Last updated on 05/24/2019

    Status of the Fund

  1. What is the Fund's funded status today?
    Our actuaries have advised that the Fund is entering critical and declining status for the plan year beginning April 1, 2019. This means that the Fund is projected to run out of money to pay benefits (or become "insolvent") within 20 years. (See FAQ 5 for more details about critical and declining status.)

    As of March 2019, the Fund has roughly $1.8 billion in assets and about $3 billion in liabilities, which is the value of all the benefits that have been earned by participants for services already performed and that will be paid in the future. That means that the Fund is about $1.2 billion underfunded.
  2. Why can't the Fund recover without reducing benefits?
    The AFM-EPF is a mature plan, with the retiree population having grown faster than the active population, which means that benefit payments are growing faster than contributions. While the Union has bargained additional contributions into the Fund, it is not enough to avoid running out of money. (See FAQ 6 for more details about impact of contributions.) With every passing month, we have to pay out much more in benefits than contributions bring in. For example, for the fiscal year ending in March 2018, while the Fund paid out $171 million in benefits, it received only $68 million in contributions. This negative cash flow is projected to continue - and worsen.

    Every year, if investment returns don't make up this shortfall, the Fund has to draw down assets, which leaves less of an asset base on which to generate investment returns the following year. There is no practical way that investment returns or contribution increases will be able to close this gap in the long term and avoid insolvency. To illustrate the problem facing the Fund, our actuaries project that for the fiscal year ending March 31, 2034, the Fund would have to earn over a 30% return just for assets to stay flat. It is not realistic to assume that the Fund could consistently achieve investment returns that high.

    Because the Fund is entering critical and declining status, the Trustees are now able to, and now intend to, apply to the government to reduce earned benefits. Although reducing earned benefits will be painful, the Trustees have decided to apply to do so because it is better than the alternative, which is running out of money and leaving everyone with almost no benefits in the future. (See FAQ 10 for more details about the steps the Trustees plan to take and why.)
  3. How does the benefit multiplier work?
    A participant's monthly pension benefit (when taken in the form of a single-life benefit at normal retirement age of 65) is computed by taking the amount of contributions paid to the Fund on the participant's behalf for each benefit period described in the following table (rounded to the nearest $100), dividing that by 100 and then multiplying the resulting number by the "multiplier" -- that is, a specified dollar amount based on your age, as shown in the table below. Here's the formula:

    [Contributions (rounded to the nearest $100) ÷ 100] x Multiplier = Monthly Benefit

    Before 2004, the multiplier was set at $4.65 for retirements at age 65, the Fund's normal retirement age. Over the following six years, the Trustees lowered the multiplier four times, ending at the current level of $1.00 for covered employment on or after January 1, 2010. So, the multiplier varies based on the time period in which contributions were earned and the age of the participant at the pension effective date:
  4. Are there any plans to lower the benefit multiplier for future service?
    The Trustees do not plan to lower the current $1.00 multiplier for future service.

    Additionally, in planning benefit reductions under the Multiemployer Pension Reform Act, the Trustees do not anticipate reducing benefits that have already been earned under the $1.00 multiplier. (See FAQ 13 for more details about how the Trustees may allocate benefit reductions among participants.)

  5. Critical and Declining Status

  6. What is critical and declining status?
    In December 2014, Congress passed a law known as the Multiemployer Pension Reform Act (MPRA), which created a new funded status for multiemployer plans, called critical and declining status. That status means the fund is projected to become insolvent (run out of money) within 20 years.

    Under MPRA, if a fund enters critical and declining status, the Trustees can apply to the U.S. Department of the Treasury for approval to reduce participants' benefits by an amount sufficient to avoid insolvency. (See FAQ 13 for information on the anticipated structure of benefit reductions.) Although reducing earned benefits will be painful, the Trustees are planning to seek approval to do so, absent legislative relief, because the alternative of running out of money leaves everyone with almost no benefits in the future. The Trustees have no other viable way to save the Fund for the long term, that is to say, realistic investment returns and contribution increases will not avoid insolvency.
  7. Can the Fund's status be fixed with employer contribution increases?
    The Federation has negotiated significantly increased employer contributions and the Trustees recently updated the Fund's Rehabilitation Plan to increase the required contribution rate, which generates new contributions that are more helpful to the financial health of the Plan because they are not tied to particular participants' benefits. However, it is clear that additional contributions alone are not going to fix this problem. Our benefit liabilities are increasing much faster than the Federation or Locals can bargain more money into the Fund.

