WHAT HAPPENS IF I LOSE MY MEDICAL AT UNITED AIRLINES

[00:01:04]Welcome back to another episode of Pilot’s Portfolio guys. Today we are having another look at loss of medical this time with United Airlines and I want to say guys, thank you for the great feedback on these episodes. I really appreciated the emails and the comments. I learned something, you know, there’s so many flashy things in personal finance you know, investments, investment returns, tax reduction strategies, and so on but, through these episodes that I, learned that pilots also care about what happens if they go out on disability. Well, of course you care, right? We’d hate to see the income that we’ve come to rely on and that we’ve worked so hard to get to where you are.We’d hate to see that go up in smoke and so, you know, know before you go awareness is key. So thank you for your feedback on disability.
[00:01:59]So before I go any further, let me introduce myself, Timothy P. Pope here, certified Financial Planner, specializing in the planning needs of the professional pilot. I also wanna make another note.You know, guys, one of the things that I like about doing this show is when I get to interact with you all with the listeners, and I finally have a little bit more capacity now than I have had previously and I would love to engage with you. So send us your financial questions to info@pilotsportfolio.com. [00:02:31]I’d love to feature your question on the show. Maybe you’re interested in coming on the show and asking your question live, and then we can walk through it. So let us know. Send us your questions info@pilotsportfolio.com. Now, in today’s episode, as I just mentioned, we are exploring the loss of medical benefits that United pilots have through their contract.And while I must say. If I had to choose a favorite. You probably heard in the last episode, if you listen to the Southwest episode, you heard that Southwest was my favorite.
They have my favorite loss of medical benefits and I listed out the reasons why. So if I had to choose one that was not my favorite.
[00:03:14]Here it is. It’sUnited. United’s loss of medical benefit is not my favorite. So I just presume that as you guys were negotiating this in your last contract, they were bigger fish to fry And, so some of these provisions while not terrible, not bad, but when compared to your peers I think there’s some room for improvement. So let’s go through this with your loss of medical, the definition of disability. It’s essentially the loss of your first class medical. I think when you read the language, it’s a little bit more flowery than that, but it comes down to if you’re not able to hold your first class medical, you are going to go out on disability. [00:03:54]Now, every insurance that we buy typically has some kind of elimination period, and that’s a waiting period. Okay? So, you know, you buy the insurance or in your case, United buys the insurance and then you lose your medical. They are not going to pay out on day one, you’re gonna apply for the claim, and then you have to wait 60 days before your benefits will kick in.So, that means that you need to have a sick bank. That you can tap, or that also means you need to have an emergency fund that can help you out for two months worth of expenses there before your loss of medical benefits kick in. Now let’s talk about the taxability of your benefits here with your contract.Your benefits are automatically after tax. Now when compared to your peers, Southwest and American have choices that they can elect every year, whether they want to have a tax free benefit or a taxable benefit. With Delta, it’s automatically pre-tax. With United, it’s automatically after-tax.
[00:05:03]Now, I can’t say that I’m too upset or upset at all about it being automatically after-tax because quite frankly most days of the week, I’m going to want an after-tax loss of medical benefit so if you take your loss of medical benefit after tax then when you get it, you do not have any taxes to pay on it, and it’s closer. It’s gonna be closer to your take home pay than if you took a pre-tax benefit and then you had to pay taxes on what you received. Now here’s the trade off though. This means that every time you get paid. Twice a month, you’re going to see some imputed income for a loss of medical or long-term disability benefits. So you are paying some tax now on the imputed income there, and then if you go out on claim, those dollars are going to be tax free. You don’t have to worry about managing it or setting anything aside or having a tax withholding or anything like that. [00:05:58] Now, how much is your benefit? So with United. You guys have a unique calculation, and so essentially you’re going to take 1026 hours, you’re
gonna cut that in half, so divide that by two, and then you’re gonna multiply that result by your hourly rate, and then you’re gonna divide by 12, and that is what your monthly long-term disability or loss of medical benefit is going to be. Now, here’s the thing. Delta has a three year look back, you can smash, do really well, and they will find your highest 12 consecutive months in a three year period. And they’re gonna give you 50% of that number. With American, it’s five years, they’ll find your highest 12 consecutive months and a five year period.
