Last updated on 01/07/2020

    Benefit Reductions Under the Multiemployer Pension Reform Act (MPRA)

  1. How do participants find out how much their benefit is proposed to be reduced under the plan that was submitted to the U.S. Treasury Department?
    In early January, all participants and beneficiaries of deceased participants were mailed a notice that included a personalized statement showing their estimated benefit should the proposed reduction submitted to the Treasury Department be approved and go into effect. In addition, participants who are registered on the Plan website can also access this benefit statement by logging into the participant portal and clicking on the MPRA Benefit Estimates icon.

    A description of each component of the proposed benefit reductions can be found on the MPRA Benefit Reductions page.
  2. When will the proposed benefit reductions go into effect? What are the timeline and steps that must be taken before that happens?
    On December 30, the Trustees submitted an application to reduce benefits under the Multiemployer Pension Reform Act (MPRA). This began a long and complex approval process that will take place throughout much of 2020. If approved, the benefit reductions will go into effect on January 1, 2021.

    See below for a timeline of key points in the MPRA process. Please note that some of the anticipated points in the timeline depend on when Treasury takes certain actions. MPRA gives Treasury specific periods of time in which to take these actions (review the MPRA application, mail voting ballots to participants, etc.).

    Additionally, it is possible that Treasury may identify changes that need to be made in the MPRA application before it can be approved. In this case, the Plan may withdraw the application and resubmit it, which would restart the timeline. This has occurred for many other pension funds that ultimately have had successful MPRA applications. To reduce the likelihood of this scenario, we have had numerous communications with Treasury about its expectations.



    January 6, 2020: Participants sent notice, including an estimate of the proposed benefit reduction

    On January 6, 2020, the Plan mailed a notice to each of our 50,000 participants and beneficiaries of deceased participants. This notice included a personalized benefit statement with participants' current benefit and estimated reduced benefit.

    January 17, 2020: Treasury posted application and opened public comment period

    Treasury posted the application on its website on January 17, 2020.
    • Click here to view the application.
    • Click here for instructions on how to submit a public comment on the application. The comment period is open for 45 days, through Monday, March 2, 2020.
    August 11, 2020 (anticipated): Treasury completes review of MPRA application; approves or denies it

    Treasury has up to 225 days to review the Plan's application and approve or deny it. For a pension fund as large and complex as the AFM-EPF, we expect that Treasury will take all or nearly all of this 225-day period for review.

    September 2020 (anticipated): Participant vote begins

    If the MPRA application is approved, Treasury will mail ballots to all participants and beneficiaries of deceased participants within 30 days of the approval. Voters will indicate if they approve or reject the proposed benefit reductions and then mail their ballots back to Treasury. The deadline to return ballots must be at least 21 days after the date that Treasury mailed ballots to voters.

    October 2020 (anticipated): Treasury announces outcome of participant vote

    Treasury must announce the outcome of the vote within seven days of the voting deadline. For a plan of benefit reductions to be voted down, a majority of eligible voters must vote against it. So, unreturned ballots are effectively counted as votes to approve the benefit reductions.

    Treasury will post the results of the vote on its website, including the number of people who voted in favor of the reductions, the number who voted against them and the number of unreturned ballots.

    January 1, 2021: Benefit reductions go into effect

    If the participant vote approves our MPRA application, Treasury will give final authorization for the Plan to implement the benefit reductions. The Trustees expect to implement benefit reductions effective January 1, 2021.
  3. How did the Trustees decide on which categories of benefits to reduce and by how much?
    The Trustees' goal in preparing a plan for benefit reductions was to make them fair and equitable. The Plan's MPRA application to Treasury contains a detailed description of the factors taken into account in order to achieve this goal.

