Tag Archives: pension

Officer Columns, President's Message

Biden-Harris Victory is a Win for Working People, Unions

The American Federation of Musicians congratulates President-elect Joe Biden and Vice President-elect Kamala Harris for their victory in the November 2020 general election. Our union endorsed the Biden-Harris ticket because their campaign agenda promoted the protection of American workers, and committed to strengthening worker organizing, collective bargaining, and unions.

As I’ve mentioned in this column previously, there has been an all-out war against unions and collective bargaining for decades, and which accelerated after President Reagan broke the Professional Air Traffic Controllers Union (PATCO) in 1981. More recently, state governments have binge-legislated anti-worker laws, including so-called “right-to-work” laws to favor union-busting agendas to sabotage labor unions, organizing, and collective bargaining.

The Biden campaign labor platform, if implemented as promised, may result in the most pro-labor atmosphere of any administration since the presidencies of FDR and Harry Truman. President Truman, as students of history may recall, vetoed the Taft-Hartley Act of 1947, which sought to restrict and weaken the power of unions (as it certainly did), but his veto was overridden by Congress. In the years since, the expansion of union-busting corporate power over working people has multiplied exponentially. 

Over the last four years, an anti-labor biased National Labor Relations Board has produced a parade of rulings that look to hurt unions and to reverse the progress made during the Obama years. Joe Biden proposes to check the abuse of corporate power over labor by holding corporate executives personally accountable for interfering in organizing efforts and for labor law violations. He also proposes to restrict federal dollars to employers who engage in union-busting activities and would penalize companies that bargain in bad faith.

And on an issue that particularly and directly impacts the business of freelance professional musicians who struggle to survive in the gig economy—pandemic notwithstanding—Joe Biden supports extending the right to organize and bargain collectively to independent contractors. This is a point of paramount importance for our union because the employment status of musicians performing short-term engagements for multiple employers is routinely and unfairly determined by labor boards to be that of an independent contractor.

Independent contractors do not have recourse under the National Labor Relations Act when unfair labor practices are committed against them by purchasers of their services. In many cases, because of their pattern of employer conduct and strict control over the services of musicians, the purchasers and also the booking agents are de facto employers and should be held subject to labor law jurisdiction.

A good portion of the Biden labor platform can be accomplished through executive orders and a re-alignment of National Labor Relations Board appointees. Some platform pieces will need Congressional approval and are likely to meet resistance if the Republicans maintain control over the Senate. By the time you read this column, we may know the outcome of US senate runoff races in the state of Georgia, which could impact whether the full extent of Biden’s pro-union agenda, as well as other critically important items, may be implemented. 

Two top Federation legislative priorities in the new Congress concern the urgent need for relief for critically underfunded multi-employer pension plans, and long overdue amendments to copyright law to provide for a terrestrial performance right. These two items were under Congressional consideration in the form of the Butch Lewis Act—which would guarantee low interest loans to troubled pension funds, including the AFM pension fund, eliminating benefit reductions for participants—and the AM-FM Act, which would require US radio stations to pay musicians, singers, and copyright owners for the music they use.

The Butch Lewis Act is part of the relief recipe for struggling multi-employer plans now embedded in pending COVID-19 supplemental relief legislation, in the form of Emergency Pension Plan Relief Act of 2020.  While we do not expect any year-end congressional relief package to include pension relief provisions, we do expect early 2021 COVID relief legislation to include a rescue package for multi-employer pension plans.

Republicans have indicated they will push for a smaller-scale compromise plan that would be paired with benefit reductions. The Federation will fiercely resist such an inadequate solution and instead lobby hard for a broader stimulus package that would include pension relief provisions designed to shore-up multi-employer plans, restore benefit reductions already implemented, and preclude the possibility of prospective benefit reductions.

The new Congress will also see the introduction of successor legislation that would establish a performance right in terrestrial over-the-air radio broadcasts, requiring radio stations to pay musicians and singers, as well as major and indie labels, for the use of recordings. Gone are the days when radio play promoted the sale of physical products such as vinyl records, tapes, and compact discs, that drove artist royalties and label income. With streaming services such as web radio, satellite radio, and interactive services such as Spotify and Apple Music acquiring a greater percentage of consumption and growing bigger piles of money, especially during the pandemic, labels and performers are pushing to get paid on terrestrial radio play.

