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.
Musicians want to know what they can do right now.
First, contact your Local's elected leadership and ask them to demand that the Trustees personally appear at your Local to explain what is going on, and to answer all your questions. The Trustees should do this in person and not by webinar. With cuts to our hard-earned benefits now becoming a reality, AFM members deserve an opportunity to ask questions and have their voices heard at such a critical time. Find your local AFM contact info here.
Second, AFM elections are right around the corner. They will be held at the AFM convention this June in Las Vegas. Contact your Local's elected leadership and your AFM Delegates before the convention and ask them to make the pension crisis an issue on the agenda at this year's convention. As the Trustees pursue cuts to our existing benefits over the next few years, we need accountability and transparency more than ever. Anyone running for AFM office should publicly engage with AFM members at the convention about the pension crisis.
Third, at the upcoming AFM convention in June, there will be a proposed resolution to add an investment expert and an actuarial expert to the Board of Trustees at the AFM-EPF. Contact the leaders of your Local and AFM Delegates now and ask them to support that progressive resolution. The task of overseeing actuaries and investment managers in a multi-billion dollar fund is extraordinarily complex. The training and education that our Trustees go through may be helpful but they cannot possibly provide the kind of sophisticated, and critical, expertise that finance and actuarial professionals would bring to the Board.
Finally, when discussing the pension fund with your colleagues make sure they understand the facts and know the truth behind a few common myths that have been circulating for the past two years:
Myth: The pension crisis was caused by external factors over which our Trustees have no control: a declining music industry and declining populations of active musicians versus retired musicians.
Reality: MPS hired a renowned actuary, Tom Lowman, who has told us that’s just not that case. (See his analysis here.) Lowman says that the industry dynamics and demographics of the AFM-EPF are much more favorable than any of the other plans in critical and declining status that he’s seen before. Also, there is plenty of data showing that entertainment industry pension plans are much healthier and more robust than pension plans in just about any other industry, whether it’s manufacturing, transportation, retail and food, construction or the services industry.
Myth: Expenses at the AFM-EPF are under control.
Reality: There has been no real effort by the Trustees to curb expenses. The Executive Director makes over $425,000 per year. The Trustees’ own documents show that administrative expenses have increased in the past year from $15 million to $16 million. (see here, page 8)
Myth: The Trustees have taken all reasonable measures to grow employer contributions.
Reality: According to the Trustees' own projections (see page 18) they think that over the next 20 years, employer contributions will grow at the paltry rate of 3% per year. This compares unfavorably to the 6.9% rate at which employer contributions have been growing nationally for multiemployer plans. (See footnote 3.)
After years of voicing concerns about accountability and transparency at the AFM-EPF very little has changed. As musicians now face the reality of cuts to their existing benefits in coming years, now more than ever, AFM members across the country deserve answers. Plan participants also have the right to ask for and demand change in the future. Musicians know that we can't go back and undo the problems that have plagued the AFM-EPF for decades. However, we also know that we cannot simply continue on into the future with the same Trustees and the same processes which have failed us, somehow expecting a different result. In 2019, AFM members deserve better.
The peer group consists of five other pension plans, all in the entertainment industry. We used a standard measurement for cost efficiency, comparing the administrative expenses to assets under management. We found that the average in the peer group was 0.73% whereas the AFM-EPF is 1.21%. (Peer group was: Screen Actors Guild (SAG). International Alliance of Theatrical Stage Employees (IATSE), Producer-Writers Guild of America Pension Plan (PW), Directors Guild of America (DG), American Federation of Television and Radio Artists (AFTRA), and American Federation of Musicians (AFM).)
The comparison group is 23 multiemployer pension plans similar to the AFM-EPF with assets over $1 billion. The comparison was done by Meketa, AFM-EPF’s investment advisor.
Aggregate contributions to multiemployer pension plans from 2009 to 2014 increased by 6.9 percent per year, significantly outpacing the average inflation rate of 2.1 percent over this period.” Lisa A. Schilling and Patrick Wiese, Multiemployer Pension Plan Contribution Analysis, Society of Actuaries, March 10, 2016,www.soa.org/Files/Research/research-2016-03-multitmployer-analysis.pdf. The AFM-EPF trustees have calculated that between 2010 and 2016, sustainable employer contributions at AFM-EPF, factoring out what they called “noise,” have been increasing annually at 2.2%. Milliman, Presentation to AFM-EPF Trustees, May 16, 2017, page 6.