Fund Status FAQs

ARPA stands for the American Rescue Plan Act of 2021. ARPA allows certain troubled multiemployer pension plans to obtain special financial assistance through the federal Pension Benefit Guaranty Corporation (PBGC). The special financial assistance is intended to provide these plans with the additional funding they need so that they are projected to be able to pay benefits and administrative expenses through 2051, without reductions to participants' benefits. Our Plan was approved for $1,440,137,839.00 of special financial assistance plus $87,701,535.81 of interest on the financial assistance amount since December 31, 2022.

Special financial assistance under ARPA is paid in the form of a lump-sum grant and does not need to be repaid.

No. ARPA does not impose any reductions to participants' benefits in plans that receive special financial assistance.

The American Federation of Musicians and Employers’ Pension Fund’s (AFM-EPF) rules do not allow contribution rate reductions.

Also, the Special Financial Assistance is intended to provide the additional funding to pay benefits and expenses through 2051, without any changes to contribution levels. So, plans receiving special financial assistance generally are not allowed to permit reductions in employer contribution rates.

Under the rules for receiving special financial assistance, the Plan is still considered to be in “critical” status through the Plan year ending 2051 – and subject to the restrictions that apply to plans in critical status – even if it would otherwise not be in critical status based on the funding measures that apply to plans without SFA.

The Plan received $1,440,137,839.00 of assistance plus $87,701,535.81 in interest on the assistance amount since December 31, 2022.

The special financial assistance under ARPA is intended to provide plans with the additional funding they need so that they are projected to be able to pay benefits and administrative expenses through 2051, without reductions to participants' benefits. The calculation to determine the amount of special financial assistance the Plan received started with the assets of the Plan as of December 31, 2022, then factored in the expected income (assumed contributions and investment returns) and outflow (assumed benefits and expenses) from 2023 through 2051.

As a result of the receipt of special financial assistance, the AFM-EPF will no longer be in critical and declining status. (However, the Plan is still considered to be in critical status. See FAQ 14.)

The special financial assistance is intended to provide our Plan with the additional funding we need so that we are projected to be able to pay benefits and administrative expenses through 2051. This calculation was made using some assumptions required by ARPA.

Now that the Plan has the special financial assistance, in order to project the financial health of the Plan decades into the future, the Plan’s actuaries use a number of assumptions (based on what they think are reasonable expectations for our Plan, rather than what was mandated by ARPA) to assess:

• How much income the Plan will have each year in the future – this is based on current provisions in each of the thousands of collective bargaining agreements/contracts under the Plan, assumptions about the future levels of work that will generate contributions to the Plan, and future investment returns.
• How much the Plan will pay out each year in the future – this is based on the benefits that have already been earned and assumptions about future benefits earned at the current $1 multiplier, how long these benefits will be paid out to each retiree and beneficiary based on the demographics of the group and assumptions about mortality, and forecasts of expenses such as Fund personnel, Fund professionals, and overhead rent for the Fund office.

Clearly, not all of the assumptions will be met. That’s why this rigorous assessment is required by law to be updated each year and reported to the PBGC under the special financial assistance compliance reporting requirements.

To the extent the Plan can outperform some of the assumptions that ARPA required us to use, it may remain solvent long beyond 2051. Right now, we are cautiously optimistic. Market conditions, investment returns, and future contributions to the Plan are a few of the many factors that will have an impact on the Plan’s financial health in the decades to come and cannot be predicted with certainty. As always, we will monitor our progress along the way and communicate that to you.

ARPA requires plans to keep the special financial assistance separate from other plan assets. Pursuant to PBGC rules, 33% of special financial assistance may be invested in "return-seeking assets" and at least 67% must be in investment-grade, fixed-income securities.

All benefits and expenses will be paid from special financial assistance funds until these funds are used up which is expected to occur in less than ten years. Given this purpose and relatively short time frame, it makes sense to keep volatility to a minimum for this portion of the Plan’s assets. As a result, the Plan currently expects to invest 100% of the special financial assistance in investment-grade, fixed-income securities.

It’s important to note that we evaluate investment diversification for the Plan as a whole. The special financial assistance is only part of the Plan’s total assets. The Plan’s non-special financial assistance investments are being adjusted, as needed, to create a well-balanced portfolio overall.

This investment strategy provides a distinct advantage. While benefits and expenses are paid from the segregated special financial assistance funds, the Plan’s remaining assets can be focused on investment returns and will have the opportunity to grow without the burden of a constant outflow of cash.