    The first step was to remove subsidies – most notably, the early retirement subsidies – that were instituted when the Plan was in excellent financial condition and could afford them. Removing these subsidies will level the playing field for all participants regardless of when benefits began. This enabled the Trustees to protect the core promise of the Plan, which is the $1.00 multiplier that has been in place since January 1, 2010. It also enabled the Trustees to limit the size of reductions to the higher multipliers that applied to contributions earned prior to January 1, 2010. In addition to the early retirement subsidy, the proposed plan for benefit reductions removes subsidies for the following:
    • Re-retirement benefits
    • Re-determination benefits
    • Late retirement with contributions
    • The annual benefit maximum
    • A Cost of Living Adjustment for the portion of an American Federation of Musicians staff participant's benefit earned under the AFM Retirement Plan prior to its merger into the Plan
    After the removal of the early retirement subsidy, the primary component of the reduction plan is an across-the-board reduction to the benefit multipliers other than the $1.00 multiplier. The Trustees feel it is important to protect the $1.00 multiplier from further reduction because participants who earn benefits under this multiplier have already sacrificed to help stabilize the Plan by accepting this lower rate of benefit accrual. Preserving the $1.00 multiplier will also help encourage continued participation in the Plan by active workers, which is essential to maintaining the Plan's solvency for all participants.

    A description of each component of the proposed benefit reductions can be found on the MPRA Benefit Reductions page.
  4. Why would the Trustees ever consider reducing benefits that participants have already earned?
    The decision to apply for benefit reductions under MPRA was painful, but it is essential that we do everything possible to put the Plan on stronger financial footing.

    Doing nothing also results in benefit reductions. This isn't a choice between reducing benefits and not reducing benefits. It is a choice between reducing benefits now or reducing benefits later, but to a greater extent. No one wants to reduce benefits. But, if we don't reduce benefits now, at some point in the future the Plan won't have enough money to pay benefits. If the Plan does not have enough money, the PBGC will provide financial assistance so the Plan can continue paying a portion of your benefits. However, by law, the portion that will continue to be paid is capped at a maximum guaranteed amount that is less (sometimes significantly less) than the current benefit for many participants in the Plan. So, insolvency of the Plan could result in benefits lower than the benefits paid under this proposal. Further, if the Plan becomes insolvent and the PBGC provides financial assistance, there are no special protections for those who are over age 75 or receiving a disability pension. Simply put, reducing benefits ourselves now means smaller cuts than if the Plan went to the PBGC.

    We have a real opportunity to save the Plan. There are a number of other financially troubled plans that are too far gone to even apply under MPRA. We believe that our proposed reduction will reposition the Plan to be around to pay benefits to current and future retirees for decades to come.

    We can protect the $1.00 multiplier – the core promise of the Plan. Active participants and those who have retired more recently have already made enormous sacrifices to repair the damage done by the 2000-2002 Dot Com Bubble and the 2008-2009 Financial Crisis. The Plan started out in 1959 with a $1.00 multiplier. When times were good, benefit increases, which reached a $4.65 multiplier, were applied not only to benefits that would be earned in the future but to benefits already earned in the past for retired, active, and terminated vested participants alike. But, when economic crises required reducing benefits, those benefit reductions and contribution increases applied only going forward (as required by law). We owe it to this more recent group to do all we can to ensure that the Plan can continue to honor its core promise— the Regular Pension Benefit earned at the $1.00 multiplier.

