In 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.
Recent Appointment of Trustee Kruvand
Recently you announced the appointment of Gail Kruvand to the board of trustees replacing Phil Yao who recently resigned. In Pension Fund Notes you mention that she will participate in "rigorous ongoing education and training on issues such as plan funding, investments, federal legislation and other issues relevant to administering the fund."
Q-Isn’t it true Gail Kruvand has no professional experience in the area of pensions and investments?
Q-How can "education and training" make up for this deficit?
Q-Why should musicians run a pension fund in the first place?
Q-Why not have an investment professional on the board of trustees?
Q-If you don’t have an investment professional on the board of trustees how do you know your advisers are giving you good advice?
Q-At the next AFM convention, will the IEB support a change in the AFM bylaws which makes the mechanism by which our pension trustees are selected more open and democratic and which allows the player conferences and representatives of freelance musicians to choose their own fund trustees?
Q-ARTICLE 22.6(i) of the AFM bylaws specifically requires the President to consult with the player's conferences and representatives of freelance musicians. What, if any, attempt did you make to reach out to or ask the Locals in New York, Boston, Chicago, Nashville, Los Angeles and other cities to consult with freelance musicians to ask for their input?
Butch Lewis Act
Congress is now in serious negotiations to come up with a solution to the multiemployer pension crisis. In Select Committee hearings Senator Joe Manchin has flatly said that unless everyone makes their voice heard the Butch Lewis Act will fail.
Ray Hair, as President of the AFM, has said he supports the Butch Lewis Act. But the trustees of the AFM-EPF are on the fence and have not advocated for Butch Lewis in the past six months. They are only saying that there is a need for Congress to act in a "bipartisan fashion" and that any solution must be "fair to the musicians."
Q-Don’t you think it would be helpful if the trustees of the AFM-EPF came out on the record to strongly declare their support for the Butch Lewis Act immediately?
There’s an uncomfortable contradiction in the AFM’s luke-warm statements to its membership urging support for the Butch Lewis Act on the one hand, while the other hand, the AFM-EPF is spending $27,000 of fund resources annually to belong to an employer trade organization (NCCMP) which has been actively lobbying against Butch Lewis and promoting legislation that makes it easier for trustees to cut pension benefits.
Q-How can the AFM wear two different advocacy hats credibly at such a critical time?
In a recent hearing for the class action lawsuit brought against the AFM-EPF trustees, a federal judge criticized the trustees' investment strategy as “extraordinarily risky.” Also in that same lawsuit, the trustees admitted that in five of the last eight years their investment returns were subpar, underperforming their own benchmarks. The trustees also had their consultant Meketa prepare a comparison of 23 multiemployer pension plans' investment performance including the AFM-EPF. With the 100th percentile being the worst and 1st percentile being the best, over the last 10 years, the AFM-EPF’s investment performance is ranked in the 99th percentile, the worst in the peer group. The five-year performance was ranked in the 91st percentile and the three-year performance 87th percentile.
Q-Do you still contend that you don't need an investment professional added to the board of trustees?
Documents from your files indicate that Milliman the plan actuary has had a series of discussions with the staff of the US Treasury about the best way to frame your application to cut our benefits.
Q-It is obvious the trustees anticipate these cuts coming soon. Can you describe in detail the process you are following to prepare for cuts?
There is a communications committee for the board of trustees whose members are Ray Hair, Tino Gagliardi, and Christopher Brockmeyer. They hired an expensive Washington, D.C. firm named Hart Associates last fall.
Q-Can you describe what Hart Associates has done for us and how much they have been paid to date?
Q-Have any other consultants such as communications consultant also been hired by the trustees?
You recently decided to eliminate the disability pension for musicians over 55 years of age and fully vested in the pension. You have a very robust process for weeding out fraudulent disability claims and that includes the right to order an independent medical examination for a disability claim. So what we’re talking about is disallowing medically valid and proven disability claims and converting them into straight pensions.
Q-Can you tell me why you decided to do this?
Q-Isn’t it true that under MPRA disability claims are exempted from cuts whereas a regular pension can be cut? Isn't this the real reason you eliminated disability claims for older musicians?
Contact your orchestras ICSOM delegate before the start of this year's conference on 8/22 and ask them to be sure to have President Ray Hair answer these important questions.