    The Fund's actuary has calculated that contributions would have to increase by 25% across the board immediately just for the Fund to remain solvent over the next 30 years, and by 50% for the Fund to be projected to be fully funded 30 years from now. And those would be in addition to what is already required by the recent Rehabilitation Plan Update. Contribution increases that high are not achievable.
  8. Will I keep getting my pension check now that the Fund is entering critical and declining status?
    Yes, you will continue to receive your pension check as normal - without benefit reductions - throughout the MPRA application process. The Trustees plan to submit an application to reduce benefits by the end of 2019, and it will take at least one year before we receive final approval from the U.S. Treasury Department to implement the benefit reductions. We do not anticipate any approved reductions to become effective until late 2020 or the beginning of 2021 at the earliest. Until then, you will continue to receive your existing pension check. And, depending on things like your age and the amount of your benefit, you may not have any reduction. (See FAQs 14 - 17 for details about the participants who are protected from benefit reductions.)
  9. Will I continue to earn new benefits now that the Fund is entering critical and declining status?
    Yes. If you continue to work in covered employment for a signatory employer that contributes to the AFM-EPF, you will continue to earn new benefits.
  10. Now that the Fund is entering critical and declining status, will my benefit automatically be reduced?
    No. While the Trustees have determined that, absent legislative relief, benefit reductions are the only viable course of action to prevent the Fund's insolvency, nothing will happen immediately.

    Under the Multiemployer Pension Reform Act (MPRA), if a fund is in critical and declining status, the Trustees can seek to reduce participants' benefits by an amount sufficient to avoid insolvency. (See FAQ 13 for information on the anticipated structure of benefit reductions.)

    To do so, the Fund will first have to submit an application to the U.S. Treasury Department. Both Congress and Treasury created a long and complicated MPRA approval process that's designed to protect participants and ensure that any approved benefit reductions are necessary and are expected to actually keep a pension fund from running out of money over the long haul. We do not anticipate any approved reductions to become effective until late 2020 or the beginning of 2021 at the earliest.

  11. Benefit Reductions Under the Multiemployer Pension Reform Act (MPRA)

  12. Why would the Trustees ever consider reducing benefits that participants have already earned?
    Unfortunately, the Trustees face two challenging options – to allow the Fund to run out of money within 20 years or to apply to the government for approval to reduce benefits now to try to prevent that from happening.

    If the Fund does run out of money, a federal government insurer called the Pension Benefit Guaranty Corporation (PBGC) is supposed to provide funding to keep paying benefits - but it pays benefits only up to a certain limit. What's more, the PBGC's program covering multiemployer plans (including the AFM-EPF) is projected to run out of money by 2025. That means if our Pension Fund runs out of money in the future, unless something changes, all participant benefits will be reduced to virtually nothing - an unacceptable result. (See FAQ 18 for more details about what would happen if the Fund ran out of money and see FAQs 23 and 25 for more details about the PBGC and what happens if it went bankrupt.)

    There is a second option. Under the Multiemployer Pension Reform Act (MPRA), if a fund is in critical and declining status, the Trustees can apply to the U.S. Department of the Treasury for approval to reduce participants' benefits by an amount sufficient for the Fund to avoid insolvency. (See FAQs 14-17 for information about MPRA's protections against benefit reductions that apply to some participants.)

    The Trustees are planning, absent legislative relief, to seek permission to reduce benefits under MPRA because the alternative of running out of money leaves everyone with almost no benefits in the future. And, there is no advantage in delaying making that choice. As time progresses, the date of insolvency will draw closer, the Fund's assets will shrink, and the liabilities will grow. The longer we wait, the larger reductions will have to be.

