(AFM-EPF) – A Pension Plan for Musicians
What Will Be the Next Steps for the AFM-EP Fund
After the fiscal year for the AFM-EP Fund ended on April 30, 2019, the Independent auditors determined in May that the fund had reached “critical and declining status,” and that there are resources remaining to last for only twenty more years. The Multi-Employer Pension Reform Act (MPRA) of 2014 now permits pension plans that have reached “critical and declining status” to reduce benefits to its participants as a means of preserving the plan’s existences. Some of the possibilities for reductions may include the following.
Potential Approaches to Benefit Reductions
While the Trustees do not have much discretion about the total amount of reductions, they still have to decide how the reductions will be designed – that is, which benefits are going to be reduced and how.
MPRA provides rules that must be strictly followed by all funds filing applications. First, MRPA includes some specific protections that limit benefit reductions for different categories of participants:
- Participants age 80 or older are fully protected
- Participants between the ages of 75 and 79 are partially protected, using a sliding scale based on age
- Participants receiving a disability pension benefit from the fund are fully protected
There is no practical way that investment returns and contribution increases alone will be able to close the long-term, worsening gap between the money coming in and the money going out.
That leaves the Trustees with two challenging options – either allow the Fund to run out of money and become insolvent or to apply to the US Department of the Treasury for approval to reduce benefits under MPRA by an amount sufficient to prevent insolvency. Although reducing benefits will be painful, the Trustees have decided to seek permission to do so because running out of money would leave all participants with virtually no benefits in the future.
Benefit reductions are not happening immediately. Throughout the MPRA application process, benefits will continue to be paid each month with no change in the amount, and you can continue to earn new benefits under the Fund through covered employment.
The Trustees are continuing to actively push for legislation from Congress that will provide assistance to our Fund and the more than 120 other multiemployer pension funds across the nation covering 1.3 million participants now facing the prospect of insolvency, but we cannot wait for that to happen. The stakes are too high to avoid taking action while we wait for Congress to act. We have a responsibility to do everything in our power to ensure that the Fund is able to pay benefits for the long-term.
WHAT HAPPENS NEXT
The Trustees and the Fund’s expert advisors will begin preparing a MPRA application to submit to the U.S. Department of the Treasury. Due to the complexity and requirements of the process, our application will likely not be filed until the end of 2019. Any benefit reductions approved by Treasury would not be expected to start until late 2020 or the beginning of the 2021, at the earliest.
When the application is submitted, the Fund will mail a notice to each of our 50,000 participants and beneficiaries of deceased participants. This notice will include an individualized estimate of the proposed reduction to their monthly benefits.
Congress and Treasury have created a lengthy, complicated MPRA approval process designed to protect participants by ensuring that any approved benefit reductions are necessary and are expected to actually keep a pension fund from running out of money in the long-term. This process is expected to take at least a year and includes review, public comment, Treasury approval, and a participant vote.
MORE QUESTIONS?? TRY THE AFM-EP FUND WEB SITE
There are frequently asked questions (FAQs), financial reports on contributions and investments, and a list of Pension Trustees, including Brad Eggen, who is President of the Twin Cities Musicians Association. As a musician, Union leader, and an attorney, Brad has a responsibility to advocate on behalf of those participants in the plan who are already retired or collecting benefits.
Brad Eggen has selected the Reinhart, Boerner, and Van Deuren law firm to act as his independent legal counsel. Leading the representation are Peter Rosene and Pam Nissen. Both Pete and Pam have extensive experience in working with defined pension plans, like AFM_EPF. They are uniquely experienced in working with retiree representatives. This is their third engagement as counsel to a retiree representative.
Brad Eggen has also engaged an independent actuary. He selected First Actutial Consulting Services, Inc. The lead actuary is Jay Egelberg. Jay is an experienced actuary, having worked with numerous defined benefit pension plans. Jay has also previously worked with a retiree representative and as the consulting actuary for a plan considering a MPRA application. Jay worked as a consultant for AFM-EPF approximately 15 years ago.
THE BUTCH-LEWIS ACT
This is a plan that would provide financial assistance to Multi-Employer Pension Funds in the critical and declining status. This was passed by the House of Representatives and is on its way to the Senate. In order to become law it must pass the Senate. If you have not done so, please consider contacting your Senator to encourage passage of this vital legislation.