The Plan uses a number of professional investment managers with proven long-term track records to manage the Plan’s assets. Cambridge Associates, LLC, an experienced and highly regarded investment consulting firm, serves as the Plan’s independent Outsourced Chief Investment Officer (OCIO) and, in that role, is responsible for the selection, fee negotiation and, monitoring of each of the Plan’s investment managers. In addition, the OCIO will determine, when appropriate, the removal of investment managers. The OCIO reports to the Trustees and their Investment Committee on a regular basis regarding the investment performance of the Plan and its individual managers.

The Trustees also employ an OCIO Independent Monitoring fiduciary, Opus Investment Advisors, LLC, which assists the Trustees in their ongoing review of the OCIO’s performance. Opus is highly regarded for its expertise and independence.

The Trustees rely on the OCIO and Opus to assist in developing the asset allocation. Opus is responsible for choosing the Plan’s asset allocation, subject to the Trustees approval, and for providing ongoing advice and recommendations to the Committee and the Trustees.

Pension funds reduce risk and have the potential to enhance their expected returns by diversifying their investments across multiple asset classes (types of investments). When you diversify, it is prudent to rely on experts in each particular asset class. Where we have larger allocations to a particular asset class, we hire multiple managers in that asset class so we aren’t exposed to only one manager in that class and for strategic reasons, such as hiring managers who have styles that complement each other.

When you look at the dollar amount of the fees, they may seem high; however, investment management fees are typically paid as a percentage of the assets under management, and those fees vary by asset class. For example, risk-seeking assets generally incur higher fees than non-risk-seeking assets. The Plan’s independent Outsourced Chief Investment Officer (OCIO), Cambridge Associates, LLC, closely monitors fees and negotiates with investment managers on a regular basis to ensure fee levels are appropriate for each asset class.

Investing pension plan assets is very different than investing your personal savings, such as in a 401(k):

• The horizon is different – with your own savings, you can adjust the risk level of your investments based on how many years you have until you plan to retire; a pension has thousands of horizons all at the same time, running the gamut from those just beginning their careers to those who have already been retired for many years, and everything in between.
• Unlike your personal savings, pension plans have a constant outflow of funds paying benefits and expenses. The volatility inherent in risk-seeking assets dampens the benefits of compounding that can be gained when funds are left untouched, as in a 401(k). Receiving special financial assistance has given the Plan a rare opportunity to take more advantage of compounding over the next several years. While benefits and expenses are paid from the segregated special financial assistance funds, the Plan’s remaining assets can be focused on investment returns and will have the opportunity to grow without the burden of a constant outflow of cash.
• As an individual, you can invest according to your personal risk tolerance. A pension provides benefits to thousands of participants. It has to carefully balance risk, volatility, and potential investment returns to maximize risk-adjusted returns over the long term instead of year by year.

All of this means that the Plan’s results may be more conservative than those of an individual investor – the highs may not be as high, and the lows not as low.

Yes. Benefit improvements are not permitted in the first 10 years after receiving the special financial assistance under ARPA unless they are for future accruals only and fully paid for with new contribution increases not initially considered in the application. After 10 years, a plan may request an exemption from this rule if it can demonstrate that it will avoid insolvency even with the benefit improvement.

A plan receiving ARPA special financial assistance is also not permitted to allow reductions in an employer's contribution rate. More specifically, an employer's contribution rate in each collective bargaining agreement cannot be any lower than it was on March 11, 2021, the date that ARPA was signed into law.

These restrictions on benefit increases and contribution rate reductions will expire after 2051.

There is little impact on the calculation of withdrawal liability, at least in the short- to medium-term.

The special financial assistance is not recognized all at once when calculating withdrawal liability. In accordance with the final rule from the PBGC, it will be phased in over several years. For this Plan, special financial assistance will be recognized in the calculation of withdrawal liability over seven years, beginning with the 2024 Plan year.

The regulations also prescribe the methodology for selecting the interest rates that must be used during the ten plan years following the receipt of the financial assistance to determine withdrawal liability amounts and payment schedules. This is the same methodology that was used by the Plan before receipt of special financial assistance.

As of January 2023, the Plan had roughly $1.7 billion in assets and about $3.5 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 Plan is about $1.8 billion underfunded.

However, as a result of the receipt of special financial assistance, the AFM-EPF will no longer be in critical and declining status.