    Not only is the PBGC guarantee lower, but the PBGC is in bad financial condition and can't be relied upon. Absent a change in the law, the PBGC currently projects its multiemployer insurance program will become insolvent by the end of its 2025 fiscal year. If this happens, the PBGC will not have nearly enough money to pay the benefits it guarantees. Therefore, if the Plan runs out of money, participants' benefits would be much less than even the current PBGC guaranteed amount. The Plan's proposed benefit reduction is structured to avoid the Plan's insolvency and involvement by the PBGC. It gives us the chance to be able to pay benefits to current and future participants for many years to come, and not have to rely on whatever help—likely very little—that the PBGC may be able to provide.
  5. 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 6 for more details on how age protections work.)
    • Participants between 75 and 80 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 6 for more details on how age protections work.)
    • Participants receiving a Disability Pension Benefit from the Plan. The Disability portion of the benefit paid to a participant is fully protected and cannot be reduced. (See FAQ 7 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 Plan ran out of money (assuming the PBGC itself has the money to do so). (See FAQ 20 for more details about the PBGC guarantee.)
  6. How do the age protections in the Multiemployer Pension Reform Act (MPRA) work for participants age 80 and older and for those ages 75-80?
    MPRA includes specific protections that limit the benefit reduction based on age ( click here to jump to a few examples illustrating how the age protections work). Let's start with what ages are protected and by how much (and then we can move to whose age you look at – participant, beneficiary or alternate payee).
    • 80+: Full protection from any benefit reduction for those age 80 or over on January 31, 2021 – no cut.
    • 75-80: Partial protection from benefit reduction for those between ages 75 and 80 on January 31, 2021. These protections are calculated on a sliding scale based on age. The older a participant is, the less his or her benefit can be reduced.
      • ­ Specifically, the degree of partial protection is based on the number of months beginning with February 2021 and ending with the month in which the person turns 80. Here's the formula:

        (number of months until 80 ÷ 60) x (amount of proposed reduction)
      • ­For example, if you are 78 years and 6 months old as of January 31, 2021, you will be 18 months away from age 80. The amount of your benefit reduction is multiplied by 0.3 (18 ÷ 60 = 0.3). If the proposed reduction to your benefit was $100, because of your age, the reduction would be only $30 ($100 x 0.3 = $30).
    This protection is applied only once, on January 1, 2021. It will not apply in the future if you reach 75, 76, etc., after January 31, 2021.

    Moving to whose age you look at, generally speaking, if the participant is still living on January 1, 2021, the participant's age determines whether the benefit is protected. In that case, the participant's age determines what protections apply not only to the participant's benefit but also to the portion that might later be paid to a beneficiary after the participant dies.

    However, if the participant is deceased on the effective date of the reduction, the spouse or other beneficiary's age is what matters.

    The exception to these rules is where there is a Qualified Domestic Relations Order in place as part of a divorce or other family law proceeding. In that case, the person's age that matters depends on the type of order. If it is an order (called a shared payment order) that gives the alternate payee a share of each payment but allows the participant to choose the form and timing of payment, then it is the participant's age that is used. If it is an order (called a separate interest order) that gives the alternate payee the separate right to receive the benefit at a time and in a form different from that chosen by the participant, then it is the alternate payee's age that is used.