    Nobody wants to see benefits reduced. Although reducing earned benefits will be painful, absent legislative relief, the Trustees are planning to seek permission to do so because we must do everything we can to prevent insolvency and a near-total loss of benefits in the future.
  13. When are benefit reductions expected to go into effect?
    Because the Fund is entering critical and declining status, the Trustees are now able to, and now intend to, apply to the U.S. Department of the Treasury for approval to reduce participants' benefits by an amount sufficient to avoid insolvency. Any benefit reductions approved by Treasury under the Multiemployer Pension Reform Act (MPRA) would not be expected to start until late 2020 or the beginning of 2021 at the earliest. Until then, participants and beneficiaries will continue to receive their existing pension check without a change in the amount. (See FAQ 19 for more details about the application process and the timeline for benefit reductions.)

    Both Congress and Treasury created a long and complicated approval process under MPRA that's designed to protect participants and ensure that any approved benefit reductions are necessary and are expected to actually keep a pension fund from running out of money over the long haul.

    Due to the length and complexity of the application process, this application will not be filed until close to the end of 2019. The MPRA approval process should take at least a year including review, public comment, Treasury approval and a participant vote.
  14. How much will participants' benefits be reduced?
    The Trustees will not know the total amount of benefit reductions or each person's individual benefit reduction until just before an application is submitted to the Treasury Department under the Multiemployer Pension Reform Act (MPRA). This is because MPRA provides very strict rules about how much benefits can be reduced.

    Specifically, MPRA contains something many people refer to as the "Goldilocks rule." The Goldilocks rule requires that proposed benefit reductions be sufficient to ensure that a fund is projected to remain solvent for at least 30 years. However, the reductions can't be any larger than are necessary to remain solvent. The Goldilocks rule tries to strike a balance. The government does not want plans to reduce benefits unless the reductions are expected to protect the plans' solvency. On the other hand, reducing even a portion of people's pensions can have a huge impact on their lives, so the government rightfully wants to make sure plans only make reductions that are absolutely necessary. This means that there is a very specific allowance for reducing benefits, and the Fund must prove to Treasury that we are reducing them only by that amount.

    The calculation of whether the Goldilocks rule is met is based on financial information for the calendar quarter before the MPRA application is filed. What that means is that we can't know the exact amount of the reductions until that time.
  15. How do the Trustees anticipate allocating the benefit reductions among participants?
    As a result of the Goldilocks rule (See FAQ 12 for more details.), the Trustees do not have much discretion about the total amount of reductions, but they still have to decide how the reductions will be designed - that is, which benefits are going to be reduced and how.

    The Multiemployer Pension Reform Act (MPRA) provides rules that must be followed by all funds filing applications. First, MPRA includes some specific protections that limit benefit reductions for different categories of participants based on age, receipt of a disability pension from the Fund and amount of the benefit. (See FAQs 14-17 for more details.)

    MPRA also says that benefit reductions have to be shared equitably. The law provides a list of equitable factors that can be considered by Trustees.

    A final decision has not been made on every term of the benefit reduction. The Trustees proposed reduction will protect the $1 benefit multiplier. The Trustees anticipate reducing the four other multipliers by the same flat percentage.

    Since January 1, 2010, the benefit multiplier has been set at $1.00 for retirements at age 65, which is the Fund's normal retirement age. Under the anticipated benefit reduction, each of the higher multipliers - those that were in place prior to January 1, 2010 - will be reduced by the same percentage. The age 65 multipliers that will be impacted are shown in the chart below - the percentage reduction will apply to the $4.65, $3.50, $3.25 and $2.00 multipliers, as well as the associated multipliers for participants who have retired or will retire at earlier ages. The $1.00 age-65 multiplier will not be reduced, nor will its associated multipliers for retirement at earlier ages. (See FAQ 3 for an explanation of how the multiplier works, including the formula for how it affects participants' benefits.) However, benefit reductions must take into account MPRA's protections for age, disability and the maximum benefit reduction (See FAQs 14 - 17 for an explanation of these protections.)

    As part of the reduction, the Trustees also expect to propose eliminating some of the Fund's unique benefit features that were instituted when the Fund was in excellent financial condition and could afford them. Eliminating some of these features will allow the Trustees to limit the size of the percentage reduction.

    For example, the Trustees anticipate eliminating the subsidized early retirement benefit that participants received if they retired before age 65 prior to June 1, 2010. These retirees did not have their benefits reduced by the full amount necessary to account for the fact that they are being paid for a longer period of time.

    The Trustees also anticipate revising the way that "re-retirement" benefits are calculated. These are the additional benefits earned by a participant who retires before age 65 and then continues to earn benefits in the period before he or she reaches age 65.

