Last updated on 03/11/2019

    Status of the Fund

  1. What is the Fund's funded status today?
    As of February 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.

    After the end of each plan year (March 31 for our Fund), the Fund's actuary is required to make a determination of the Fund's status under the law.

    For the plan year from April 1, 2018 to March 31, 2019, the Fund is in critical status, as it has been since 2010. Simply put, critical status means that the Fund faces a significant funding shortfall between assets and liabilities.

    Although the Fund will remain in critical status through March 31, 2019, the Fund's actuary projects that it will soon enter critical and declining status. Entering critical and declining status means that the Fund is projected to run out of money to pay benefits within 20 years. (See FAQ 4 for more details about critical and declining status.)

    Based on the current projections, the Fund's actuary has advised that it is likely that the Fund will enter critical and declining status for the next plan year - beginning April 1, 2019. The actuary has also advised that even if the Fund avoids entering critical and declining status for this next plan year, the Fund is unlikely to avoid it for more than another year or two after that.

    The long-term math simply doesn't work in part because the AFM-EPF is a mature plan, with the retiree population growing faster than the active population, which means that benefit payments are growing faster than contributions. With every passing month, we have to pay out much more in benefits than contributions or investment earnings bring in. So, for example, for the fiscal year ending in March 2018, while the Fund paid out $171 million in benefits (an increase of $90 million over 2004), it received only $68 million in contributions (an increase of $23 million over 2004).

    Given this reality, the Fund is projected to run out of money - probably within 20 years - if action is not taken now. As a result, when the Fund enters critical and declining status, the Trustees 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 11 for more details about the steps the Trustees plan to take and why.)
  2. Are there any plans to lower the benefit multiplier for future service?
    The Trustees' goal is to avoid reducing the $1.00 multiplier. We are not anticipating changes to that multiplier at this time.
  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 multiplying the amount of contributions paid to the Fund on a participant's behalf for each benefit period described in the following table (rounded to the nearest $100) divided by 100 by a specified dollar amount based on your age - the "multiplier".

    [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. Critical and Declining Status

  5. 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 would be 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 FAQs 13-20 for information on how benefit reductions could be structured.). Although reducing earned benefits will be painful, the Trustees are planning to seek permission to do so, absent legislative relief, because the alternative of running out of money leaves everyone with almost no benefits in the future.
  6. When is the Fund expected to enter critical and declining status?
    The Fund is likely to enter critical and declining status for the plan year beginning April 1, 2019. Entering critical and declining status means that the Fund is projected to run out of money to pay benefits within 20 years. Even if the Fund avoids entering critical and declining status for the plan year beginning April 1, 2019, we very likely won't be able to avoid it for more than another year or two. The long-term math simply doesn't work. With every passing month, we have to pay out much more in benefits than contributions or investment earnings bring in.
  7. Can the Fund's status be fixed with employer contribution increases?
    While the Federation has negotiated significantly increased employer contributions and the Trustees recently updated the Fund's Rehabilitation Plan to increase the required contribution rate, it is clear that additional contributions alone are not going to fix this problem. Our benefit liabilities are increasing much faster than the Federation 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 realistic.
  8. How will I know if the Fund enters critical and declining status?
    We will notify participants if the Fund enters critical and declining status via the Fund website and through postal mail or eDelivery. Note: If you want email delivery, you must register on our website and opt for eDelivery.

    The Fund's status at the start of each fiscal year determines the Fund's status for the entire fiscal year. After the end of the Fund's fiscal year on March 31, 2019, the Fund's actuary will begin the process of determining whether the Fund has entered critical and declining status. That work will take some time to complete. Once that determination has been made, all participants and beneficiaries will be notified—no later than this summer. The deadline for the Plan actuaries to certify the Plan's status for the plan year beginning April 1, 2019 is June 28, 2019.
  9. Will I keep getting my pension check if the Fund enters critical and declining status?
    Yes. If the Fund enters critical and declining status, you will continue to receive your pension check. Even if the Trustees agree to reduce benefits as a last resort to allow the Fund to continue paying benefits and then get U.S. Treasury Department approval, benefits will not and cannot be reduced to zero. In addition, if the Fund enters critical and declining status for the next fiscal year beginning April 1, 2019, we do not anticipate any approved reductions to become effective until late 2020 or early 2021 at the earliest.
  10. Will I continue to earn new benefits if the Fund enters critical and declining status?
    If you continue to work in covered employment for a signatory employer that contributes to the AFM-EPF, you will earn new benefits regardless of whether the Fund becomes "critical and declining."
  11. If the Fund enters critical and declining status, will my benefit automatically be reduced?
    No. While the Trustees have determined that benefit reductions are the only remaining course of action, absent legislative relief, to prevent the Fund's insolvency if the Fund becomes critical and declining, nothing would happen immediately.