Because Joe Biden has promised to be “the most pro-union president you’ve ever seen,” I am optimistic that the Federation’s legislative goals, those of our arts and entertainment union partners and all of labor, are far more achievable today.  But if Republicans continue to control the Senate, there will be serious challenges. That’s why Georgia’s twin runoff elections on January 5, 2021, which will decide the political tone of the Senate, are so important.

The American Federation of Musicians will work with the Joe Biden administration to promote, encourage, and incentivize unionization, to adopt legislation to protect our pension fund, to further beneficial copyright and performance rights legislation, and to promote initiatives that will improve the lives of musicians everywhere.

pension
Officer Columns, President's Message

Pension Benefit Reduction Plan Explained

As many of you know, on December 30, 2019, the AFM-EPF Trustees filed an application to reduce benefits under the Multiemployer Pension Reform Act (MPRA). The decision was reached after the trustees had engaged in more than two years of difficult discussions. The reductions are projected to allow the Fund to avoid insolvency and preserve a meaningful benefit for Fund participants and their beneficiaries. Far more drastic benefit reductions would result if the Fund were to become insolvent.

More work is needed in order to strengthen the Fund, particularly by bargaining improvements in employer contributions into the Fund, as the Federation has done over the past several years, and by earning good investment returns, as we have since the 2008-2009 financial crisis—an average annual return of nearly 9%. But the benefit increases that were adopted repeatedly through the 1990s and other generous benefit features provided by the Fund have ultimately proven unaffordable after the 2001 dot-com bubble burst and the 2008-2009 financial crisis. This has left us no alternative but to reduce benefits in order to keep the Fund solvent for future generations of participants.

The MPRA application is a very long and complex document, running over 1,500 pages. You can review it on the US Treasury website at www.treasury.gov/services/Pages/American-Federation-Of-Musicians-And-Employers-Pension-Fund.aspx, but in this month’s column, I will summarize the main features of the proposed benefit reductions and answer some questions we have received from a number of participants.

There are three underlying principles in our proposed reduction plan: level the playing field, protect the $1 multiplier, and minimize benefit reductions as much as possible.

Removing the Subsidies and Other Costly Features

The first principle involves leveling the playing field by reducing costly benefits and features of the plan that are richer than the regular pension benefit payable at age 65. These include the early retirement subsidy and certain other generous plan features that the trustees considered to have the same effect as subsidies. The trustees decided that the fairest way to distribute the reductions was first to eliminate the subsidies and other costly features that are not applicable to all participants. That allowed us to minimize the reductions to multipliers other than the $1 multiplier, which we decided to protect, without any reduction.

As we have informed participants, the flat percentage cut to the multipliers above $1 was 15.5%. If we had not removed the early retirement subsidy (which only those who started to collect before June 2010 have been eligible to receive), the flat percentage cut for multipliers above $1 would have been 17.3% instead of 15.5%. Since the regular pension benefit—the age 65 benefit—is the Fund’s core promise, we determined that it was fair to protect that to the maximum extent possible.

There have been lots of questions about the early retirement subsidy. An early retirement benefit is “subsidized” if it is not reduced as low as the actuarial equivalent amount that would cost the plan the same as the regular pension benefit payable at age 65 over the expected lifetime of a participant. Because the benefit begins earlier, it is payable for a longer period of time and, over thousands of participants, the costs quickly become significant. And, because the money is being paid earlier, the Fund cannot earn investment income for those years prior to normal retirement age.

For Benefit Period A (through 12/31/2003) at age 55, the multiplier was $2.33 for retirements before June 2010, while the unsubsidized multiplier that went into effect for retirements on and after June 1, 2010 was only $1.70. The $2.33 multiplier is subsidized because it is 37% higher than the $1.70 multiplier. This means that the early retirees who started collecting before June 2010 are receiving more than the actuarial value of their age-65 benefit.

