view out an airplane window Photo by Tove Liu:

Delta recently announced the introduction of a new Market Based Cash Balance Plan (MBCBP) intended to supplement their current 401(k) plan. (“Negotiators’ Notepad 23-17,” 2023). This new MBCBP is a supplemental plan that offers the opportunity for Delta pilots to shelter a portion of their excess 401(k) employer contributions (known as “spill cash”) from both income taxes and union dues. However, you may be wondering what exactly a Cash Balance Plan is, and how this may fit into your retirement and investment strategies.

What is the Delta pilots MBCBP?

First, here is a quick review of Cash Balance Plans: A cash balance plan is a defined benefit plan in which employer contributions are made based on a percentage of the participants salary and added to a single account that includes all plan assets. Contributions to the plan are made on a pre-tax basis, so no income tax is due on these contributions. Earnings on a cash balance plan are generally tied to a defined interest rate contribution made annually by the employer. 

While the MCBCP will be similar to a cash balance plan, there will be some significant differences.


First, Delta’s MBCBP contributions will be dependent on Delta’s profit sharing contributions made to a pilots’ 401(k) account that fall above the annual 401(k) total contribution limit ($66,000 for 2023). 

Let’s look at an example: James makes $330,000 at Delta and is maxing his 401(k) deferrals of $22,500. He is entitled to Delta’s 16% profit sharing contribution of $52,800. Total contributions to his 401(k) plan would be $75,300, but the IRS caps total contributions to 401(k) plans at $66,0000 in 2023. 

Before Delta pilots had the MBCBP, the amount over the section 415(c) contribution limit for 401(k) plans would be paid as taxable income and subject to both income taxes and union dues. The MBCBP would instead take the excess contribution ($9,300 in James’s case) and contribute that amount to the MBCBP for the benefit of the participant. Because these contributions are pre-tax, that excess contribution will no longer be subject to income tax or union dues for the participant. (“Negotiators’ Notepad 23-17,” 2023).


Earnings on the MBCBP will also be calculated differently than a standard cash balance plan. The funds in the MBCBP will be tied to public equity and bond market returns rather than a defined interest rate. Delta has stated that plan assets will be invested in a 40% equity/60% bond allocation. (“Negotiators’ Notepad 23-17,” 2023). Because of this, you may see more volatility but possibly a higher return than a standard cash balance plan, though we expect it to be fairly similar. For reference, according to many cash balance plans target a 4-5% rate of return. Cash balance plans are typically designed to be a more stable piece of your retirement planning strategy.

How can I include this in my financial plan?

First, I want to touch on who may not be using the Delta pilots’ MBCBP. If you are not exceeding the 401(k) total annual contribution limit ($66,000), you will likely not have contributions added to the MBCBP. You can determine this by adding your 401(k) deferral, any after-tax deferrals you are making through Delta’s Mega Backdoor Roth option, and Delta’s profit-sharing contribution together. 

One caveat is that Delta’s profit sharing contribution will be increasing to 17% in 2024 and to 18% in 2026, so you may not be exceeding the contribution limit now but could in the future. (“Negotiators’ Notepad 23-17,” 2023).

Delta pilots’ MBCBP plus a Mega-Backdoor Roth

Delta’s 401(k) plan allows for a Mega-Backdoor Roth strategy (more information here), in which you can effectively save above and beyond your $22,500 annual deferral and get it into a Roth vehicle. 

If you are already doing a Mega-Backdoor Roth at Delta, you may have noticed that your after-tax contributions have pushed more of Delta’s profit sharing contribution above the annual contribution limit, making it taxable income to you. With the introduction of the MBCBP, those Delta contributions above the contribution limit will now be contributed to the MBCBP and excluded from your taxable income.

This is really great news. 

If you are trying to save a significant amount of money for your retirement, this may be a great strategy for you to get after-tax money into a Roth account while also taking advantage of the pre-tax nature of the MBCBP.

This strategy works if after-tax contributions are made prior to Delta’s profit sharing contributions. Please confirm with your HR department the timing of these contributions.

Including the MBCBP in your investment strategy

You may be wondering how to include the new cash balance plan in your investment strategy since you don’t have direct control over how your assets are invested in the plan. 

Delta has stated plan assets will be invested in 40% equities and 60% bonds, which lends itself well to be included as a more conservative portion of your investment portfolio. (“Negotiators’ Notepad 23-17,” 2023). Work with your fiduciary financial planner to decide how to incorporate this plan (or not) into your personal financial plan.

This is not to be taken as financial, investment, or tax advice. Do not make any changes to your investment portfolio without speaking to your financial advisor and tax advisor first.

Don’t have a financial planner? We can help. Get started by scheduling a free appointment if you are interested in utilizing your Delta pilots’ retirement benefits to their fullest potential.

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