LTD Benefit Calculation

Understanding how your Long-Term Disability benefit is calculated helps you plan financially and verify that you're receiving the correct amount.

Overview (CBA Section 27.J.2, 27.J.6, 27.J.7)

Your LTD benefit is based on:

1. Your monthly earnings (special calculation method)
2. Benefit percentage (varies by time on LTD)
3. IRS 401(a)(17) cap (maximum benefit limit)

Monthly Earnings Definition

The "Best 12 of 36" Rule (CBA 27.J.6)

Your monthly earnings are calculated as:

"The 12 highest consecutive months out of the 36 consecutive months preceding the disability period"

This is more favorable than simply using your last month's pay or a 12-month average.

Why This Matters

If you had a particularly good 12-month stretch within the last 3 years, that's what counts for your LTD calculation.

Example:

Last 36 months included:
- Months 1-12:   Average $15,000/month (peak flying schedule)
- Months 13-24:  Average $13,500/month (training, less flying)
- Months 25-36:  Average $14,000/month (moderate schedule)

Your monthly earnings = $15,000 (best 12 consecutive months)
NOT $14,166 (average of all 36 months)

What's Included in "Monthly Earnings"

Basic monthly compensation includes:

• Base pay
• Flight pay
• Override pay
• Premium pay
• Per diem

Typically EXCLUDES:

• Vacation pay (unless part of regular pay structure)
• One-time bonuses
• Reimbursements
• Non-regular compensation

Benefit Percentages

First 24 Months: 60% (CBA 27.J.2)

For your first 24 months on LTD:

Monthly Benefit = Monthly Earnings × 60%

Example:

Monthly earnings: $15,000
Benefit: $15,000 × 60% = $9,000/month (before offsets)

After 24 Months: 50% (CBA 27.J.2)

After 24 months on LTD:

Monthly Benefit = Monthly Earnings × 50%

Example:

Monthly earnings: $15,000
Benefit: $15,000 × 50% = $7,500/month (before offsets)

Why the Reduction?

The reduction from 60% to 50% after 24 months:

• Encourages return to work when possible
• Reflects standard industry practice
• Is specified in the CBA

IRS 401(a)(17) Cap

Maximum Benefit Limits (CBA 27.J.7)

The IRS imposes an annual compensation limit on qualified plans. This caps your maximum LTD benefit.

IRS 401(a)(17) Limits:

Maximum Monthly Benefits

Months 1-24 (60% of cap):

Months 25+ (50% of cap):

How the Cap Works

Your benefit is the lesser of:

1. Your calculated benefit (monthly earnings × percentage)
2. The IRS 401(a)(17) cap

Example 1: Below the cap

Monthly earnings: $15,000
Percentage: 60% (first 24 months)
Calculated: $15,000 × 60% = $9,000
Cap: $17,500
Actual benefit: $9,000 (lower amount)

Example 2: Above the cap

Monthly earnings: $32,000
Percentage: 60% (first 24 months)
Calculated: $32,000 × 60% = $19,200
Cap: $17,500
Actual benefit: $17,500 (capped)

Complete Calculation Example

High-Earning Captain

Background:

• Best 12 consecutive months: Average $28,000/month
• Currently in month 10 of disability
• 2026 benefit year

Calculation:

Step 1: Monthly earnings = $28,000 (best 12 of 36)

Step 2: Apply percentage
        Month 10 = within first 24 months = 60%
        $28,000 × 60% = $16,800

Step 3: Check cap
        2026 cap (months 1-24) = $17,500
        $16,800 < $17,500 ✓ Not capped

Gross monthly benefit: $16,800

Note: This is BEFORE offsets (CA SDI, SSDI, outside income).

First Officer Example

Background:

• Best 12 consecutive months: Average $12,000/month
• Currently in month 30 of disability
• 2026 benefit year

Calculation:

Step 1: Monthly earnings = $12,000

Step 2: Apply percentage
        Month 30 = after 24 months = 50%
        $12,000 × 50% = $6,000

Step 3: Check cap
        2026 cap (months 25+) = $14,583
        $6,000 < $14,583 ✓ Not capped

Gross monthly benefit: $6,000

Verifying Your Benefit

Request Detailed Calculation

When you receive your first LTD payment, request:

1. Which 12 months were used for your monthly earnings
2. Calculation breakdown showing:
   • Monthly earnings amount
   • Percentage applied
   • Any cap applied
   • All offsets applied
3. Supporting documentation from payroll records

Common Errors

Watch for:

• Wrong months used - Verify they used your best 12 consecutive
• Incorrect percentage - 60% vs 50% based on time on LTD
• Wrong cap applied - Verify correct year and timeframe
• Missing earnings components - Ensure all eligible pay included

How to Challenge

If you believe the calculation is wrong:

1. Document your concern in writing
2. Show your calculation with supporting pay stubs
3. Request recalculation from administrator
4. Escalate if needed through PBRB process

Impact of Returning to Work

Trial Work Period

If you return to work temporarily:

• Your monthly earnings calculation may be reevaluated
• Your benefit percentage continues based on total time on LTD
• Coordinate with administrator before returning

Partial Return

If you return part-time:

• You may receive partial LTD
• Earnings from part-time work may affect your benefit
• See Outside Income rules

Adjustments Over Time

Annual Updates

• IRS 401(a)(17) cap may increase annually with IRS updates
• Your benefit may increase if cap increases
• Administrator should notify you of any changes

Recalculation Triggers

Your benefit may be recalculated if:

• You return to work and then go back on disability
• There's a correction to your earnings history
• Cap changes significantly
• CBA amendments change calculation method

Tools and Resources

Calculation Helper

Use the calculator on this site to estimate your benefit:

• LTD Calculator
• Enter your pay history
• See estimated benefit amounts
• Compare scenarios

Getting Your Pay History

From Workday:

1. Log in to FedEx Workday
2. Navigate to Pay → Payslips
3. Download last 36 months of pay stubs
4. Calculate your best 12 consecutive months

From Benefits Administrator:

• Request the earnings history they have on file
• Verify it matches your records
• Correct any discrepancies before claim approval

Next Steps

• Understand offsets - How offsets reduce your benefit
• Plan for reduction - Prepare for 50% rate after 24 months
• Track your time - Know when you'll hit the 24-month mark
• Verify calculation - Review your first benefit statement carefully