>END OF UPDATE< Below is a description of the Pension Plan
The billion-dollar-plus American Federation of Musicians and Employers’ Pension Fund is a retirement plan that provides a secure return on your pension investment. The pension plan pays in monthly installments, and does not stop paying during your lifetime.
The Fund was created in 1959 by former AFM President Herman Kenin, who negotiated it as part of a new five-year agreement between the AFM and the phonograph record industry. By mid-1960, pension coverage was extended to network radio and television, AFM traveling engagements and the AFM’s jingles contract. In July of 1961, symphony orchestras, arrangers, orchestrators and copyists became eligible for inclusion in the AFM-EP Fund. It now is available to Local 802 musicians in all fields.
The concept of a pension fund for musicians – many of whom are casually employed by many different employers in the course of a year, a month or even a week – would have to address the issue of portability. With the AFM-EP Fund, musicians are able to accumulate individual pension credits from different employers.
The American Federation of Musicians and Employers’ Pension Fund is administered by a Board of Trustees consisting of seven AFM union officers and seven employer representatives.
The day-to-day operation of the Fund is the responsibility of a Fund Administrator and a staff of some 55 people. Their jobs include making sure contributions are received and credited, maintaining eligibility files, processing pension applications and contributions, answering questions, and sending out pension checks each month to participants and their beneficiaries.
The AFM-EPF pension plan is protected under the Employee Retirement Income Security Act (ERISA) and is, therefore, subject to close scrutiny by the federal government. The Fund’s assets are managed by investment managers, who invest the fund in bonds, stocks, government issues and real estate. The fund is insured under U.S. law by the Pension Benefit Guaranty Corporation, which guarantees most vested retirement pensions.
How Can a Musician Become a Participant in the Plan?
The pension plan is made available to musicians through contributions made to the fund by your employer when the employer signs an agreement with the union regarding wages and pension contribution rates. Your employer may be, for example, a theatre producer, a symphony orchestra, an incorporated leader, a record company, a club or a manager. A musician may not make contributions to the Fund on his/her own behalf unless incorporated, since the Fund is an “employer only” fund.
The union agreement or contract with the employer must include certain necessary language and specific provisions in order for pension contributions to be made to the plan. The amount that is contributed to the pension plan is negotiated between the union and your employer.
Vesting in the Plan
As with any employer offering a pension plan, a certain amount of time and level of contributions must be made before one becomes “vested” or eligible to receive a pay-out from the plan. This must be for work that is done under contract with the union! Once you are a vested member of the plan you cannot lose any pension credits you have accumulated, even if you become inactive in the union.
It’s Quicker than You Think
The vesting period for participation in the AFM-EP Fund is only five years. Being “fully vested” means that a participant has earned a right to a regular pension that cannot be forfeited. A musician may accrue the five years on a quarter-year, half-year, three-quarter-year, or full-year basis, as follows:
Table Headings: Covered Earnings in Calendar Year/Years of Vesting Service
$1,500 or more/1
$1,125 but less than $1,500/3/4
$750 but less than $1,125/ 1/2
$375 but less than $750/1/4
less than $375/none
Of course, the more work you do under contracts which have pension provisions, the greater the benefit you will receive when you retire. But these quarter-year vesting provisions make it easier to become vested in the pension plan and to secure a guaranteed pension benefit.
AFM-EP Fund Means Big Benefits
The current regular pension benefit from the AFM-EP Fund consists of monthly payments to you based on (1) total contributions credited to you, and (2) your age on the effective date of your pension.
The regular pension benefit is generally paid as a life annuity with guaranteed amount or as a husband-and-wife (joint & survivor) pension. Currently, monthly payments under the life annuity option are calculated according to the following table:
Table: Headings Age/Monthly Amount per $100 Contribution
65 or older/$4.35
Under the husband-and-wife (joint and survivor) pension, monthly payments will be lower because the expected payment period is for the remainder of both you and your Joint Annuitant’s lifetimes. The exact amount of adjustments will depend on the age difference between you and your Joint Annuitant.
Who to Contact
If you have questions concerning your eligibility for participation in the AFM-EP Fund or would like to check the status of your account, direct your inquiry to:
Maureen Kilkelly, Fund Administrator
AFM & EP Fund
One Penn Plaza, Suite 3115
New York, NY 10119
In your letter, state your local number, Social Security number and birth date.
If you wish to learn how the Pension Fund can work for you, call the Local 1 office at (513) 241-0900 and ask about the AFM Pension Plan.