It only took 48 hours after the Musicians for Pension Security national meeting on April 4th for the AFM-EPF Trustees to reject each and every proposal we made, casually brushing aside months of careful work by our team of experts. Rather than engaging in a dialogue concerning the positive and creative recommendations we made for lessening the impact of cuts to our pensions, cutting expenses, or reforming the board, the Trustees chose to question our motives and attack our all-volunteer organization that works on behalf of fellow musicians across the country. Read the letter the trustees sent to us on 4/6 here.
This is especially disappointing because at the national meeting MPS made clear its desire to work with the Trustees to find solutions to our pension crisis. Prior to the meeting MPS and its actuary Tom Lowman made direct offers to the Trustees, and AFM-EPF plan actuary, Milliman, to meet and discuss our proposals. The Trustees did not respond. Again, at the meeting, we reached out to our Trustees and urged them to engage with us. We wanted to represent the voice of musicians around the country and be part of the process now before any cuts are instituted. After all, it is our pension plan that is currently at risk.
Unfortunately, these honest overtures have been summarily rejected. The Trustees have made it clear that they have no intention of listening, engaging or taking input from MPS or anyone else. Since December of 2016, when the Trustees first told plan participants about the possibility of cuts, we have been held in suspense, waiting for a plan from the Trustees. Unfortunately sixteen months later, our Trustees still have no plan for the future until we hit rock bottom. Then, and only then, will the Trustees act, taking the easy way out by pursuing cuts to our benefits.
At the National Meeting MPS proposed a comprehensive Action Plan that would stabilize the AFM-EPF for decades to come. The Action Plan included a three-year delay of benefit cuts, negotiating 6% increase in employer contributions, and a 10% cut in administrative expenses. We also called for board reform, including the replacement of five out of eight the trustees and bringing more financial investment and actuarial expertise onto the board. Finally, we asked the Trustees to engage more meaningfully on the Butch Lewis Act in Washington DC.
The Trustees’ response to each of these proposals was to reject them out of hand. Here is a point by point response to the Trustee’s misguided attack:
Proposal For a Three-year Delay in Cuts
Trustees: Plan for a three-year delay in benefit cuts is “based on a distortion of facts“ and is “just empty rhetoric.”
MPS: The three-year delay was based on financial modeling done by one of the foremost actuaries in the multiemployer pension field, Tom Lowman. Mr. Lowman believes a three-year delay is possible if the Union leaders can obtain 6% contribution increases and a 10% cut in expenses. In support, Mr. Lowman cited numerous instances where pension plans in trouble obtained 6% increases in employer contributions for multiple years. These included the Baltimore Teamsters and the Central States Teamsters fund. He also cited the fact that the AFM-EPF itself obtained 6% increases in employer contributions for multiple years in the middle part of the last decade. The Trustees do not even attempt to address this extensive factual record.
History of Mismanagement
Trustees: “Since the 2008 global financial recession, the Trustees have consistently taken action to preserve the Fund.”
MPS: The Trustees have produced the worst investment returns in their peer group of large pension plans, have the highest expenses of any fund in the entertainment industry, and cannot raise employer contributions even to the rate of wage inflation. We have written a piece entitled “A Track Record of Mismanagement” that you can access here to view our detailed analysis of the Trustees’ self-serving and misleading claims on their performance. There is now overwhelming evidence that this pension plan has been badly mismanaged. The Trustees’ refusal to take even an iota of responsibility for that fact is alarming.
Assumptions Concerning Growth in Employer Contributions
Trustees: Getting employers to contribute more is “complicated.” The AFM-EPF is assuming that employer contributions will grow 2.5% per year, and this is “based on historic averages.” Any claim that the growth in employer contributions should be set higher “shows lack of understanding of our industry or the Fund’s actual experience.”
MPS: Tom Lowman does not lack understanding of the situation. He explained his reasoning on this point quite clearly. First, the AFM-EPF has itself obtained much higher employer contributions than 2.5% in the past. Second, the current rate of wage inflation is 2.9% and as Tom said, any pension plan that assumes its rate of increases in employer contributions is less than wage inflation is probably making an erroneous assumption.