The special financial assistance granted to the AFM-EPF under ARPA is intended to provide the Plan with the funding needed so that it is projected to be able to pay benefits and administrative expenses through the plan year ending in 2051, without reductions to participants' benefits. To the extent the Plan can outperform some of the assumptions that ARPA requires us to use, it may remain solvent beyond that. Right now, we are cautiously optimistic. Market conditions, investment returns, and future contributions to the Plan are a few of the many factors that will have an impact on the Plan’s financial health in the decades to come and cannot be predicted with certainty. Of course we will monitor our progress along the way.

Under the rules for receiving Special Financial Assistance, the Plan is still considered to be in “critical” status through the Plan year ending 2051, even if it would otherwise not be in critical status based on the funding measures that apply to plans without SFA. That means that in future years, no matter its financial health, the Plan is required to provide a Notice of Critical Status each year, and the Plan’s Annual Funding Notice will describe the Plan as in “critical” status.

No. The Trustees have no plans at this time to change the current $1.00 multiplier for future service.

Under the rules for receiving Special Financial Assistance, the Plan is not allowed to increase the multiplier unless certain conditions are met. ( See FAQ 11 for more information on these conditions.)

The PBGC is a government insurance agency that provides financial assistance to plans that no longer have enough money to pay benefits on their own. Pension plans pay annual premiums to the PBGC. This financial assistance is independent of the new special financial assistance for troubled multiemployer plans created by ARPA as described above.

Although the PBGC provides financial assistance to insolvent plans, it does not necessarily "cover" the full benefit amount. Rather, it insures and pays benefits up to a maximum amount set by federal law, which is known as the PBGC "guarantee."

The PBGC's website has more information on how the guarantees are calculated.

The PBGC is also charged with administering ARPA's special financial assistance program for troubled multiemployer plans. ( See FAQs 1 through 12 for more information on ARPA.)

All defined benefit 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. PBGC premiums are indexed each year for inflation, so they increase over time. In 2023, the Plan paid $1.8 million in PBGC premiums.

For 2024, multiemployer plan premiums are $37 per plan participant, but the per participant annual PBGC premium will increase to $52 in 2031. Plans must continue to pay PBGC premiums after receiving the ARPA special financial assistance, the amount of which includes the projected PBGC premiums through 2051.

Under federal law, multiemployer pension funds like the AFM-EPF are administered by union and employer trustees with equal voting power. The Plan 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 Plan, 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 theatre 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 Plan and makes financial projections to inform the Trustees’ decisions.
• The outsourced chief investment officer (OCIO), Cambridge Associates, which oversees day-to-day decisions for the Plan’s investment portfolio—including the selection of asset managers—acting within established parameters.
• The independent monitoring fiduciary, Opus Investment Advisors, which assists the Trustees in monitoring the OCIO’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.

New Trustees meet for several hours with each of the Plan’s professional advisors, i.e., Counsel, Actuary, Auditor and the Plan’s Outsourced Chief Investment Officer (OCIO), to review matters within each advisor’s and professional’s expertise. They also meet with the Fund’s Executive Director and such of her Directors as she may designate to review basic operations of the Fund and the Fund’s various Committees, as well as the Trustees meeting schedule.

New Trustees each receive the Trustee Handbook, which, among other things, contains critical documentation, including the governing Trust Agreement and Plan document, the Summary Plan Description, certain administrative guidelines and procedures, contact information and the Fund’s Investment Policy Statement. In addition, new Trustees receive the previous year’s meeting minutes, the most recent audited financial statements and actuarial valuation, and the most recent investment performance report.

Each year, all Trustees have the opportunity to attend up to two educational conferences, seminars, and similar programs and events sponsored by, among other groups, the International Foundation of Employee Benefit Plans (IFEBP). There, the Trustees obtain important insights and knowledge relevant to performing their roles on behalf of the Fund prudently and for the benefit of the Fund’s participants, including foundational principles of fund management and governance, current legislative and regulatory developments under ERISA, and other laws affecting the Fund, employee benefit plan administrative issues, economic and investment matters, and other issues relevant to the Fund. Trustees receive periodicals, newsletters, client bulletins and memoranda, and other relevant updates from the educational organizations and the Fund’s professional advisors.

The Fund’s advisors also provide ongoing education and training at regular Trustee meetings and at special educational Trustee meetings as the Trustees may schedule in their discretion from time to time.

While the Union and Employer Trustees do not receive compensation for performing their Trustee duties, they are reimbursed for expenses actually incurred in attending Trustee and Committee meetings, educational conferences and otherwise performing their duties.