mindful if you are crop dusting or
skydiving, hang gliding, or, you know, being the pilot of a hot air balloon. If you’re doing those
things and you get hurt your disability pay is not gonna pay out there. So now both the
FedEx and the UPS, what I’ve covered so far, not the union board, but just the company’s
policies. These are going to be pre-tax, meaning you’re gonna receive your 60% or your
50% or whatever it is, you’re gonna receive that, and then you’re going to have to pay taxes
from those dollars. Okay. The union. options of course are, after tax. You receive that money,
no taxes are owed. The other thing with the FedEx benefits, there’s like a long list of benefit
offsets.

[00:10:58]You have your usual suspects, which is like, you know, workers’ comp or state
mandated disability benefits or social security if you’re receiving social security because
you’re disabled. And by the way, if you are, that means your disability is probably pretty
severe as it’s fairly difficult to qualify for social security income. But, you know, thinking of the
passenger carriers that have offsets like this delta comes to mind with workers’ comp, say,
hey, you got hurt at work. So the company’s paying out in some capacity anyway, right
through their workman’s comp claim. And so your long-term disability is going to be offset by
what workers’ comp is paying out. And then there’s a couple states that mandate disability
payments. So New York and California come to mind. I think there’s a handful of others. Hey,
if you live in those states and you’re receiving benefits from the state, then the company’s
policy is gonna be offset from that as well.

[00:11:52]This next one caught my attention though, and it says your benefits are gonna be
offset if you receive earned income, from another employer or self-employment income. So, I
talk to a lot of pilots who have a side hustle and let’s say that you lose your medical, okay?
That’s the best definition.’Cause that means, hey, I, I can’t fly an airplane, but that doesn’t
necessarily mean I can’t work. So maybe now that I’m no longer flying, I can put more time
and energy into my side hustle and it grows. Right? And so when you think about that, there
is a disability offset if your disability income and your other earned income or
self-employment income exceeds your pre-disability pay. Now, here’s the thing. What the
company will do is I’ll look and say, hey, like what was your average compensation from the
company? And then what was your average other earnings in the 12 months before
disability? So if you had a side hustle and while you were flying, cool, we get to look at that
income and include it to find what that average is.

[00:12:58]So then. After you go on disability, if your disability payment. And your, let’s call it
side hustle or other earnings payment exceeds your pre-disability payment. Your disability
payment is gonna be offset. Now there is gonna be some wiggle room because remember,
right outta the gate you’re gonna get a 40% drop at FedEx because your disability payment
is 60%,and then after two years, you’re gonna get a 50% drop. Okay? So there is some
wiggle room for you to pour into your side hustle because now you have more time and for
that to grow without you getting penalized there. So, just keep that in mind. Both of these
disability policies from UPS and FedEx can be used with other non employer supplemental
policies. Okay? So that’s your union stuff. That’s not gonna be offset from those.

[00:13:46]So I kind of sprinkled this in as I was going, like, how does this compare to
industry standard? Well one, UPS is like we need longer benefit duration for sure, and we
need a shorter elimination period, right? So as folks are negotiating your contracts, that’s
what you’re interested in. You want out to age 65 and you don’t want to have to wait six
months for you to receive these benefits. For FedEx, we’d love to get rid of the 401 a17 cap.
We’d love that. And just have no cap. If you do that, maybe they’ll go to 50% all the way. I
don’t know the numbers to say like, hey, how many FedEx pilots are making more than 360
for this to be an issue for everybody. Like, how many people are gonna want that?

[00:14:31]Right? But it’d also be interesting to see like, Hey, what phase of your career is
disability most likely? Is it the older that you get? Or is it fairly even across the board? That’d
be interesting numbers too to look at I bet the retirement insurance team has those numbers.
And then the other thing to keep in mind is like the passenger carriers are getting these
really big NECs. Okay. 17% NEC on 18% in 2026, and as their pilots go on disability, they
are continuing to get that NEC. Into their 401 Ks. You guys are not getting those double digit
NECs because you’ve got a pension. And so one thing to keep in mind is the team
negotiates these benefits and tries to make them better for you. And standard across the
board with the industry is hey, protecting. Like, hey, are we making sure we’re still getting
contribution to the pension? Making sure you still are getting the NECs that you currently are
receiving, right? You don’t want to give any of those things up as you enhance your disability.

[00:15:37]So with that, that’s gonna do it for the FedEx and UPS long-term disability, how it
compares to each other, how it compares to the industry, and some things to think about.
Definitely wanna give a shout out, and thanks to Beacon Relocation for sponsoring the show
and making this happen. And guys, if you’re thinking about moving in 2026, give them a call.
We’ll see you on the next episode.