Like many other Taft-Hartley funds, the AFM-EPF has offered a subsidized early retirement benefit since at least 1972. However, the Fund can no longer afford this subsidy. The trustees also determined it would be unfair to continue this subsidy for those who are receiving it and who retired before June 2010 because it was already taken away from everyone else, even those who worked prior to 2003 while the subsidy was in effect, if they did not retire before June 2010. Moreover, those who will lose their early retirement subsidy by the 2021 effective date of the change if the application is approved will have already received the subsidized early retirement benefit for 10 years, and in some cases many more years. The Fund is not taking back that “excess” value. The trustees are very aware that this change, as well as other changes described below, will adversely affect the retirement benefits for a number of participants, but we believe that eliminating subsidies is the most equitable way to distribute the benefit reductions.

The proposed reduction plan also removes certain other generous, subsidy-like benefit features in order to reduce benefit costs, help preserve the $1 multiplier, and minimize the flat percentage reduction. The two most prevalent and expensive are the re-retirement benefit and the re-determination benefit.

The re-retirement benefit is the additional benefit participants earn if they retire before age 65 and then return to work. It is a very unusual benefit for a pension plan. Under existing rules, when such a retiree reaches age 65, the total benefit is recalculated as if the individual were first retiring at age 65, using the age-65 multiplier for all benefits. That amount is then reduced to reflect the early retirement benefits actually paid to the person during the years before age 65. The existing methodology produces an increased benefit that is like a subsidy because it provides a larger re-retirement benefit when compared to the benefit based solely on the new contributions earned during post-retirement employment.

If the proposed MPRA application is approved, re-retirement benefits would be calculated based only on the contributions earned after the early retirement pension begins, until age 65. For virtually all musicians not yet in pay status, the re-retirement benefit for service in and after June 2010 will use the $1 multiplier for contributions credited after the person’s early retirement through age 65, which amount will be added to the amount of the early retirement benefit, and adjusted for the forms of benefit selected.

Another costly benefit that would be modified if the application is approved is the re-determination benefit. The re-determination benefit is the additional benefit that a musician earns by working in covered employment after age 65 and after starting to collect a pension. Currently, the re-determination benefit is based on contributions received in the prior calendar year, reduced by the value of all re-determination benefits received in the year before that. Many pension plans do not permit participants to receive pension benefits while also earning additional pension credit. Under the proposed MPRA suspension, participants will still be able to return to work after age 65 while receiving their pensions, but their re-determination benefits will be offset by the total amount of all benefits already received from the Fund, rather than just the re-determination benefits in the year before. If the application is approved, current re-determination benefits will be reduced to $0, and re-determination benefits after January 1, 2021 will likely not result in any additional accruals.

Protecting the $1 Multiplier

The trustees concluded that the fairest way to design the proposed reduction plan was to protect the $1 multiplier from any reduction. We believe this is of paramount importance in order to maintain Fund support from active participants—those who are still employed and earning contributions but not yet retired. We know that the $1 multiplier, which has been in effect since 2010, is not a rich benefit. But it can provide a meaningful benefit payable over a lifetime starting at age 65. We also know that further reductions to this already reduced amount would jeopardize not only ongoing contributions, but also increases to contributions, which are critically important to the Fund. Eliminating the subsidies and the costly features that are effective subsidies helped us maintain this basic benefit.

Minimizing the Flat Percentage Reduction

After eliminating the subsidies, the central feature of the proposal is a flat 15.5% reduction to all multipliers other than the $1 multiplier. Each of the higher, pre-2010 multipliers would be reduced by 15.5%, although various statutory protections apply to different participants, resulting in either no reductions for some participants or reductions for many that amounted to less than 15.5% in total.

Benefit estimate statements were mailed to all participants on January 6. These statements provide participants with current and estimated future reduced benefits, if the MPRA application is approved and plan reductions become effective. We know that the information included on the statements does not provide the detailed calculation of your estimate. If you wish to receive a statement that will include all calculation details, you can call the Fund office at 212-284-1311 and request a detailed statement. When your detailed statement is available, it will be posted to the benefit estimate icon in the registered participant’s portal on the plan’s website. You will be advised by email that it is available or you can request a copy to be sent in the mail to you. Fund representatives will walk you through it and help you understand the detailed calculations.

Removing the subsidies is painful, and will be difficult for many participants, but the regular pension benefit, that is, contributions from the $1 multiplier payable at age 65, is the core promise of the Fund. We believe it would be unfair to reduce that benefit or to reduce the other multipliers even more in order to maintain the early retirement subsidy and other costly features that the Fund can no longer afford.

