New Court Filing Reveals Risky and Imprudent Investment Decisions by Trustees

New revelations have emerged in the class action lawsuit filed by AFM Local 802 members Andy Snitzer and Paul Livant in Federal District Court, Southern District of New York. A recent court filing by the attorney for the plan participants, Steven Schwartz, details how risky and imprudent investment decisions by our trustees led us to where we are today.

The filing, which you can access here, compares the AFM-EPF investment strategy to that of other large multiemployer pension plans. That comparison showed a “stark departure in terms of asset allocation from other large Taft-Hartley [multiemployer] plans.” The filing continues:

Our Retiree Representative Must Be Independent

As many of you know, the trustees have appointed Brad Eggen, long time President of the Twin Cities Musicians Union, as Retiree Representative. According to Mr. Eggen’s website, he is “an independent voice for a secure future,” and “an independent voice” in the process by which our pensions will be cut.

We are sure Mr. Eggen is a capable lawyer, union leader and musician. But if he is not independent, he should not serve as Retiree Representative. Unfortunately, his initial actions as Retiree Representative raise real questions as to whether he can be a truly independent voice for our retirees.

Join MPS and Rally to Support the Butch Lewis Act in Washington, D.C.

Yesterday the AFM-EPF trustees continued to spin basic facts about our pension fund in their ongoing attempt to evade accountability. Their latest PR effort, ironically titled “A Call to Act Responsibly,” is a very misleading piece of propaganda in the area of investment performance (read it here). For those who want to read MPS’s response to the trustees’ piece, please click here.

It’s important that the truth be told about our trustees’ failures. However, it’s also important to talk about possible solutions and ways to help save our pensions from being cut. So we want to let plan participants know of an important event next week in Washington DC, and how you can help.

Investment Performance at AFM-EPF Consistently Falls Short

Many of you have seen the trustees’ response to our recent article concerning investment performance at our pension plan. Their attempt to defend their investment record sent us back to the documents, and the situation is actually worse than we thought. Recent investment performance at the AFM-EPF is currently well below the trustees’ own expectations, below the average of peer plans, and below the performance of simple index funds.

Trustee Mismanagement Continues

In the latest round of disclosures from the AFM-EPF, their own documents reveal that our trustees continue to have trouble managing our pension fund. They've attempted to educate themselves by attending conferences and courses, and we applaud them for making the effort. But the truth is, we have a group of trustees with little financial or actuarial experience, trying to manage our collective financial futures at a very complicated time. Once again MPS calls for new trustees to be brought onto the pension board who have the expertise and insight to help do the job properly. As long as the trustees refuse to reform themselves, no one should be surprised to see the mismanagement of the past ten years continue to damage our Fund in the future.

Federal Judge Once Again Calls AFM-EPF Trustees’ Investment Approach “Exceedingly Risky”

We have consistently maintained that one of the factors contributing to the crisis at the AFM-EPF was mismanagement of the fund by our trustees. One key area of mismanagement was investments, where the trustees gambled our retirement money away on risky and ill-advised bets.

As many of you know, Local 802 members Andy Snitzer and Paul Livant filed a class action lawsuit against the AFM-EPF trustees, charging them with breaches of fiduciary duty. At a recent hearing on the case (see full transcript here), federal Judge Valerie Caproni commented on our trustees’ decision to ratchet up the AFM-EPF’s targeted returns following the 2008 financial crisis. In pursuit of higher returns, the trustees started making outsized bets on things like emerging markets and private equity.

At the hearing on March 1st Judge Caproni said:“I mean they adopted an exceedingly risky strategy and that is part of the gestalt of the facts. Again, there may well be a good record that makes it all make sense. I’m trying to not just look at this like, looking back, it was really a bad decision, but even at the time, they were getting into very risky, illiquid investments, which just doesn’t seem like what a pension fund should be invested in.” (See Transcript page 8)

Call on Congress to Support a Fair Vote on Pension Cuts

Musicians deserve a fair vote on whether and how our pensions are cut.
Under current law, all uncast ballots are counted as votes to cut your benefits. 
For example, in a pension plan with 20,000 participants, there could easily be 15,000 members who don’t vote. Those 15,000 non-voters will be counted as “yes” votes in favor of benefit cuts. 
 