    Here are a few examples to illustrate how the age protections work:
    • Participant is 80: Julio will turn 80 years old on January 20, 2021. His benefit is fully protected from the benefit reduction that is effective on January 1, 2021 because he will be at least 80 as of January 31, 2021.
    • Participant is 80 but spouse is younger than 75: Joan chose a joint and survivor benefit when she retired. Joan is 80 years old as of January 31, 2021 and her spouse is 74. Joan's benefit is fully protected from the benefit reduction. If Joan dies before her spouse, her spouse's survivor benefit will be based on the fully-protected amount.
    • Participant is between 75 and 80, but ex-spouse is younger than 75: Rosa is entitled to a portion of her ex-husband's benefit under what is known as a "separate interest" QDRO. Her ex-husband will be 78 years old as of January 31, 2021, so his benefit will be partially protected due to his age. However, because she has a benefit under a separate interest order, the reduction to Rosa's benefit is based on her age and her piece of the benefit alone. Rosa will be 62 as of January 31, 2021 so there is no age protection for her benefit when the reduction occurs January 1, 2021.
    • Participant is younger than 75: Paul will be 63 years old as of January 31, 2021 and he plans to wait until age 65 to start receiving benefits. Paul's benefit is not shielded by any of the MPRA age protections because he is younger than 75 on the effective date of the reduction. If Paul later dies and his beneficiary receives a survivor benefit, the amount will be based on Paul's reduced amount – his beneficiary's age does not matter for purposes of the benefit reduction.
    • Participant is younger than 75 but spouse is 80: Helen chose a joint and survivor benefit when she retired at age 65 and started receiving benefits. As of January 31, 2021, Helen will be 74 and her spouse will be 80. Helen's benefit is not shielded by any of the MPRA age protections because she is younger than 75 on the effective date of the reduction. Her spouse's benefit is also not shielded by these protections because the participant's age is what matters if Helen is alive on January 1, 2021. If, at a later time, Helen dies before her spouse, the spouse's survivor benefit will be based on Helen's reduced amount.
    • Participant is deceased and spouse is younger than 75: Emily chose a joint and survivor benefit when she retired, and she later died at age 80 (before January 1, 2021). Her spouse, who will be 72 as of January 31, 2021, receives a monthly survivor benefit. Since Emily died before January 1, 2021, it is her spouse's age that matters in determining the age protections. Thus, Emily's spouse is not shielded by any of the MPRA age protections because her spouse will be younger than 75 on the effective date of the reduction.
    • Participant is deceased and spouse is 80: Jerry was fully vested in his benefit under the Plan but died before retirement and before January 1, 2021. His spouse, who will be 83 as of January 31, 2021, now receives a monthly survivor benefit. Since Jerry died before January 1, 2021, it is his spouse's age that matters in determining the age protections. Thus, his spouse's benefit is fully protected from the benefit reduction because his spouse will be over 80 on the effective date of the reduction.
  7. How do the disability benefit protections work under the Multiemployer Pension Reform Act (MPRA)?
    Retirees receiving a Disability Pension Benefit from the Plan on or before the effective date of the reduction (January 1, 2021) cannot have that benefit reduced under MPRA. However, only the disability portion of the benefit is protected. For example, if a retiree is receiving a Disability Pension Benefit and then earns a Re-Retirement Benefit, the Disability portion is protected but the Re-Retirement portion could be reduced. (Those who begin their pension benefit before age 65 but then earn contributions before reaching age 65 may earn "Re-retirement Benefits.")

    Under MPRA, this protection applies only to retirees who receive a Disability Pension Benefit from the Plan. The beneficiary or spouse (technically known as a joint annuitant) of a deceased retiree who had been receiving a Disability Pension Benefit can have his or her benefit reduced.

    Receiving a disability benefit from the Social Security Administration plays no role in this protection. What matters is whether a participant was determined to be totally disabled under the Plan and approved for a Disability Pension Benefit at the time he or she started the pension.
  8. Will I keep getting my pension check now that the Plan has applied to reduce benefits?
    Yes, you will continue to receive your pension check as normal—without benefit reductions— throughout the application process under the Multiemployer Pension Reform Act (MPRA). Under the proposed reduction plan, approved reductions will not become effective until January 1, 2021. (See FAQ 2 for more details about the MPRA application process throughout 2020.)

    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 5-7 for details about the participants who are protected from benefit reductions.)
  9. Now that the Plan has applied to reduce benefits, will my benefit automatically be reduced?
    No. Under the proposed reduction plan, approved reductions will not become effective until January 1, 2021. 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.

    (See FAQ 2 for more details about the MPRA application process throughout 2020.)
  10. Will I continue to earn new benefits now that the Plan has submitted an application to reduce benefits?
    Yes. Both before and after the Plan's application is approved, 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.
  11. 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, under the proposed reduction plan, starting to receive benefits now would not necessarily provide additional protection from benefit reductions.

    That said, regardless of the specifics of the proposed benefit reductions, each participant's personal and financial situation is unique, and the Plan 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.
  12. If benefit reductions are made, could they be restored in the future?
    If the Plan 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 are in pay status. However, with limited exceptions, benefit restorations could be done only if, at a minimum, the Plan 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. It is unlikely that our Plan will recover to a degree that meets these requirements for a very long time.

    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 that have been introduced would allow (or even require) plans that previously reduced benefits to restore some or all of those benefits.

