Now is the right time to become an American Federation of Musicians member. From ragtime to rap, from the early phonograph to today's digital recordings, the AFM has been there for its members. And now there are more benefits available to AFM members than ever before, including a multi-million dollar pension fund, excellent contract protection, instrument and travelers insurance, work referral programs and access to licensed booking agents to keep you working.
As an AFM member, you are part of a membership of more than 80,000 musicians. Experience has proven that collective activity on behalf of individuals with similar interests is the most effective way to achieve a goal. The AFM can negotiate agreements and administer contracts, procure valuable benefits and achieve legislative goals. A single musician has no such power.
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Like the industry, the AFM is also changing and evolving, and its policies and programs will move in new directions dictated by its members. As a member, you will determine these directions through your interest and involvement. Your membership card will be your key to participation in governing your union, keeping it responsive to your needs and enabling it to serve you better. To become a member now, visit www.afm.org/join.
March 1, 2021Ray Hair - AFM International President
Participants in the American Federation of Musicians and Employers’ Pension Fund were notified in January that the Fund filed a second application with the US Treasury Department to reduce benefits under the Multiemployer Pension Reform Act (MPRA). This month, I’ll explain the decision by the Fund trustees to file another MPRA application, the difference in this application from last year’s, and where we are with this year’s application.
I’ll also discuss the all-out lobbying efforts by the Federation and the Fund to mobilize rank and file and participant support for the Butch Lewis Emergency Pension Plan Relief Act of 2021, which would eliminate the need for benefit reductions and provide the Fund with enough money to pay benefits for the next 30 years. Unions have been lobbying hard for pension relief legislation for years. We are very hopeful that soon, with the support of the new Biden Administration and a new Congress, legislative relief will finally become a reality.
The trustees filed an MPRA application on December 30, 2019, which was denied because Treasury disagreed with two actuarial assumptions related to mortality and new entrants into the Fund. We considered our options and decided that, without pension relief legislation, the only way to save the Fund was to file another application soon, for the same reasons as we decided to file last year. We re-filed on December 30, 2020.
Without a reduction in benefit payments, or a pension relief bill, the Fund will eventually run out of money. All that would be left for retirees would be amounts payable by the federal insurer, the Pension Benefit Guaranty Corporation (PBGC). As the law now stands, that would amount to about $12,800 a year for a participant with 30 years of service. Also, under PBGC rules, the benefits of all pensioners can be reduced, even if you’re 80 years of age or older. But, even worse, the PBGC itself is projected to run out of money by 2026, which would mean that the benefits of participants in insolvent plans would be reduced to almost nothing. That’s why MPRA benefit reductions are a better option than insolvency.
The second application has the same design as the previous one. A notable difference is the size of the flat reduction for multipliers other than $1, which went from 15.5% to 30.9%. The reason for the increase in the reduction is the advent of COVID-19, which caused an abrupt halt in employment in the live entertainment industry and led to a substantial reduction in employment in media production.
Despite the Fund’s strong investment performance during the pandemic period—the Fund returned 17.1% from March 1, 2020, to December 31, 2020, which beat our benchmark (and it returned 32.3% in the first nine months of its fiscal year, from April 1, 2020, to December 31, 2020)—employer contributions have been decimated by job losses from government-imposed pandemic-related shutdowns. From April to September of 2020, the Fund received about $22 million in contributions, compared to about $48 million in 2019.
With the arrival of vaccines to help prevent the spread of the virus, we are hopeful that the economy and the entertainment industry will recover sooner than it would otherwise. Nonetheless, we are projecting that employer contributions will be substantially reduced for several years. The dramatic pandemic-driven decline in employer contributions entirely upended our original projections
and led to the increase in the flat reduction percentage.
Just as with last year’s application, the trustees were determined to make the cuts as fair as possible and were also determined to protect the $1 multiplier, the core promise of the Fund. In addition, the trustees recognized that participants who had worked more recently already had huge cuts to their pensions due to the reductions of the $4.65 multiplier to $1 and the elimination of the early retirement subsidy and other subsidies.
Faced with these painful reductions, the trustees developed a plan to apply reductions as equitably as possible by eliminating the early retirement subsidy, and the re-retirement and re-determination benefits. The trustees decided to retain the cap on anyone’s benefit reduction at no more than a 40% reduction. There are other statutory protections for older and disabled retirees.
You might also remember that the trustees appointed Brad Eggen as the independent “retiree representative” to advocate for the interests of retired and terminated vested participants and beneficiaries. Brad is a 50-plus-year member of the AFM and is the current president of the Twin Cities Musicians Union, AFM Local 30-73 in Minneapolis-St. Paul, Minnesota. He and his “equitable factors panel” of several retired participants from different parts of the industry will communicate directly with participants concerning the pending MPRA application. Brad has retained his own independent lawyers and actuaries to assist in assessing the application.
But MPRA cuts may not be necessary. Immediately following President Biden’s inauguration, House Education and Labor Committee Chairperson Bobby Scott (D-VA) and House Ways and Means Committee Chairperson Richard Neal (D-MA) introduced pension relief legislation to save troubled multiemployer pension plans like the AFM-EP Fund. The bill was then revised and introduced as the Butch Lewis Emergency Pension Plan Relief Act of 2021, as part of the larger COVID supplemental relief bill, a priority in the new Congress. With Democrats controlling the White House and both houses of Congress, the bill has a far better chance of becoming law than any prior legislative attempt to address the multiemployer pension crisis. By the time this column reaches your mailbox, the bill may have already become law.
The COVID-19 economic catastrophe has increased the urgency for legislative multiemployer pension relief. According to Congressman Neal, pandemic-driven job losses and the related reduction in employer pension contributions could cause an additional 180 multiemployer plans to become insolvent, “bringing the total of plans facing failure to 300 plans covering 2.5 million participants.”
This new bill is structured differently from the original Butch Lewis Act that was introduced in 2019, but, like the prior version, we believe it would eliminate the need for the AFM-EP Fund to apply for benefit reductions. The bill would provide the necessary funding through the general fund of the US Treasury to permit the Fund to pay all of its liabilities through 2051. The trustees of the Fund are studying the new bill with our actuaries, and if it is as good as it looks, and it passes, the trustees plan to withdraw the pending MPRA application and apply for pension relief.
Visit http://ow.ly/e89L50DBZ2Q to review the congressional legislative summary of the new Butch Lewis Act.
The Federation is all-in with other unions in the campaign to enact the new Butch Lewis Emergency Pension Plan Relief Act. Please join with the hundreds of AFM members who are contacting their legislative representatives by following the links in our email blasts and at www.afm.org as we coordinate the push to renew the health of the AFM-EP Fund and protect all participants.