Trustees: “MPS' own actuary stated clearly that expenses were not the issue.”
MPS: Tom Lowman said nothing of the kind. His model clearly calls for 10% expense cuts, and a three-year delay in cuts would not be achievable without them. MPS legal counsel Jonathan Kantor stated at the meeting that without meaningful expense cuts, the Trustees might not be able to clear the key MPRA hurdle at U.S. Treasury of taking “all reasonable measures” to avoid insolvency. The Trustees’ renewed claims that they have exercised expense discipline is demonstrably false. Their own projection calls for 2.25% increases in expenses over the next 20 years, with no cuts in sight. See our accompanying piece, “A Track Record of Mismanagement,” for details on the Trustees’ abysmal record on expenses here.
The Trustees simply failed to address this important issue, even though it is an essential element of our Action Plan, and one that received an enthusiastic response at the National Meeting.
At the meeting, we pointed out that the Trustees we have been serving for a long time – some of them for decades. We also pointed out that they severely mismanaged this Plan to the brink of disaster. Even if they get the cuts that they are looking for, there is nothing to prevent them from going for more cuts in the next 5 to 10 years. The only way to prevent this from happening is to bring onto the board competent, experienced and accountable Trustees who are experts in their fields, particularly the investment and the actuarial fields.
Even in their recent piece, it’s clear that the Trustees have left themselves plenty of room to back away from the Butch Lewis Act. “The trustees will strongly advocate to [the select committee] for a remedy that fully addresses the financial issues facing our fund while treating our participants fairly.” That could well include the proposal of the NCCMP, which is the lobbying organization which is closely aligned with our Trustees. NCCMP has been advocating forcefully against the application of the Butch Lewis Act to plans like ours. They have also been advocating changes to MPRA that would make it easier for plan sponsors to get cuts to pension benefits. Details on this can be found in the attached piece, “A Track Record of Incompetence.”
Trustees: “MPS’ propaganda and smear tactics are detrimental to the Union’s ability to get members behind negotiating increases to contributions….We will continue to provide the participants with accurate information, not political spin.”
MPS: It appears the Trustees have adopted a popular method of response to constituents demanding accountability that is widely used in politics today: When faced with fact-based and solid criticism, they claim to be “attacked” and call the truth a “fantasy.” We deserve better leadership. We deserve leadership that holds the democratic process as sacred and does not denigrate its members for having an open discourse about the possibility of speaking with our vote on this issue. They could have an open discussion with us but they hide behind Hart Associates. They could have face to face meetings but they use webinars where they control the message. They claim that this is politics when no member of MPS has ever held nor ran for an AFM office. As long time, dues-paying members, we deserve a responsive and respectful discourse from our elected leaders. We did not get that in Friday night’s letter nor at any moment since we started a year ago.
The Trustees’ Plans
Trustees: “Trustees are also planning for the future and are currently considering many options.”
MPS: That is deliberately vague. MPS has obtained documents from AFM-EPF files showing that the Trustees are in advanced stages of planning for cuts to our pensions. They have even had a series of discussions with the staff of the U.S. Treasury about the best way to frame their cut application. They have extensively modeled cuts in the 23-30% range, and this has been going on since late 2015. The Trustees have set compassion and empathy aside for retirees who could lose their homes or have a significantly reduced quality of life by saying “we simply don’t know” when continually asked, “what is the plan.”
Fellow musicians - we deserve better than this.
There is a clear absence of leadership at the AFM-EPF. Ray Hair, Tino Gagaliardi and the other trustees’ only plan is to wait for our fund to hit rock bottom, then and only then they will finally act and cut benefits taking the easy way out. It is now clear that while the Trustees wait for us to hit rock bottom the only other thing they will do is attack anyone trying to propose proactive solutions or asking for a basic level of accountability. While the Trustees try to attack their way out of the problem they created, Musicians for Pension Security will continue to look for solutions and find a way forward on behalf of fellow musicians across the country.
In order to continue working on your behalf, we need your help. We will be starting our spring fundraising drive later this week. Please donate what you can.