    Such proposals include the Butch Lewis Act, which the Trustees support. The House's version of this bill (the Rehabilitation for Multiemployer Pensions Act) passed in July 2019, but it has not moved forward in the Senate. A legislative proposal released in November 2019 by Senators Charles Grassley and Lamar Alexander provides for a partial restoration of benefits, though the Trustees do not support it as drafted due to serious flaws that would negatively affect our participants, our Plan and the multiemployer system as a whole.

    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 23 for more details about the status of possible legislation.)
  13. 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 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 attended Trustee meetings along with his Equitable Factors Panel and they actively participated in the Trustees' discussions of the proposed benefit reduction plan. Brad has established his own website at www.afmretireerep.org and has held meetings with participants around the country.

  14. Status of the Plan

  15. What is the Plan's funded status today?
    As of March 2019, the Plan had 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 Plan is about $1.2 billion underfunded.

    Our actuaries determined that the Plan entered "critical and declining status" in April 2019. This means that the Plan is projected to run out of money to pay benefits (or become "insolvent") within 20 years under the Multiemployer Pension Reform Act (MPRA), a law enacted in December 2014. 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.

    Although reducing earned benefits will be painful, the Trustees have submitted an application to do so because the alternative of running out of money would leave participants with a much greater benefit reduction in the future. The Trustees have no other viable way to save the Plan for the long term – that is to say, realistic investment returns and contribution increases will not avoid insolvency.
  16. What would happen if the Plan did run out of money (became insolvent)?
    In the event the Plan runs out of money (becomes insolvent), the federal insurer, the Pension Benefit Guaranty Corporation (PBGC), is supposed to provide funding for the Plan to continue paying benefits up to a certain amount. (See FAQ 21 for more details on the PBGC guarantee.)

    There are no age or disability protections if the Plan becomes insolvent. Everyone's benefit would be subject to reduction, unless the amount of the benefit is already below the PBGC-guarantee. This is another important reason for the Trustees to seek approval to reduce benefits and to avoid the Plan's 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 Plan became insolvent, then participants' benefits would be reduced dramatically. (See FAQ 21 for more details on the PBGC multiemployer program's projected insolvency.)

    That's why it's so important for us to ensure that the Plan avoids insolvency. While there is no doubt that benefit reductions for participants will be difficult, they cannot be worse than the catastrophic reductions that would take place for participants if the Plan and the PBGC both ran out of money.
  17. Why can't the Plan 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 significant additional contributions into the Plan, they are not enough to avoid running out of money. (See FAQ 17 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 2019, while the Plan paid out $185 million in benefits, it received only about $76 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 Plan 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 Plan, our actuaries project that for the fiscal year ending March 31, 2034, the Plan would have to earn over a 30% return just for assets to stay flat. It is not realistic to assume that the Plan could consistently achieve investment returns that high.
  18. Can the Plan's status be fixed with employer contribution increases?
    The Federation has negotiated significantly increased employer contributions. The Trustees also updated the Plan's Rehabilitation Plan in 2018 to require an increase in the required contribution rate as contracts renew. This increase 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 Plan.

    The Plan's actuary has calculated that contributions would have to increase by 25% across the board immediately just for the Plan to remain solvent over the next 30 years, and by 50% for the Plan to be projected to be fully funded 30 years from now. And those would be in addition to what is already required by the 2018 Rehabilitation Plan Update. Contribution increases that high are not achievable.
  19. 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 Plan on the participant's behalf for each benefit period described in the following table (rounded to the nearest $100), dividing that amount 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 Plan'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.

    Under the proposed benefit reductions, there will be an across-the-board 15.5% reduction in all the multipliers used to calculate benefits for contributions earned before January 1, 2010 (when the age-65 multiplier was higher than $1.00). There is no change to the multipliers for contributions earned on or after January 1, 2010.