[00:06:48]And then they’re going to give you 50% of that number Southwest. They’re going to look back at your last 12 months and then give you 50% of that number. So with United you have this calculation, right, that I just went over. Here’s the other thing that United has that others don’t have, and this is, what I don’t like about the loss of benefit that you guys have at United, there’s a cap. So in 2025, your monthly disability earnings cap is $14,913 a month. So that means if you are earning $358,000 or more, you’re going to hit the cap. Now in 26 and 27, your contract increases your cap to the following amount. So in 26 your disability maximum, or your cap is $15,509 a month.
[00:07:36]So if you’re earning $372,000 or more, you’re going to hit the cap. And, then in 2027, as I mentioned, it goes up again to $15,975 is the cap per month that you can receive on disability. So that means if you’re earning in 2027, $383,000 or more, and I’m rounding up to the nearest thousand here you are going to hit the cap. So I’m not a fan of the cap, right? If somebody goes out and they are just really crushing it. Then they happen to go on disability. Like I’m a fan of, hey, give ’em 50% of what they’ve earned, but I’m not negotiating for you guys. So take that up with your union representatives for the next contract cycle.
[00:08:19]Now, just like your peers in the industry if you go out on disability United will continue to make those non-elective contributions to your PA. And they’re supposed to make it to your market-based cash balance plan as well. But since that hasn’t been approved just yet, you can expect 50% of the NAC that you will receive to go to your PA and then 50% you can expect that in taxable earnings. So I suppose, I mean, that may not be a bad deal since you guys have that cap anyways. The disability payment is going to be after tax. That may not be a bad deal to receive 50% of your NEC as taxable earnings and then if you don’t need it, just go invest in a brokerage account, right?
[00:09:02]You know, maybe that can stick around even when your market based cash balance plan is approved. So you can expect that you’re still gonna get your NEC that you know and love. Now, I don’t think it’s gonna be on your full
pre-disability amount though. It looks like it’s gonna be some mixture between what you’re actually receiving and then adding the monthly cap onto it. So you could take a look at that to see what your NEC is going to be. there is really only one offset to your. Loss of medical benefit, and that is if you earn compensation from the company. And that’s the offset that I was able to find. But this taxable earnings of your NEC that you can receive is not going to reduce your long-term disability benefit there.So you can keep that in mind. [00:10:53]Now, how long does your disability benefit last? Well it goes out to age, you know, mandatory retirement, FA, a mandatory retirement And then if you are receiving benefits because of drug or alcohol or substance abuse or you have 24 months available to you in that way. So, you know, there is. That’s what you have contractually in your contract from United that they pay for and that you’ve received. So, hey, it’s not bad overall. I mean, you know, 50% after tax. Don’t, we don’t love the cap. Okay. But otherwise, and then you’re still getting the NEC. So there, there’s actually a lot to like, but you know, if I’m comparing them against everybody else, this one has to fall as my least favorite, by the way talking about least favorite. I’m gonna throw this bone in here about life insurance, okay? Negotiate this to next time you guys are getting a new contract right now, your life insurance for United pilots. Is pretty low it’s 2052 times your hourly rate. So you do the math on what that means for you, but,your friends at American are getting $750,000 that the company pays for and gives to them, your friends at Southwest are getting $800,000 that the company pays for and gives to them, and your friends at Delta are getting a little over a million dollars in company paid life insurance. So you know, 2,052 times your hourly rate.
[00:12:21]Seems to be a little low for the majority of your career when compared to your peers, and you guys are, you know, you’re doing the same job and just as skilled and, you know, just as awesome as everybody else. So, when you guys negotiate that, I’d say try to get a little bit more life insurance out of it, and then we hope you don’t use it. But it’s nice to have. Let’s talk about what your long-term disability payments can be through ALPA, because you can supplement what United gives you through the union coverage, and ALPA is going to provide three options that you can take advantage of there’s the monthly base option, there’s the plus option, and then there’s the lump sum option as well.