    Under the Multiemployer Pension Reform Act (MPRA), if a fund enters critical and declining status, the Trustees can seek to reduce participants' benefits by an amount sufficient to avoid insolvency. (See FAQs 13 - 20 for information on how benefit reductions could be structured.)

    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.

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

  13. Why would the Trustees ever consider reducing benefits I have already earned?
    Unfortunately, if the Fund enters critical and declining status, the Trustees are left with two terrible 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 multiemployer program 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, everyone's benefits will be reduced to virtually nothing - an unacceptable result. (See FAQ 21 for more details about what would happen if the Fund ran out of money and see FAQs 26 and 28 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 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 FAQs 13-20 for information about MPRA's protections against benefit reductions that apply to some participants.)

    Trustees are planning, absent legislative relief, to seek permission to do so 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.
  14. If benefits are cut, when will they be cut?
    Any benefit reductions approved by Treasury would not be expected to start until late 2020 or early 2021 at the earliest. (See FAQ 22 for more details about the application process and the timeline for benefit reductions.)

    Earned benefits generally cannot be cut unless the Fund enters critical and declining status. If the Fund enters critical and declining status for the fiscal year beginning April 1, 2019, the Trustees plan to apply to the U.S. Department of the Treasury for approval to reduce participants' benefits by an amount sufficient to avoid insolvency.

    Both Congress and Treasury created a long and complicated approval process under the Multiemployer Pension Reform Act (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 would 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. In fact, Treasury has stated that applications for Funds like ours should have an effective date for benefit cuts that is no earlier than one year from the date of application.
  15. If benefits are cut, how much will they be cut?
    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 cut.

    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 it is 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 cuts that are absolutely necessary. This means that there is a very specific allowance for cutting benefits, and the Fund must prove to Treasury that we would be 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.
  16. How would the Trustees decide how to allocate cuts among participants?
    As a result of the Goldilocks rule (See FAQ 13 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 strictly 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 FAQ 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.

    To prepare for a MPRA application, the Trustees are currently looking at alternative ways that benefits could be reduced equitably under MPRA. There are different options the Trustees could consider, including some that other pension funds have used in their applications.

    For example, one equitable factor is to look at the history of benefit improvements and how high the multiplier was when participants earned their benefits. (See FAQ 3 for an explanation of how the multiplier works.) If the Trustees focused on that factor, they could consider reducing benefits earned at the $4.65 and other high multipliers, so that those benefits are calculated instead at a lower multiplier. We do not know now which multipliers would be reduced under this scenario, because benefit reductions must be based on the financial state of the Fund as of the end of the fiscal quarter before the quarter in which the application is submitted. However, it is extremely unlikely that there would be a need to lower the $1.00 multiplier if the Trustees use this approach.

    Another equitable factor is the extent to which a participant or beneficiary is receiving a subsidized benefit. An example of a subsidized benefit is where someone took his or her retirement benefit before age 65 but did not have the benefits reduced by the full amount necessary to account for the fact that he or she is being paid for a longer period of time. Anyone who retired before age 65 prior to June 2010 received a subsidized early retirement benefit from the Fund. So, if the Trustees focused on this equitable factor, they could eliminate the subsidy for people who took early retirement before June 2010.

    Other equitable factors include things like length of time in pay status, the amount of benefit or whether participants received post-retirement benefit increases.

    The Trustees can also consider other factors even if they aren't listed as examples in the statute. For example, they can look at changing any of the Fund's unique benefit features that were instituted when the Fund was in excellent financial condition and could afford them.

    These are only examples to illustrate what kinds of approaches could be allowed in a MPRA application. The Trustees can weigh the factors in lots of different ways. The Trustees could use just one approach if it reduces benefits enough to avoid insolvency, or they could use multiple approaches. They could even decide to reduce everyone's benefit by the same percentage across the board - except for those participants who are protected, as noted above. Some other funds have used this approach. In addition, the law provides that if an individual's earned benefit is reduced through this process, it cannot be reduced below 110% of what the PBGC (the federal agency that insures a minimum benefit) would pay if the Fund were to run out of money. (See FAQ 11 for more details about why the Trustees are contemplating reducing benefits.)