    The benefit reductions that result from eliminating these features must also take into account MPRA's protections for age, disability and the maximum benefit reduction (See FAQs 14 - 17 for an explanation of these protections.)

    The Trustees are also considering the inclusion of a maximum percentage benefit reduction, so that no participant can have his or her benefit reduced more than this maximum percentage.

    MPRA requires that benefit reductions be based on the Fund's financial condition as of the end of the quarter before the application is filed. Therefore, the Trustees do not - indeed, they cannot - yet know the precise dollar amount of the overall reduction that is needed to protect the Fund's solvency, nor how much any reduction to any individual's pension will be. What we do know is this: Benefit reductions are much preferred to the Fund's running out of money (becoming insolvent).
  16. Are some participants protected from benefit reductions?
    The Multiemployer Pension Reform Act (MPRA) includes some specific protections that limit benefit reductions for different categories of participants:
    • Participants age 80 or older are fully protected, and their benefits cannot be reduced. (See FAQ 15 for more details on how age protections work.)
    • Participants between 75 and 79 are partially protected, using a sliding scale based on age that increasingly limits benefit reductions the closer a participant is to age 80. (See FAQ 15 for more details on how age protections work.)
    • Participants receiving a disability pension benefit from the Fund are fully protected and they, too, cannot have their benefits reduced. (See FAQ 17 for more details on how disability protections work.)
    Additionally, no participant's benefit can be reduced below 110% of what the PBGC is supposed to pay if the Fund ran out of money (assuming the PBGC itself has the money to do so). (See FAQ 23 for more details about the PBGC guarantee.)

    Taking all of this into consideration, the Fund's actuaries estimate that nearly 60% of our participants are completely protected from benefit reductions under MPRA. These participants will therefore see no change to their current pension checks or the amount they have earned thus far and expect to receive in the future.
  17. How do the age protections in the Multiemployer Pension Reform Act (MPRA) work for participants age 80 and older and for those ages 75-79?
    Participants are fully protected from benefit reductions under the Multiemployer Pension Reform Act (MPRA) if they are 80 years of age or older.

    Participants receive partial protection from benefit reductions if they are between 75 and 79 years of age. These protections are calculated on a sliding scale based on age. The older a participant is, the less his or her benefits can be reduced.

    Both of these MPRA protections are determined based on a participant's age on the last day of the month in which reductions become effective. For example, if MPRA benefit reductions are first made effective on January 1 of a year, then the protections are applied based on a participant's age on January 31 of that year.

    These same MPRA age protections apply to beneficiaries receiving survivor benefits at the time that reductions are effective, based on the beneficiary's age on the last day of the month in which reductions are effective.

    A beneficiary who is not yet receiving a benefit will receive a reduced benefit if the participant's benefit is reduced.

    For example, if a participant is 80 at the time reductions are effective and his/her beneficiary is 74, then benefits for both the participant and the beneficiary are fully protected from benefit reductions (because the participant is age 80). If a participant is 74 and his/her beneficiary is 80, then benefits for neither the participant nor the beneficiary are protected from benefit reductions (because the participant is age 74).
  18. If my benefit is reduced, will it revert to the unreduced amount when I turn 80 years old?
    No. If your benefits are reduced under the Multiemployer Pension Reform Act (MPRA), they will not revert to the previous unreduced benefit amount when you reach age 80.
  19. How do the disability benefit protections work under the Multiemployer Pension Reform Act (MPRA)?
    Participants receiving a disability benefit from the Fund cannot have that benefit reduced under MPRA. However, the beneficiary of a participant who receives a disability benefit can have his or her benefit reduced.

    Note: Receiving a disability benefit from the Social Security Administration plays no role in this protection. Also, if a participant was disabled at the time of retirement but took an early or normal retirement pension instead of a disability pension, that participant would not receive this protection. Under MPRA, this protection applies only to participants who receive a disability pension benefit from the Fund.
  20. What would happen if the Fund did run out of money (became insolvent)?
    In the event the Fund runs out of money (becomes insolvent), the federal insurer, the Pension Benefit Guaranty Corporation (PBGC), is supposed to provide funding for the Fund to continue paying benefits up to a certain amount. (See FAQ 23 for more details on the PBGC guarantee.)