No Easy Choices

The trustees agonized over decisions that we knew would affect the lives and families of thousands of participants, and we struggled over how to make those decisions in a fair and equitable manner. The trustees capped the MPRA reduction so that, even with the elimination of the subsidies, no individual benefit would be reduced more than 40%, and, as it turned out, the cap applied to only 0.35% of participants. The law provides protection for participants who receive smaller benefits, for disability pensions, and for people who are over 75 years of age.

The vast majority of the plan’s participants had either no reduction or a smaller than 20% reduction.

Here is a breakdown of numbers of participants and percentage of benefit reductions: The total number of Fund participants is 50,782. Of that number, 27,099 either earned all their credit at the $1 multiplier or were protected by law and received no benefit reduction. This meant that the money to address the problem of fund sustainability had to come from the remaining 23,683 participants. Of those, 11,483 received a reduction of 0%-9%; 11,270 received a reduction of 10%-19%; 374 received a reduction of 20%-29%; 376 received a reduction of 30%-39%; and 180 participants received a reduction of 40%. 

Finally, given the choice of preserving the Fund or letting it become insolvent, the trustees chose to propose a benefit reduction plan that adjusts benefits in the fairest way possible under the circumstances to allow the Fund to continue to serve past, current, and new participants into the foreseeable future.

Recent News

AFM-EPF Submits MPRA Application to U.S. Treasury Department

On December 30, 2019, the American Federation of Musicians and Employers’ Pension Fund (AFM-EPF) submitted an application to the U.S. Treasury Department to reduce benefits under the Multiemployer Pension Reform Act (MPRA) in order to prevent the Plan from becoming insolvent. “We know that our participants have anticipated this difficult moment for some time. Now that the application has been completed and submitted, we can provide important information about how each participant would be affected by the proposed benefit reductions if the application is approved by Treasury,” according to a statement from the Fund trustees posted on www.afm-epf.org.

On January 6, the Fund office mailed a packet of information about the MPRA application to all participants and beneficiaries of deceased participants. This mailing includes three documents, all of which are important for participants to read in full:

• Personal Benefit Estimate Statement ― Personalized statement showing participant’s estimated benefit as of January 1, 2021 should the reduction be approved and go into effect.

• Difficult Choices Newsletter ― Overview of what’s happening and why.

• Official Notice of Proposed Reduction ― Official notice of the Plan’s application to reduce benefits, including important information about participant rights.

In addition to the copies that participants will receive via U.S. mail, the Difficult Choices newsletter and Official Notice of Proposed Reduction are available now on the Recent Mailings page of the Plan website, under the “Stay Informed” tab.

Participants who have registered on the Plan website can access their Personal Benefit Estimate Statement by logging into the Participant Portal at www.afm-epf.org and clicking on the MPRA Benefit Estimates icon. Participants who have not yet registered may do so by clicking on the link in the heading of the plan website.

The AFM-EPF will continue to keep participants informed throughout the MPRA process via the Pension Fund Notes e-newsletter. It will also maintain resources on the Plan website, including the Frequently Asked Questions page and the MPRA Benefit Reductions page, which contains a description of each component of the proposed benefit reduction.

retiree representative
Officer Columns, President's Message

AFM Pension Fund: The Retiree Representative and Equitable Factors Panel

The American Federation of Musicians and Employers’ Pension Fund (Fund) has faced financial difficulties since the global 2007-2008 recession. Similar to dozens of other pension plans, the Fund is now underfunded and will be unable to pay benefits at the level projected in the pre-recession financial market. The Fund’s history of financial struggles is available here. The Fund is in the process of evaluating various options to reduce a portion of participants’ benefits in order to remain financially solvent.

Continue reading →
Officer Columns, President's Message

The AFM-EPF and the Multiemployer Pension Crisis

The United States currently faces a worsening multiemployer pension crisis. One recent report estimated that 114 multiemployer pension plans across the country will become insolvent over the next two decades. These plans cover nearly 1.3 million people and they are underfunded by more than $36 billion. The American Federation of Musicians and Employers’ Pension Fund (AFM-EPF, “the Fund”) is not immune to the forces driving this crisis.