Senator Rob Portman (R-OH) and Senator Sherrod Brown (D-OH), together with four other Senators, have co-sponsored the Pension Accountability Act (S. 833), which would ensure that all votes on any cut proposal would be counted fairly.
 
As Senator Brown said in support of S. 833, “Workers sat at the negotiating table and gave up raises because they were counting on these pensions when they retired. It’s common sense that these workers should also have a seat at the table when negotiating the future of the pensions they fought so hard for.”

Our Trustees Must Support a Fair and Democratic Vote on Pension Cuts

Last Friday, our trustees formally announced that they will begin the process of cutting our pension benefits. That process is spelled out in a law called the Multiemployer Pension Reform Act (MPRA). MPRA overturned 40 years of labor law by allowing accrued (already earned) pension benefits to be cut by trustees.
 
MPRA was quietly tucked into a must-pass Omnibus Budget compromise bill in late December 2014. It was drafted in secret and was kept from lawmakers until the last minute. It was never debated, and no amendments were offered. The result, as many Senators and Congressmen have stated, is that MPRA is unfair to workers and retirees. 
 

The AFM-EPF Crisis and What You Can Do Right Now

As you have seen by now, the AFM-EPF Trustees announced that they will formally apply to the US Treasury for cuts to our pensions by the end of this year. In pursuing these cuts, the AFM-EPF joins a tiny minority of all multiemployer plans – under 2% –that have taken this drastic step. The AFM-EPF is in crisis because it has not been managed nearly as well as the others in our peer group of pension funds. Its expenses, its investment performance, and its employer contributions severely lag objective benchmarks. (See notes 1,2 and 3)

The Trustees also reveal, for the first time, that a Retiree Representative-designate has attended AFM-EPF board meetings for the past year. Under the law, a Retiree Representative must be appointed by the Trustees if they decide to pursue cuts to pensions. The AFM-EPF Trustees have repeatedly pledged to be transparent but never informed us that a year ago they had already identified, and started working with, a Retiree Representative.

The Trustees have made decisions like these behind closed doors with little to no transparency and accountability for far too long. As we proceed toward cuts to existing benefits, thousands of plan participants across the country now face an uncertain future without the transparency and accountability we deserve. Questions that only the Trustees can answer, must now be answered.

MPS RESPONSE TO AFM-EPF WEBINAR

The trustees held a Webinar on October 9, which is full of misleading and inaccurate information. Here is MPS’ point by point response:

Trustee Statement: “We supported the Butch Lewis Act since it was introduced and throughout the Joint Select Committee process.”

What they are not telling you:

The trustees supported Butch Lewis in late 2017, but since have gone soft on it. Meantime, Butch Lewis has been under attack from the NCCMP, a powerful Washington lobbying group that played a key role in the formulation of MPRA, the 2014 law that allows trustees to cut accrued pension benefits. NCCMP wants to put the loan assistance program under Butch Lewis out of reach for plans like AFM-EPF. 

AFM-EPF is an important member of the NCCMP and has long been in its inner policymaking circle.  

Making MPRA Fair and Transparent

Background: The proposed Butch Lewis Act has been severely narrowed so that the proposed loan assistance program will be available to only a handful of multiemployer plans. This will leave most troubled plans subject to the MPRA suspension process. That process is riddled with procedural unfairness and should be improved. Unfortunately, lobbying groups such as the NCCMP are proposing to make the MPRA suspension process even more unfair than it already is. 

Trump Administration is Kinder to Disabled Musicians Than Our Trustees

In a prior post, MPS called attention to the fact that our trustees have decided to eliminate the disability pension for most musicians who need it (see post here). In response to our post the AFM-EPF trustees published a Pension Notes article on Wednesday, August 21 (see article here), In that article, the trustees pushed back saying that their recent action has nothing to do with MPRA cuts. Rather, it has to do with “new federal regulations effective April 1, 2018, that imposed more stringent and complex requirements for how plans process Disability Pension claims.” In other words, the Disability Benefit has become too complex and expensive to administer, so the trustees have eliminated it, except for a very narrow category of claims.