    For those who retired before June 1, 2010, early retirement benefits for contributions made before 2004 were subsidized. The proposed removal of the early retirement subsidy first reduces early retirement benefits, which are then further reduced by an across-the-board 15.5% reduction in all the multipliers used to calculate benefits for contributions earned before January 1, 2010. (Click here for an explanation of how the multipliers will change under the proposed benefit reductions)
  20. 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, the proposed benefit reductions will not lower the $1.00 multiplier for benefits that were already earned. (Click here for an explanation of how the multipliers will change under the proposed benefit reductions)

  21. Pension Benefit Guaranty Corporation (PBGC)

  22. What is the PBGC? How much of my pension does it insure?
    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. The PBGC receives no taxpayer funding. Instead, pension plans pay annual premiums to the PBGC. For multiemployer plans like ours, annual premiums are based on a flat rate per number of participants in the plan. For 2020, multiemployer plan premiums are $30 per plan participant, increased from $8 per plan participant in 2007.

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

    The PBGC guaranteed benefit is calculated in an entirely different way than your benefit is calculated under the AFM-EPF. In a nutshell, the highest PBGC-guaranteed monthly benefit available is $35.75 per year of "pension credit," which for this Plan is the same as years of "vesting service." If you have accrued partial years of vesting service under this Plan, the PBGC will take those into account when calculating your guaranteed benefit.

    The PBGC calculates each participant's guarantee by determining the average monthly benefit you earned (your total monthly benefit divided by your years of pension credit/vesting service); then it guarantees 100% of the first $11 of that monthly average plus 75% of the next $33, but not more than $35.75 per month. The result is then multiplied by your years of pension credit/vesting service to calculate your PBGC guaranteed monthly benefit.

    For example:
    • Let's say your monthly benefit is $600.00 and you have 20 years of vesting service. Your average monthly benefit earned is $30.00 ($600.00 ÷ 20). The PBGC will cover $25.25 per year of vesting service ($11 + (.75 x $19)). Therefore, your PBGC guaranteed monthly benefit would be $505.00 ($25.25 x 20).
    • If your monthly benefit is $200.00 and you have 20 years of vesting service, your average monthly benefit earned is $10.00 ($200.00 ÷ 20). The PBGC will cover the entire $10.00 per year of vesting service because the PBGC guarantees 100% of your average monthly benefit up to $11.00 per year. Therefore, the PBGC would guarantee all of your $200 monthly benefit ($10.00 x 20).
    • If your monthly benefit is $2,400.00 and you have 40 years of vesting service, your average monthly benefit earned is $60.00. The maximum the PBGC will pay is $35.75 per year of vesting service. Therefore, your PBGC guaranteed monthly benefit would be $1,430.00 ($35.75 x 40).
    The PBGC's website has more information on how guarantees are calculated.
  23. How Much Does the Plan 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 2020, multiemployer plan premiums are $30 per plan participant, increased from $8 per plan participant in 2007. The Plan'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, including a November 2019 proposal by Senators Charles Grassley and Lamar Alexander. If passed, such increases would drain the assets of troubled plans like the AFM-EPF even faster, thereby hastening possible insolvency. The Trustees oppose these increases. (See FAQ 23 for more information on federal legislation.)
  24. What happens if the PBGC runs out of money?
    Absent a change in the law, the PBGC currently projects its multiemployer insurance program will become insolvent by the end of its 2025 fiscal year. If this happens, the PBGC will only be able to pay out what it collects in premiums. The PBGC projects that approximately 125 additional plans will run out of money over the next 20 years. Whatever money the PBGC has to fund benefits will have to be spread among more and more insolvent plans. Therefore, if the Plan runs out of money, participants' benefits could be much less than even the current PBGC guaranteed amount.

  25. Federal Legislation

  26. Will there be legislation that helps the Plan? 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.

    In the following nine months, AFM-EPF Trustees, the Federation and employer representatives spent days on Capitol Hill, meeting with legislators and their staffs to advocate for a solution. The Plan's website also provided tools for participants and contributing employers 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.