    There are no age or disability protections if the Fund becomes insolvent. This is another important reason for the Fund to avoid insolvency.

    It's also important to note that the PBGC's multiemployer program is projected to become insolvent by 2025. If that happens, then there will be little to no PBGC guarantee to fall back on. In this scenario, if the Fund became insolvent, then all participants' benefits would be reduced to almost nothing. (See FAQ 25 for more details on the PBGC multiemployer program's projected insolvency.)

    That's why it's so important for us to ensure that the Fund avoids insolvency. While there is no doubt that benefit reductions for participants would be painful and difficult, they cannot be worse than the near-total reductions that would take place for all participants if the Fund and the PBGC both ran out of money.
  21. Now that the Fund is entering critical and declining status, what is the timeline and what steps must take place before benefit reductions can go into effect?
    The Trustees expect to submit by the end of 2019 an application to the Treasury Department under the Multiemployer Pension Reform Act (MPRA). This application takes several months to complete because a MPRA application is extremely complex and can run hundreds of pages in length.

    Treasury has up to 225 days to review the application. If Treasury approves the application, there will be a vote on the application among Fund participants and beneficiaries of deceased participants receiving benefits. Treasury will mail out ballots and voters will mail them back to Treasury.

    Under MPRA, there are some unique aspects to the voting process. For an approved application to be rejected, a majority of eligible voters must vote against it. So, unreturned ballots are counted as "yes" votes. Depending on the results of the vote, Treasury will give final authorization for approved benefit reductions to go into effect.

    The MPRA approval process should take at least a year including review, public comment, Treasury approval, and the participant vote, so any benefit reductions approved by Treasury would not be expected to start until late 2020 or the beginning of 2021 at the earliest.
  22. Have the Trustees appointed a retiree representative to advocate for the interests of participants who are no longer active?
    Before an application is submitted, the Multiemployer Pension Reform Act (MPRA) requires a large fund like this one to appoint a retiree representative who will advocate for the interests of retirees and deferred vested participants. (A "deferred vested" participant is someone who has earned a pension benefit and is no longer working in covered employment but hasn't begun to collect a pension yet.)

    The Trustees have appointed Brad Eggen, a Minneapolis-St. Paul-based AFM-EPF retiree, to fill this role.

    Brad has been an AFM trumpet player and brass instructor since his teens, and has worked full-time in the nightclub and jobbing scene. He has been the President of the Twin Cities Musicians Union, AFM Local 30-73, continually since 1990, including during the Minnesota Orchestra and St. Paul Chamber Orchestra lock-outs, and he has served as the Finance Committee Chair at recent AFM Conventions.

    Brad has a master's degree in public affairs and a law degree. He has taught middle school instrumental students as a Band Director and has taught college courses in music business and arts administration. He is a practicing lawyer who has earned the Minnesota State Bar Association's President's Award for his service on a task force for Rules of Professional Conduct. He has been designated a "Super Lawyer" several times.

    Brad has expressed his commitment to keeping retirees and deferred vested participants informed as MPRA alternatives are examined. Although not formally appointed until recently, Brad has been attending Trustee meetings for the past eighteen months and is participating in discussions about the anticipated plan for benefit reductions.

    Additional information about the Retiree Representative is available on Brad's website at www.afmretireerep.org.
  23. If I file to receive benefits now, will I be protected if benefits are reduced later under the Multiemployer Pension Reform Act (MPRA)?
    Active workers and retirees are both subject to benefit reductions under MPRA. Therefore, starting to receive benefits now would not necessarily provide additional protection from benefit reductions.

    That said, regardless of the specifics of a plan for benefit reductions, each participant's personal and financial situation is unique, and the Fund cannot advise what is best for any individual. If you are deciding whether to file to receive your benefits now, we recommend that you discuss this situation with a personal financial and tax advisor.
  24. If benefit reductions are made, could they be restored in the future?
    If the Fund were to progress financially to a sufficient extent after reductions are made, then benefits could be restored. This could mean partially or completely reversing benefit reductions imposed under the Multiemployer Pension Reform Act (MPRA) prospectively. If benefits were restored for people who have already begun receiving pension payments, the restoration would have to be applied on an equitable basis, just like the reductions. Benefits could only be restored for those who have not yet begun receiving pension payments if there were an equivalent increase for those who have.

