AFM-EPF Approved for Special Financial Assistance

August 1, 2024

Tino Gagliardi  -  AFM International President

I am pleased to announce that our pension fund’s application for Special Financial Assistance (SFA), provided through the multiemployer pension rescue plan, has been officially approved. The American Federation of Musicians and Employers’ Pension Fund (AFM-EPF) will receive the restorative funding this month. The funding ($1,440,137,839 of assistance, plus $87,701,535.81 in interest from December 31, 2022) ensures that our dedicated musicians can continue to rely on secure retirement income after years of enriching our communities with their talent.

Administered by the Pension Benefit Guaranty Corporation (PBGC), the SFA program—also known as the Butch Lewis Act—was part of President Joe Biden’s American Rescue Plan. It provides security for roughly 200 distressed multiemployer pension plans to remain solvent, ensuring the sound retirement of around 2 million workers for the next several decades.

Background

You may recall the all-out Federation lobbying effort that included our National Legislative Office, player conferences, and rank-and-file members like yourself to push Congress to pass this legislation over the past few years. We are grateful and proud of the grassroots organizing and determination it took to succeed.

The Butch Lewis Act was introduced to Congress in 2017 and 2019, but died in committee both times. It was introduced in its current form in 2021 and passed by the House in February. Senator Sherrod Brown (D-OH) sponsored the Butch Lewis Emergency Pension Plan Relief Act in March 2021. Senate Majority Leader Chuck Schumer (D-NY) fought to include the legislation in the American Rescue Plan—making pension solvency his very first major bill as majority leader. President Joe Biden signed it into law on March 11, 2021.

What the Law Provides

One of the most important pieces of legislation in a generation, the Butch Lewis Act provides financial relief to multiemployer union pension plans like ours that are facing financial distress, improving and securing the finances of millions of workers and retirees. These plans are essential to the dignity and welfare of workers and an integral part of the financial foundation of our communities. Beyond AFM-EPF, supported pension plans for union workers and retirees across industries include:

• 500,000+ Teamsters
• 120,000+ United Food and Commercial Members
• 110,000+ United Steelworkers and United Auto Workers
• 100,000+ Bakery and Confectionery Workers
• 50,000+ Communication of America Workers

Their pension plans will be supported with enough money to pay benefits for decades into the future (at least through 2051). To date, the Biden-Harris Administration has delivered assistance to 83 pension plans, securing the retirements of more than one million workers and retirees.

These types of retirement plans, created through agreements between employers and a union, typically involve multiple employers in a single industry or related industries. The workers and their unions chose to take less wages in their working years to ensure they could have resources for a strong retirement.

A worker whose multiemployer plan became insolvent would have seen their expected pension benefits slashed substantially. Before American Rescue Plan assistance, workers and retirees participating in more than 200 multiemployer pension plans faced the prospect of not receiving the full benefits they earned and need to support them and their families in retirement.

These plans are insured by the PBGC, a federal agency that provides partial protection of the benefits of approximately 11.2 million workers and retirees in approximately 1,400 private-sector multiemployer, union-connected plans. Prior to the Butch Lewis Act, the PBGC’s multiemployer pension insurance program was itself projected to become insolvent in 2026.

Under the American Rescue Plan, pension plans were allowed to apply for assistance on a priority basis set by the PBGC, which administers the SFA program. That priority depends on how underfunded a pension fund may be, as well as other factors. For example, plans that were already insolvent or about to become insolvent were allowed to apply first, starting July 2021. Many of those plans have already received assistance.

The AFM-EPF is considered a priority plan because it is such a large plan. Our application window opened in early 2023. The AFM applied for assistance in March 2023. Now that the PBGC has approved our plan, we should receive our financial assistance in a lump sum this month. The money our plan receives through SFA is not a loan but a grant and does not have to be repaid.

Rules Regarding SFA Funding

Once the AFM-EPF receives the financial assistance, it must be invested in stocks and bonds. The law requires plans to keep SFA money separate from other plan assets. One-third (33%) of the SFA may be invested in “return seeking assets,” generally, publicly traded stocks, and at least two-thirds (67%) must be in investment-grade, fixed income securities, generally bonds. The plan currently expects to invest 100% of the financial assistance in investment-grade, fixed-income securities. All ongoing benefit payments and expenses can be paid out of the SFA money so that the fund’s other assets can continue to grow from contribution income and investment returns.

Under PBGC rules, plans that receive financial assistance are not permitted to increase benefits in the first 10 years after receiving help, unless the increase is for future accruals and is fully paid for with new contribution increases. After 10 years, a plan may request an exemption from this rule, if it can demonstrate that it will avoid insolvency, even with the benefit improvement.

A plan receiving SFA money will not be permitted to allow reductions in employer contributions. An employer’s contribution rate cannot be any lower than it was on March 11, 2021, the date that the American Rescue Plan was signed into law. These restrictions on benefit increases and contribution reductions will expire after 2051. Reductions or increases in contribution rates that took effect July 9, 2021, or later, are disregarded in calculating the amount of assistance. (Lower contributions wouldn’t have resulted in the fund receiving more assistance and contribution increases wouldn’t have resulted in the fund receiving less.)

The Federation remains committed to providing financial security for musicians in retirement. The fund will now be able to pay full benefits through at least 2051 without any reductions in participant benefits.

The AFM-EPF trustees worked diligently to preserve pension funding, which is a vital lifeline for countless musicians in their golden years. Together, we have lobbied and persevered through negative attacks to realize this solution. We are optimistic about the health of the pension fund moving forward.

For more information or assistance with questions, please visit www.afm-epf.org.

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