    Even so, there were some new developments in Congress in 2019. In July 2019, the U.S. House of Representatives passed HR 397, the "Rehabilitation for Multiemployer Pensions Act." Also known as the "Butch Lewis Act," this bill would provide low-interest government loans to struggling multiemployer pension funds, including the AFM-EPF. If necessary, these loans can be coupled with additional financial assistance from the Pension Benefit Guaranty Corporation (PBGC). The bill would provide a multiemployer fund with enough money to pay current retirees and beneficiaries their benefits for life, and allow the fund to grow back to stronger financial footing. Thus far, the Senate version of the Butch Lewis Act (S2254) has not moved forward.

    A second legislative proposal was released in November 2019 by Senators Charles Grassley and Lamar Alexander. This proposal would allow struggling multiemployer pension plans to "partition" (which means that they would transfer a portion of participants' benefit liabilities to a second plan administered by the Trustees but funded by the PBGC) in order to remain solvent in the future. The original plans would no longer have to fund the benefit payments associated with these liabilities, which would put plans in a better position to regain their financial footing.

    The AFM-EPF would qualify for a partition under this proposal. However, the Trustees do not support the proposal as drafted because it has serious flaws that would negatively affect our participants, our Plan and the multiemployer system as a whole. The current iteration of the proposal imposes overly burdensome benefit reductions, undermines union and employer support for plans, and excessively increases PBGC premiums. In fact, the total size of the Plan-wide benefit reduction could be greater under the Grassley-Alexander proposal than under the Plan's proposed MPRA benefit reduction.

    It is hoped that with two competing proposals now on the table, Republicans and Democrats in Congress can work toward a compromise bipartisan solution that would protect our Plan and treat our participants fairly.

    The Trustees, the Federation and a great many of our employers will continue to be vocal advocates for our Plan'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. 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.
  27. Why even consider benefit reductions when Congress is working on legislation that could help plans like ours?
    While the Trustees have submitted an application to reduce benefits under the Multiemployer Pension Reform Act (MPRA), they are also continuing to push for legislation in Congress that will provide assistance to the Plan 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 Plan, 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 Plan, while also taking every action available under existing federal law to prevent the Plan 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 passes a legislative solution, something it has so far been unable to do, the options boil down to reducing benefits now or running out of money and having a much higher reduction in 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 Plan'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, the Butch Lewis Act requires multiemployer pension funds to reinstate any benefits reduced under MPRA before receiving a government loan, and a separate legislative proposal released in November 2019 would provide for a partial restoration of benefits. (See FAQ 23 for more information on federal legislation.)

  28. General

  29. If the Plan isn't healthy, why are we hanging on to it?
    The Trustees believe that the Plan 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.
  30. 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.
  31. What can I do as a participant and AFM member to help the Plan?
    Above all, participants can help the Plan by supporting the Trustees' MPRA application. While benefit reductions will be painful, they are the only way under current law to save the Plan from becoming insolvent.

    AFM members can help the Plan by continuing to pursue work engagements covered by a union collective bargaining agreement requiring contributions to the Plan and ensure that those engagements are reported to the Plan. All such covered employment, including single engagements covered by an LS-1, adds more contributions into the Plan.

    Some Plan participants have discussed the idea of holding benefit concerts to raise money for the Plan. 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 Plan has information on the website to help employers and AFM locals set up the proper documentation.

    Participants can also use the tools on our website to contact their Members of Congress and urge them to pass a solution that protects our Plan and treats participants fairly.
  32. 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 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 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 Plan and makes projections to inform the Trustees' decisions.
    • The outsourced chief investment officer, Cambridge Associates, which oversees day-to-day decisions for the Plan'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.
  33. 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 Plan'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 Plan 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 26,000 contribution checks annually (representing approximately 50,000 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 40,000 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.
  34. Do the Fund Staff and Trustees participate in the AFM-EPF?
    The Fund Staff participate in the AFM-EPF. The Union Trustees are Plan participants by virtue of being AFM or Local Union employees, or by working for other employers who contribute to the Plan. Therefore, the Fund Staff and Union Trustees are subject to the proposed benefit reductions, just like other participants.
  35. What is the Trustees' position on the litigation filed against them by two Plan 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 Plan's participants.

    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