    However, with limited exceptions, benefit restorations could be done only if, at a minimum, the Fund is projected to avoid insolvency indefinitely, taking into account the proposed benefit restoration. There also may be additional standards that have to be met, depending on the type of restoration.

    Benefit reductions could also theoretically be restored if there were new federal legislation that provides other ways for troubled multiemployer funds to avoid insolvency. Some of the legislative proposals introduced last year would have allowed (or even required) plans that previously reduced benefits to restore some or all of those benefits. This includes the Butch Lewis Act, which the Fund supported, but which unfortunately did not pass in the last Congress. Chairman Richard Neal of the House Ways and Means Committee has reintroduced the House version of that bill, which is called the Rehabilitation for Multiemployer Pensions Act. It, too, requires restoration.

    At this point, it is hard to speculate what future legislation would provide, if it were enacted. The Trustees are actively engaged with Congress to try to produce the best possible outcome for participants. (See FAQ 26 for more details about the status of possible legislation.)

  25. Pension Benefit Guaranty Corporation (PBGC)

  26. What is the PBGC? How much of my pension does it insure?
    The Pension Benefit Guaranty Corporation (PBGC) is a government agency that insures pension benefits up to the maximum amounts set by federal law. The Fund is under the PBGC's multiemployer program, which covers approximately 1,400 plans and about 11 million participants.

    The PBGC's guarantee is based in part on the number of "years of service" a participant has earned in the Fund. For example, the maximum guarantee for a participant with 30 years of service is $12,870 per year. The maximum guarantee for a participant with 10 years of service is $4,290. The other part of the guarantee is based on your accrual rate; not everyone is guaranteed these amounts if you have this many years of service. The PBGC's website contains more detailed information on how the maximum guarantees are calculated.

    For the purpose of calculating your PBGC guarantee, "years of service" are your "years of vesting credit" under the Fund. AFM-EPF participants earn "years of service" based on covered earnings (which are wages on which pension contributions were made) in each calendar year, as follows:
  27. How Much Does the Fund Pay the PBGC?
    All insured multiemployer pension plans pay annual, per-participant premiums to the PBGC. These premiums are mandated by law and are not based on a plan's funded status. For 2019, multiemployer plan premiums are $29 per plan participant, increased from $8 per plan participant in 2007. The Fund's required PBGC premiums increased from approximately $400,000 to $1,450,000 in just 12 years (from 2007 to 2019) due to the enormous increases in the per-participant annual premium.

    Some legislative proposals in Congress have included significant increases to PBGC premiums, which, if passed, would drain the assets of troubled plans like the AFM-EPF even faster, thereby hastening possible insolvency. The Trustees oppose such increases.
  28. What happens if the PBGC runs out of money?
    The PBGC's multiemployer program is projected to become insolvent by 2025. It is hard to predict what would happen if the PBGC's multiemployer program becomes insolvent. However, without assets beyond what it collects in premiums, its guarantees for benefits would likely be reduced to almost nothing.

  29. Federal Legislation

  30. Will there be legislation that helps the Fund? What are the Trustees doing to push for that legislation?
    In February 2018, Congress established a Joint Select Committee on the Solvency of Multiemployer Pension Plans to take a comprehensive look at the multiemployer pension crisis and develop legislation to address it by November 30, 2018. Over the following nine months, the Committee held five hearings to hear from participants, employers, government officials and other experts.

    Throughout this process, AFM-EPF Trustees, the Federation and employer representatives spent days on Capitol Hill, meeting with legislators and their staffs to advocate for a solution that addresses the financial issues facing our Fund and treats our participants fairly. The Fund's website also provided tools for participants to call or send emails to their own Members of Congress and the Joint Select Committee, urging them to take action.

    While the Joint Select Committee members negotiated for weeks to reach a bipartisan compromise and made considerable progress, they were unable to agree on a solution by November 30, 2018.

    However, with Democrats now in control of the House, the landscape has changed in Washington. Members of Congress are picking up the work of the Joint Select Committee and moving it forward through the normal legislative process. For example, Congressman Richard Neal, the Chairman of the House Ways and Means Committee, has already reintroduced the House's version of the Butch Lewis Act (called the Rehabilitation for Multiemployer Pensions Act), to mark the Democrats' position on a solution.