The AFM-EPF, like many other multiemployer funds, was a robust, healthy pension fund through the late 1990s. In fact, our fund was actually overfunded, meaning that assets exceeded liabilities (promised benefits to participants for service already performed). Simply put, the Fund had more money on hand than it was projected to need to pay out as benefits in the future. In 1999, the AFM-EPF was 139% funded.

Continue reading →

Recent News

Senator Sherrod Brown Holds Cleveland Pension Rally with Labor Leaders

In March, Senator Sherrod Brown (OH-D) held a rally on his work and commitment for retirement security. The event was hosted by several organizations including the Cleveland AFL-CIO Retiree Council, Senior Voice!, and AFM Local 4 (Cleveland, OH). Brown is co-chair of the Joint Congressional Select Committee on Multi-Employer Pension Plans.

“Sherrod Brown has a long history as an independent voice for working-class Ohioans and their families. In addition to championing our earned retirement benefits, Senator Brown remains one of our strongest advocates for fair trade, social and economic justice, and sensible health care policies,” says Local 4 President Leonard DiCosimo.

Local 4 (Cleveland, OH) musicians presented Senator Sherrod Brown (OH, D) with a Local 4 T-shirt at a rally in Cleveland. (L to R) are Ed Majeski, Evan Mitchell, Brown, Jeremey Poparad, and Todd Smith.

For more information on the joint committee’s work and pension progress, please read AFM Legislative-Political Director Alfonso Pollard’s column here.

Pension Fund
Recent News

Pension Fund Information Update

As an officer of the Federation who is also a trustee of our Pension Fund, I am devoting this column to the Pension Fund. Like all of you, I am concerned about the safety of my pension and, like you, I am worried about the Pension Fund’s future. But I assure you that every member of the Board of Trustees is doing our best to protect and preserve the Pension Fund into the future. Please know that the opinion I express here is solely my own and I do not speak on behalf of the other trustees or the fund.

When I became a trustee in August 2010, the fund was beginning its efforts to rebalance its finances and repair the damage done by the 2007-2009 recession. On March 31, 2009, we had an $800 million gap between the pension benefits already earned by members—that is, our liabilities—and the market value of our assets. Over the next five years, the market value of the assets increased by $500 million to $1.8 billion, but our liabilities also increased, by $300 million to $2.4 billion, narrowing the gap between our assets and liabilities by only $200 million (from $800 million to $600 million). That is the single biggest issue facing the Pension Fund.

In 2014, our actuaries provided an Asset-Liability Modeling Study that showed that over a 20-year period, our liabilities were projected to increase dramatically, such that even if we achieved our 7.5% investment return assumption, our funded percentage would be below 50% by 2034 and there would be a serious risk of future insolvency. On the other hand, the study showed that an investment allocation with a higher investment return target would reduce the probability of future insolvency. After lengthy discussion, the trustees increased the allocation of investments to some with the potential for higher returns, recognizing that an investment mix with a higher return potential (albeit with accompanying higher volatility) reduced the probability of insolvency. One of the investments we hoped would give us part of the additional return did not achieve its expected results (although today it is one of the highest performing asset classes in the portfolio). This widened the gap.

So, we have a very serious imbalance in our finances. While there are other contributing factors that exacerbate our situation—the loss in union membership (and corresponding contributions) that mirrors the decline in our participant base; the aging of our population (common among all mature pension funds) reflected in the increase in pensioners and their longer lifespans; and the growing amount of work not done under union contract—the increasing size of this gap between assets and liabilities is the most critical problem we have to solve. Resolving it is essential to our survival.

As an International Executive Officer I participate fully in the AFM’s legislative and political activities. Matters concerning federal legislation are overseen by AFM President Ray Hair and his legislative aide, Alfonso Pollard. I have worked with them consistently regarding the pension bills that have already been submitted, including the Butch Lewis Act introduced by Sherrod Brown and endorsed by the Federation.  The Pension Fund’s actuaries are currently reviewing that bill to confirm that it would help the fund. If so, I will urge my fellow trustees to fully support the bill, and I have every reason to believe that they will enthusiastically do so.