    While we don't know yet what the level of benefit reductions would be for any particular individual or group of individuals, what we do know is this: Benefit reductions are much preferred to the Fund's running out of money (becoming insolvent).
  17. If benefits are reduced, will it be an across-the-board reduction?
    The Trustees could decide to reduce everyone's benefit by the same percentage across the board - except for those participants who are protected from benefit reductions. Some other funds have used this approach. This is only one of a number of approaches that could be proposed in an application under the Multiemployer Pension Reform Act (MPRA).

    If the Fund enters critical and declining status, there is an extensive process for determining how any reductions would be distributed across the population. The law requires that this be done equitably, taking into account various factors. The Trustees are in the process of working with their actuaries to analyze different ways that benefit reductions could be implemented equitably.

    The Trustees can weigh the various equitable factors in lots of different ways. The Trustees could use just one approach if it reduces benefits enough to avoid insolvency, or they could use multiple approaches.

    (See FAQ 14 for more details about how the Trustees may allocate benefit reductions among participants and FAQ 17 for more details about the participants who are protected from benefit reductions.)
  18. If I earned my benefits at a multiplier that is higher than the current $1.00 multiplier, can the Trustees retroactively reduce those benefits by calculating them at a lower multiplier?
    The Trustees could decide to reduce benefits earned at the $4.65 and other high multipliers, so that those benefits are calculated instead at a lower multiplier. We do not know now which multipliers would be reduced under this scenario, but it is extremely unlikely that there would be a need to lower the $1.00 multiplier if the Trustees chose the approach of reducing the multiplier. This is only one of a number of approaches that could be allowed in an application under the Multiemployer Pension Reform Act (MPRA). (See FAQ 14 for more details about how the Trustees may allocate benefit reductions among participants.)

    If the Fund becomes critical and declining, there is an extensive process for determining how any reductions in earned benefits would be distributed across the population. The law requires that this be done equitably, taking into account various factors. The Trustees are in the process of working with their actuaries to analyze different ways that benefit reductions could be implemented equitably. The law also protects certain categories of participants from any cuts. (See FAQ 17 for details about the participants who are protected from benefit reductions.)

    The Trustees can weigh the various equitable factors in lots of different ways. The Trustees could use just one approach if it reduces benefits enough to avoid insolvency, or they could use multiple approaches.
  19. Are some participants protected from benefit cuts?
    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.
    • 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.
    • Participants receiving a disability pension benefit from the Fund are fully protected and they, too, cannot have their benefits reduced.
    Additionally, no participant's benefit can be reduced below 110% of what the PBGC would pay if the Fund ran out of money. (See FAQ 26 for more details about what 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.
  20. 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 are 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. 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.
  21. If my benefit is reduced because the Fund enters critical and declining status, will it revert to the unreduced amount when I turn 80 years old?
    No. Once your benefits have been reduced under the Multiemployer Pension Reform Act (MPRA), they would not revert to the previous unreduced benefit amount when you reach age 80.
  22. How do the disability benefit protections in work in the Multiemployer Pension Reform Act (MPRA)?
    Participants receiving a disability benefit from the Fund cannot have that benefit reduced under MPRA.

    Note: Receiving a disability benefit from the Social Security Administration plays no role in this protection. Under MPRA, the protection applies only to participants who receive a disability pension benefit from the Fund.
  23. 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. However, the PBGC guarantees benefits only up to a certain amount. (See FAQ 26 for more details on the PBGC guarantee.)

    There are no age or disability protections if the Fund becomes insolvent.

    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 28 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 ran out of money.
  24. If the Fund enters critical and declining status, what is the timeline and what steps must take place before benefit reductions can go into effect?
    After the end of the Fund's fiscal year on March 31, 2019, the Fund's actuary will begin the process of determining whether the Fund has entered critical and declining status for the next plan year (beginning April 1, 2019). That work will take some time to complete. The deadline for the Fund actuaries to certify the Fund status for the plan year beginning April 1, 2019 is June 28, 2019.

    Once that determination has been made, all participants and beneficiaries will be notified within 30 days of the actuary's certification. The Fund will notify participants via the Fund website and through postal mail or eDelivery. Note: If you want email delivery, you must register on our website and opt for eDelivery.