    With a national election looming in 2020, there is an opportunity to make something productive happen for multiemployer funds in 2019. This is especially true given the large number of participants across the U.S. whose multiemployer funds are approaching insolvency.

    The Trustees, the Federation and a great many of our employers will continue to be vocal advocates for our Fund's interests every step of the way. We will continue to alert participants at key moments when it is particularly important that Members of Congress hear from participants. As was the case last year, it will take the combined voices of participants, multiemployer funds, unions and employers across the country to achieve a positive outcome in Washington. Participants can use the tools on our website to contact their Members of Congress.
  31. Why even consider benefit reductions when Congress is working on legislation that could help plans like ours?
    While the Trustees are preparing an application to reduce benefits under the Multiemployer Pension Reform Act (MPRA), they also continue to push for legislation in Congress that will provide assistance to the Fund and the more than 120 other multiemployer pension funds covering 1.3 million participants across the nation now facing the same possibility of insolvency. The Trustees will strongly advocate for a solution that directly addresses the financial issues facing our Fund, while also treating our participants equitably.

    Nevertheless, the Trustees feel that it is important to keep pursuing two tracks simultaneously: Energetically advocating for federal legislation that fully sustains the long-term solvency of our Fund, while also taking every action available under existing federal law to prevent the Fund from running out of money to pay benefits. The stakes are too high to put all of our eggs in one basket.

    Nobody wants to see benefits reduced. But, unless Congress steps in with a legislative solution, something it has so far refused to do, the options boil down to reduced benefits now or running out of money and having almost no benefits later. We understand that participants don't want to hear that we need to take away a portion of the pension they have been relying on, but that's the awful choice we face.

    And, there is no advantage in delaying making that choice. As time progresses, the date of insolvency will draw closer, the Fund's assets will shrink, and the liabilities will grow. The longer we wait, the larger reductions will have to be. And at some point, the Fund's financial situation will deteriorate to the point that we will no longer be eligible to use MPRA, in which case there will be no alternative but to wait for insolvency.

    If we move forward and Congress later passes legislation that allows us to withdraw our MPRA application or roll back benefit reductions while still avoiding insolvency, the Trustees can look at doing just that. In fact, this was required by the Butch Lewis Act, which unfortunately did not pass in the last Congress, but Chairman Neal of the House Ways and Means Committee has reintroduced the parallel Rehabilitation for Multiemployer Pensions Act in the Democrat-controlled House that does require the same thing.

  32. General

  33. If the Fund isn't healthy, why are we hanging on to it?
    The Trustees believe that the Fund helps participants live and work with dignity because benefits are paid as a monthly annuity for their lifetimes. A pension should be only a piece of a retiree's income—one of the three legs of the stool along with Social Security and personal savings. It's difficult for individuals to ensure that a lump sum will last appropriately throughout retirement; they end up running out of money or they have money left over from lowering their standard of living in retirement.
  34. What are the advantages of participating in a pension plan such as the AFM-EPF versus a 401(k) or 403(b) plan, if the benefit multiplier remains at $1.00?
    Even though the current $1.00 multiplier is lower than in the past, the AFM-EPF still has important advantages over a defined contribution plan, such as a 401(k) or 403(b) plan. A retired participant receives pension benefit payments monthly for the rest of his or her life (and a reduced amount is received by the participant's beneficiary, if the participant elects a joint and survivor benefit). In contrast, payouts from a 401(k) or 403(b) plan are much less insulated from market fluctuations, and therefore provide less predictability and stability. And, unlike a pension benefit, once your account in a 401(k) or 403(b) plan is fully withdrawn, that source of retirement income ceases — regardless of how much longer you live.
  35. What can I do as a participant and AFM member to help the Fund?
    AFM members can help the Fund by continuing to pursue work engagements covered by a union collective bargaining agreement requiring contributions to the Fund and ensure that those engagements are reported to the Fund. All such covered employment, including single engagements covered by an LS-1, adds more contributions into the Fund.