ICSOM and Accountability at the AFM-EPF

n the next 12-18 months, barring another record year in the stock market, participants in the AFM-EPF are facing potentially deep cuts to their accrued pension benefits. At this critical juncture, it is especially important that the trustees of the AFM-EPF be held to the highest standards of accountability and transparency. The leadership of ICSOM can play a crucial role in this regard. Opportunities for live interactions with the AFM-EPF trustees are all too rare these days. At the upcoming convention, there will be an opportunity to question the lead Union side trustee, Ray Hair, about issues currently facing the AFM-EPF. The following are some of the questions that Mr. Hair should be called upon to answer. 

Trustees Target the Most Vulnerable Musicians

Many of you have received notice that our trustees have decided to eliminate the disability pension for most musicians who need it. In a recent mailing (click here for mailing), the trustees informed us that any musician eligible to receive a regular pension benefit – including any musician over 55 years of age and fully vested in the pension – is no longer eligible for a disability pension benefit. Even musicians below 55 years of age won’t be getting any disability pension if they don’t have at least one year of vesting service in the three calendar years beforehand. 

AFM-EPF Trustees Must Declare Support for Butch Lewis Now

The Select Committee on Multiemployer Pensions is now crafting a legislative solution to the multiemployer pension crisis. At last week’s hearing, Senator Sherrod Brown (D-OH) stated that he and the Chairman of the Select Committee, Orrin Hatch (R-UT), had agreed that beginning this week, their respective staffs would be empowered to “get serious about negotiations,” to enable the Select Committee to “get close to real solutions in September.” Hatch added that the Select Committee will come together on a bill and that it “would be to no one’s liking."


A Fellow Musician's Response to the AFM-EPF's Choice for New Trustee

Last Friday, the AFM-EPF announced the appointment of Gail Kruvand to the board of trustees. She will replace Phil Yao who recently resigned. (Read the announcement here.) As usual, we were preparing our response to this news when we received the email below from a fellow musician in the MPS network. We believe it captures the voice of musicians who are feeling marginalized by our trustees in 2018 and reflects the ongoing concerns of AFM members across the country.

Make Your Voice Heard: How to Contact Your Reps and Tell Them to  Support the Butch Lewis Act

Make Your Voice Heard: How to Contact Your Reps and Tell Them to  Support the Butch Lewis Act

We received many emails in response to Jonathan Kantor's latest "Butch Lewis Watch" blog post entitled, Butch Lewis is in Trouble Unless Plan Participants Are Heard From. Read it here. To summarize, Mr. Kantor's post reported that lawmakers are making it clear that unless there is more vocal support from Union members and retirees, The Butch Lewis Act is unlikely to pass. The Butch Lewis Act would extend government guaranteed loans to plans like AFM-EPF, avoiding any necessity for cuts to accrued pension benefits.

At the hearing, Senator Joe Manchin (D-WVA) said that unless workers and retirees “make your voice heard”there will be no help forthcoming from the Federal government.

Manchin pleaded, “we need your help.”

You asked how to make your voice heard, here's how:

Do the AFM-EPF Trustees Really Support the Butch Lewis Act?

As many of you know, the Butch Lewis Act would provide Government-backed loans to the AFM-EPF which would assure that no musician’s pension gets cut. 

So where do our trustees currently stand on the Butch Lewis Act? They declared their support for it in late 2017 after months of pressure from musicians across the country, but since then, they have been cagey about it, saying only that there is an urgent need for Congress to act in a “bipartisan” fashion and that any solution must be “fair” to the musicians.

10% Increase in Employer Contributions: Less Than Meets the Eye

Over the past 18 months, MPS has been tirelessly arguing that employers need to be part of the solution now that our pension plan is in crisis. The idea that musicians should take draconian, life-altering cuts to their pensions, while employers got away with under-contributing for the last decade, struck us as very unfair. Now the trustees have decided to take a small step toward MPS by requiring a one-time 10% increase in the rate of employer contributions to the AFM-EPF. Unfortunately, this increase does little to address the unfairness of the situation.