    If the Fund is determined to be in critical and declining status for the plan year beginning April 1, 2019, the Trustees are expecting to submit by the end of 2019 an application to the Treasury Department under the Multiemployer Pension Reform Act (MPRA).

    If Treasury approves the application, there will be a vote on the application among Fund participants and beneficiaries of deceased participants. Treasury will mail out ballots and voters will mail them back.

    Under MPRA, there are some unique aspects to the voting process. For an application to be rejected, a majority of eligible voters must vote against it. So, unreturned ballots are counted as "yes" votes. Also, for very large plans like the Fund, which are deemed to be "systemically important" (that is, insolvency of that fund would have a disproportionately adverse impact on the entire multiemployer system), Treasury is required under the law to override a "no" vote by participants or revise the application so it can approve it.

    After the voting process is completed, 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 a participant vote, so any benefit reductions approved by Treasury would not be expected to start until late 2020 or early 2021 at the earliest.
  25. 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.)

    Even though the Fund is not yet in critical and declining status, 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 lawyer and runs a law practice, having 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 year to get up to speed about the Fund, to understand the Trustees' thought process and to participate in discussions about possible benefit reductions.
  26. 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, under MPRA, there could be different reductions for individuals who have already begun receiving pension payments and individuals who have not.

    However, until the Trustees finish weighing the equitable factors and designing a plan of benefit cuts, it isn't possible to say with certainty whether there will be different reductions for those two groups. MPRA protections related to age and disability would still apply to all eligible participants (See FAQ 17 for more details about those protections.), as would the limit on any individual reduction.

    If you are deciding whether to file to receive your benefits now, we strongly recommend that you discuss this situation with a personal financial and tax advisor. Each participant's personal and financial situation is unique, and the Fund cannot advise what is best for any individual.
  27. If benefit reductions are made, could they be rolled back in the future?
    If the Fund were to progress financially to a sufficient extent after reductions are made, benefits could be improved, which 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 improved 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 improvement. 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 is 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 will provide. The Trustees are actively engaged with Congress to try to produce the best possible outcome for participants. (See FAQ 29 for more details about the status of possible legislation.)

  28. Pension Benefit Guaranty Corporation (PBGC)

  29. 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.

    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" is your "years of vesting credit" under the Fund. AFM-EPF participants earn "years of service" based on covered earnings (which is wages on which pension contributions were made) in each calendar year, as follows:
  30. 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. 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.
  31. What happens if the PBGC goes bankrupt?
    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.

  32. Federal Legislation

  33. 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.

    However, with Democrats now in control of the House, the landscape has changed in Washington. After a delay due to the government shutdown, 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, the Rehabilitation for Multiemployer Pensions Act, to mark the Democrats' position on a solution. He also included the multiemployer pension crisis as a topic at one of the first Ways and Means Committee hearings in this new Congress.

    With a national election looming in 2020, the opportunity to make something productive happen with multiemployer funds in 2019 is certainly realistic. 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.
  34. Why even consider benefit reductions when Congress is working on legislation that could help plans like ours?
    While the Trustees are planning for an application to reduce benefits under the Multiemployer Pension Reform Act (MPRA) if the Fund enters critical and declining status in the plan year that begins April 1, 2019, 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 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 incumbent on them 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 option remaining 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.

  35. General

  36. If the Fund isn't healthy, why are we hanging on to it?
    The Trustees believe that the Fund helps Fund 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 more difficult and often expensive 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.
  37. 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.
  38. 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 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. 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.
  39. 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.

    Because multiemployer pension fund trustees are not professionals in fields like institutional investing or actuarial analysis, they 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, which include rigorous training on plan funding, investments, legislative updates and other issues.

  40. 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 $60 million). These contributions result in over 675,000 engagement records to be included in the earnings accounts of approximately 60,000 participants.
    • Completes nearly 14,000 pension estimates and processes an average of 1,200 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 8,000 phone inquiries and responds to approximately 1,600 emails each fiscal year.
    The Fund Office prides itself as a responsive, well-run, professional organization.

  41. 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, should the Fund enter critical and declining status, and the Trustees apply for a MPRA benefit reduction, the Fund Staff and Union Trustees will have their benefits reduced under MPRA, just like other participants.
  42. 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.

If you have a question not listed here, please Contact Us.




American Federation of Musicians and Employers' Pension Fund