In the meantime, absent new legislation, the only way to address the imbalance between our assets and liabilities is to reduce the liabilities in a manner consistent with current law: the Multiemployer Pension Reform Act (MPRA). If the fund enters “critical and declining” status, the MPRA allows the trustees to apply to the Treasury Department for approval of an equitable plan of benefit reductions. Should such reductions become both necessary and legally allowable, that plan would be designed consistent with the strict requirements of the law to reduce benefits of those under 80 and those not disabled, but in no case below 110% of the PBGC guarantees. If a participant’s benefit is already below the PBGC guarantee, that benefit cannot be reduced further. 

Since it is unlikely at the moment that investment returns alone will resolve these funding issues, the other trustees and I must consider MPRA restructuring in order to preserve the Pension Fund, reducing benefits for some in order to maintain the viability of the fund for all. While once the fund could afford to pay the high benefits it promised to some of us, it can no longer afford to do that, and recognizing and addressing that fact appears at the moment to be the only option to preserve the fund and as much of our benefits as possible. Since benefit restructuring under the MPRA cannot reduce benefits below the PBGC guarantees, it is clearly preferable to relying on those PBGC guarantees, particularly in light of the PBGC’s own impending insolvency in 2025.

I urge all members to register on the Pension Fund’s website and carefully review the information we post there. We are committed to keeping you informed.

Ray Hair
Officer Columns, President's Message

Unallocated Contributions Support Each Participant’s Pension

Note: Fund updates appearing in this column are not applicable to the AFM’s Canadian pension fund, known since August 2010 as Musicians Pension Fund of Canada. 

To improve its funded status and restore its health over the long term, the American Federation of Musicians and Employers’ Pension Fund (Fund) needs additional employer contributions as well as good investment returns. For the plan year that ended March 31, 2017, higher employer contributions and strong investment performance kept the Fund out of critical and declining status for the plan year that began April 1, 2017. Whether the Fund can stay out of critical and declining status in the future will depend in part on income each year from employer contributions and investment returns.

Continue reading →

Officer Columns, President's Message

Pension Fund Avoids Critical and Declining Status Due to Higher Investment Returns and Increased Employer Contributions

Note: AFM-EP Fund updates appearing in this column are not applicable to the AFM’s Canadian Pension Fund, known since August, 2010 as Musicians Pension Fund of Canada. 

At its May 2017 Board of Trustees’ meeting, AFM-EP Fund actuaries advised that better than expected investment returns and increased employer contributions—most notably, $20 million in new contributions over the next three years from the Sound Recording and Motion Picture industries negotiated by the Federation—enabled the plan to avoid “critical and declining” status for at least another fiscal year.

Although the odds are that the Fund may become critical and declining at some point in the future, even as early as the next fiscal year (beginning April 1, 2018), that status will depend on investment returns, employer contributions, and other results during this fiscal year.

Busting the Myths

With the speed of today’s Internet, inaccurate information can be disseminated quickly. Here are a few myths I’ve seen, along with the facts.

Myth #1: The Fund is not critical and declining so we’re “safe.”

Though plan status has been certified critical each year since 2010, avoiding critical and declining status this year doesn’t mean the plan is healthy. High investment returns coupled with innovative increases in Federation-negotiated employer contributions kept the Fund out of critical and declining status this fiscal year. As recently as the plan year concluding March 31, 2016, employer contributions covered only 42% of benefit payments.

Increases in the percentage of employer contributions are essential to the health of the Fund. This cannot be accomplished if members opt to work off-contract without pension contributions for signatory employers, rather than insisting that Federation and locally-negotiated agreements with pension benefits be honored.

Myth #2: The Keep Our Pension Promises Act (KOPPA) proposed by Senator Bernie Sanders is good for participants.

Fund trustees would strongly support legislative changes that would help the Plan secure participants’ pensions without relying on benefit cuts. Unfortunately, KOPPA as currently drafted and sponsored by Senators Bernie Sanders (I-VT), Al Franken (D-MN), and Tammy Baldwin (D-WI) provides the Fund with no relief whatsoever.

Why not? Because a key provision in the bill disqualifies the plan from coverage. Relief provided by KOPPA pertains only to plans with a certain percentage of their funding problem attributable to employers who withdrew from the fund without paying their withdrawal liability. One example of this was the 2011 Philadelphia Orchestra bankruptcy. However, because the plan does not meet the bill’s required threshold percentage, KOPPA, if enacted, would fail to provide any relief.