    Some Fund participants have discussed the idea of holding benefit concerts to raise money for the Fund. Even though benefit concerts will not be able to raise enough money to stave off insolvency, innovative ideas such as this would be a welcomed source of supplemental revenue. These concerts need to be organized by agreement between an employer and an AFM local, so participants may reach out to those parties to arrange that. The Fund has information on the website to help employers and AFM locals set up the proper documentation.
  36. How are the Trustees selected? What is the role and structure of the Board of Trustees?
    Under federal law, multiemployer pension funds like the AFM-EPF are administered by union and employer trustees with equal voting power. The Fund has sixteen Trustees – eight Union Trustees and eight Employer Trustees.

    The AFM President appoints the Union Trustees. According to the AFM bylaws, at least three of the Union Trustees must be rank-and-file working musicians. Employer Trustees are appointed by the rest of the Employer Trustees or by the employers.

    While the Trustees receive ongoing education and training, they are not professionals in investing or actuarial analysis. This is typical across the other 1,400 multiemployer pension funds because most recognize the importance of having trustees who are stakeholders who understand the industry and act in the best interest of participants. In the case of the Fund, the Union Trustees are working and retired musicians - just as ironworkers, actors and machinists serve as union trustees of their respective funds. The AFM-EPF Employer Trustees are current or former executives from the film, recording, symphonic, television and theater industries.

    The Trustees retain a wide range of experts to provide them with guidance and make certain investment decisions within parameters the Trustees establish. These experts include:
    • The actuary, Milliman, which evaluates the funded status of the Fund and makes projections to inform the Trustees' decisions.
    • The outsourced chief investment officer, Cambridge Associates, which oversees day-to-day decisions for the Fund's investment portfolio - including the selection of asset managers - acting within parameters set by the Trustees.
    • The independent monitoring fiduciary, Meketa Investment Group, which assists the Trustees in monitoring Cambridge's performance.
    • The law firms of Proskauer Rose LLP and Cohen, Weiss and Simon LLP, which provide legal counsel.
    • The certified public accountants, WithumSmith+Brown, which advise the Trustees on accounting and financial reporting issues. Withum also conducts an annual independent audit.
    Many of the Trustees also attend educational conferences held regularly by the International Foundation of Employee Benefit Plans or other groups, which include rigorous training on plan funding, investments, legislative updates and other issues.
  37. What does the Fund Office do?
    The primary function of the Fund Office is to administer the pension benefits defined by the Fund Documents, including compliance with regulatory authorities. In addition, the Fund Office receives and processes contributions and related reports from employers and performs recordkeeping of investment transactions along with all other accounting transactions, which are audited by the Fund's independent Certified Public Accountants. The Fund Office does not make plan design or investment decisions - those responsibilities rest with the Trustees.

    The following may give you a sense of the degree of support required for a large, complex Fund like ours. The Fund Office:
    • Maintains current databases for over 5,500 employers and 3,700 collective bargaining agreements and historical databases back to AFM-EPF inception in 1959.
    • Processes over 25,000 contribution checks annually (representing approximately 55,000 engagements with total contributions of more than $62 million). These contributions result in over 650,000 engagement records to be included in the earnings accounts of approximately 38,500 participants.
    • Completes over 500 pension estimates and processes an average of 1,600 new pensioners each year. Currently, pension benefits are paid to over 16,000 pensioners and beneficiaries monthly.
    • Maintains participant data so accurate that less than 1% of the over 50,000 annual covered earnings statements distributed annually are returned with bad addresses.
    • Fields approximately 10,000 phone inquiries and responds to approximately 2,000 emails each fiscal year.
    The Fund Office prides itself as a responsive, well-run, professional organization.
  38. Do the Fund Staff and Trustees participate in the AFM-EPF?
    The Fund Staff participate in the AFM-EPF. The Union Trustees are Fund participants by virtue of being AFM or Local Union employees, or by working for other employers who contribute to the Fund. Therefore, the Fund Staff and Union Trustees are subject to benefit reductions under MPRA, just like other participants.
  39. What is the Trustees' position on the litigation filed against them by two Fund participants?
    The Trustees' position is as follows:

    The Trustees believe that this lawsuit has no merit. We have always taken our fiduciary responsibility seriously. We have consistently made our decisions on the advice of respected and experienced actuaries and investment experts, and we have always acted in the best interest of the Fund's participants.

    We will continue to contest this lawsuit. At the same time, we will continue to focus on doing everything we can to preserve the benefits of our participants.

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American Federation of Musicians and Employers' Pension Fund