[00:13:04]Now, before you go race out and open enrollment and, Shoot and just, you know, Christmas tree, this thing, and, and buy everything under the sun. I always like to say this with insurance, right? Usually it’s the one thing that we buy that we hope we do not have to use. Okay? And so, when you think about
being able to supplement your long-term disability benefits, here’s what you have available to you and the base plan, you can supplement your your loss of medical that United gives you up to an additional $6,000 a month, and you can do it in $600 increments, okay? That’s what you can purchase it in. Now, the elimination period is 12 months. That means, hey, you go on claim United Loss of medical is not gonna pay you for 60 days. So you gotta figure that out, those first two months, then they’re going to pay you and then the ALPA disability insurance is not gonna pay you for 12 months and, then after that 12 months, then they’re going to pay you. Now their benefit will not last. This base one will not last until full retirement age. it. Will last for 48 months is, is when that is, is how long that’s good for. Now. The nice thing is it shares the definition of your own occupation, I think that’s important because as you know, as pilots, there’s, there’s so many reasons you could lose your medical, and then there’s so many other things that you could actually do to earn income and, I think another reason I like the fact that. Your United loss of medical does not have some of the offsets like some of the other carriers do.
[00:14:43]But the primary offset here is income or compensation from United itself. So, there you go. You’ve got the base. You can go up to $6,000 a month, 12 month elimination period. It’ll last you for four years, and then it’s going to go away. Now if you happen to pass away. While you’re receiving the base payments this insurance will give you six times whatever your monthly benefit was to your survivor. Okay, so we got a survivor benefit on this thing. So essentially if you are receiving $6,000 a month, then they will cut a check for $36,000 for your survivor. Alright, so let’s see here. Let’s look at the plus plan. All right, so with the base. We kind of understand it. It’s a shorter term. It’s good for four years, then it goes away.
[00:15:35]The plus plan starts where your base plan stops. Okay? So the plus plan has an elimination period of five years. You go on claim with United five years later, you’re still on disability claim. And then the definition for the plus plan is any gainful occupation now that is way broader than your own occupation. Okay, so. That tells me a couple things. If the definition is so broad and the elimination period is so long, this is really designed for people who have some serious incident or disability, or it’s very likely that they’re flying days are behind them. So that’s where this plus plan would come in and its benefit is 50% of whatever your base plan was going to be.
[00:16:22]So remember we just said you can max out your base plan at $6,000 a month, and when that ends, if you had the plus plan, then that would give you 50% of that number. So $3,000 a month. Meanwhile, you’re still getting whatever you are getting from the united loss of medical. So you’ve got this plus
plan and it also has a cost of living adjustment attached to it. So after you’ve been on benefits for five years, then you’re gonna start to receive a cost of living adjustment. That’s nice, but it’s probably a token, right?
[00:17:01]Because, the amount is limited in nature. And so a cost of living adjustment on a small amount, while it helps, it’s probably not moving the needle overall so, there you go. I mean, that’s the base plan, that’s the plus plan. And then there’s one more that you have access to, and it’s called the lump sum disability. So, you know, if you. Go out on claim. You lose your medical if you’re not back. flying in 12 months, then. This plan would give you a single payment, okay? A lump sum. So up to $150,000 and you could buy it in $25,000 increments. And the definition here is own occupation, right? [00:17:43]So you can think, wow, something happened. This is taking longer than I expected to get back. Here’s an infusion of cash and, you could, you know, use that for, you know, essentially whatever you need. So those are the options that are available to you through ALPA, which is, you’ve got the, the national disability plan there. So, as I said before, before you go race out and buy everything, just evaluate what your needs are. How would your family be, or what would your circumstance be if your income got chopped in half. How would you guys, you know, be able to manage? We did a poll several weeks ago now, and I’d asked a question, would your monthly benefit, your disability benefits be able to cover your monthly expenses and 66, I think it was 66% of the folks said yes. And I love that. I love that. ’cause they know what their disability payments are and they also know what their monthly burn rate is. So that’s awesome.
[00:18:37]So with that, that’s gonna do it guys. number one, I hope you don’t lose your medical, but number two, if you do, this is what you have. And you know, despite me saying it’s my least favorite, it’s still a pretty decent plan. But your negotiators do have some work to do. So that’ll do it for this episode. Join us on the next one. Send us your finance questions at info@pilotsportfolio.com and we’ll see you in the next show.