KOPPA would also eliminate the plan’s ability to avoid insolvency (running out of money) by reducing benefits. While no one wants to see benefit reductions happen, that option is important as a last resort. Benefit reductions could allow the plan to continue paying higher benefits than if it became insolvent. As written, Congressional adoption of KOPPA, though highly unlikely in the current Congressional climate, would shorten the life of the plan.

Local 802 (New York City) President and Fund Trustee Tino Gagliardi and I met with senior staffers for Senators Sanders, Franken, and Baldwin in Washington, DC, June 6 to discuss what changes to their proposed KOPPA legislation would be needed to permit the plan to benefit from it. Unfortunately, none of those staffers believed that KOPPA would ever move through required congressional committee hearings where amendments could be made, let alone be adopted.

Myth #3: The plan lost 40% in investment returns when other plans lost 25%.

The Plan lost 29% in investment returns for the 12 months (fiscal year) ending March 31, 2009, not 40% as some have alleged. This misunderstanding was tracked back to the trustees’ December 2016 letter to participants that said plan assets declined by 40% over 18 months. Some have read this to mean the plan’s investment return was negative 40% over that period—but that was not the case. 

Myth #4: The Fund office received huge staff pay increases in 2009.

This misunderstanding was tracked back to the change in IRS reporting requirements for the compensation numbers shown on IRS Form 5500 Schedule C. The rules changed in 2009 to expand the definition of compensation to include, not just salary, but all payments made on behalf of staff—including, for example, health insurance and other benefit costs, travel reimbursements, and other expenses incurred while performing their jobs.

Fund Office staff cost increases have averaged only 2.16% a year from fiscal year 2009 to 2016. This modest increase, only slightly more than CPI, includes an increase in staff health care premiums over a period when premiums rose on average more than 25%.

What’s Next?

Because the Fund remained in critical status this year, benefit reductions to already earned benefits, which might be necessary if the Fund becomes critical and declining, will not be considered this year. Next year, the Fund will go through the same process—as it has every year in the past—to determine the plan’s status. Critical and declining status could be in the Fund’s future at some point and appropriate preparations will be made. Until then, the Fund will continue to monitor its progress, review its investments, collect employer contributions, and manage expenses.

The Federation, in each of its negotiations, will push hard for increases in employer contributions to increase the plan’s overall funding percentages and improve assets available for distribution.

I am committed to keeping you updated with the most current information about the Fund’s status. In addition, please visit the Fund website, www.afm-epf.org, register and log on for easy access to FAQ’s and updated information as it becomes available.

Recent News

AFM Sues Atlantic, Sony, Warner for Failing to Fund Musicians’ Pensions

This week the AFM filed suit against several recording companies over digital music distribution revenue. According to the suit Atlantic Recording Corporation (Atlantic), Hollywood Records (Hollywood), Sony Music Entertainment (Sony), Universal Music Group Recordings, Inc. (UMG), and Warner Brothers Records, Inc. (Warner) failed to make pension fund contributions from foreign audio stream revenue and foreign and domestic ringback revenue.

The major recording companies’ long-held contracts with the AFM require the companies to share a portion of sales revenue with musicians. Most of the revenue was originally from record sales and later CD sales. In 1994 AFM and the recording companies entered into an agreement, subsequently renewed, requiring the companies to pay 0.5% of all receipts from digital transmissions including audio streaming, nonpermanent downloads, and ringbacks.

“The record companies should stop playing games about their streaming revenue and pay musicians and their pension fund every dime that is owed,” says AFM President Ray Hair. “Fairness and transparency are severely lacking in this business. We are changing that.”

Last year independent auditors discovered that the recording companies had not made the required revenue payments from foreign audio streams, ringbacks, and foreign non-permanent downloads. Attempts to reconcile the issues outside of court have gone on for several months to no avail.

This is the fifth lawsuit filed against major media corporations for contract violations in the past few months. Under Hair’s leadership, AFM has begun to aggressively enforce existing contracts and stand up to large corporations that fail to pay musicians when their work is reused or offshored.

The suit seeks payment for all missing revenue owed the AFM Pension Fund, late payment penalties, interest, damages and legal costs.