On December 30, 2019, the American Federation of Musicians and Employers' Pension Fund (Plan) submitted an application to the U.S. Treasury Department for approval to reduce benefits under the Plan. This type of benefit reduction is allowed under a federal law called the Multiemployer Pension Reform Act of 2014 (MPRA). The Trustees are taking this action to prevent the Plan from running out of money to pay benefits. Although reducing benefits will be painful, the Trustees are seeking permission to do so because running out of money would mean a much greater benefit loss in the future.

(Click here for additional explanation on the FAQ page of why the Trustees submitted a MPRA application.)

The Trustees developed a plan for benefit reductions that we believe is distributed fairly and equitably. The first step in the plan 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 four higher multipliers that applied to contributions earned prior to January 1, 2010. After the removal of the early retirement subsidy, the primary component of the reduction plan is an across-the-board 15.5% reduction to those four benefit multipliers other than the $1.00 multiplier.

In deciding how to design the proposed benefit reduction fairly, the Trustees took into account the following factors:
  • Extent to which a participant or beneficiary is receiving a subsidized benefit (any benefit that costs the Plan more to provide than an age-65 regular pension benefit)
  • History of benefit increases and reductions
  • Differences in historical benefit levels among active participants and retirees
  • Extent to which active participants are reasonably likely to withdraw support for the Plan, accelerating employer withdrawals from the Plan and increasing the risk of additional benefit reductions for participants in and out of pay status
  • Length of time in pay status
  • Type of benefit
  • Amount of benefit
  • Limiting hardship
  • Ease of communication and understanding
(Click here for instructions on how to submit a public comment to the U.S. Treasury Department about the MPRA application. The comment period is open for 45 days, through Monday, March 2, 2020.)

The application proposes that the benefit reductions take effect on January 1, 2021. The various changes that make up the proposed reduction are listed below by affected group. Please keep in mind that participants may be affected by more than one of these changes.

Click on each heading to learn more:
Participants who began receiving subsidized early retirement benefits before June 1, 2010
The benefit multipliers used to calculate pre-65 benefits for contributions earned through December 31, 2003 (which is Benefit Period A in the charts below) were subsidized. (Click here for an explanation on the FAQ page of what the multiplier is and how used to determine your monthly benefit.)

This is called an early retirement subsidy. To start, let's explain what it means for a benefit to be subsidized. For a benefit paid before age 65 to be "actuarially equivalent" in value to the benefit that would be payable at age 65, the pre-65 benefit needs to be reduced to account for the fact that it will be paid earlier and for a longer period of time. Put simply, the earlier you start receiving benefits before age 65, the more your monthly benefit is reduced in order to be actuarially equivalent to the age-65 benefit. An actuarially equivalent benefit is one that reduces the age-65 benefit by enough to make the pre-65 benefit and the normal retirement age-65 benefit actuarially equal in value. When a pre-65 benefit is not reduced enough to make it actuarially equivalent, it is considered a subsidized early retirement benefit.

Turning back to the current Plan terms, here is who has a subsidized early retirement benefit:
  • Pre-January 1, 2004: Those whose Initial Pension Effective Date was earlier than January 1, 2004 and were under age 65 received this subsidy on the full amount of their benefit.
  • Pre-June 1, 2010: For those whose Initial Pension Effective Date was January 1, 2004 through May 1, 2010, the subsidized pre-65 multipliers applied only to the portion of their contributions earned through December 31, 2003.
  • June 1, 2010 and later: For Pension Effective Dates on or after June 1, 2010, the multipliers used to calculate pre-65 benefits have not included any subsidy no matter when the contributions were earned.
As part of the proposed benefit reduction, participants whose Initial Pension Effective Date for an early retirement pension was before June 1, 2010 will have the subsidy removed. This means that benefits for contributions earned through December 31, 2003 will be recalculated using multipliers that produce a benefit that is actuarially equivalent to the Regular Pension Benefit that would have been payable at the Plan's Normal Retirement Age of 65.

The Trustees determined that the Plan should remove subsidies (and other costly features which the Trustees considered as having the same effect as subsidies) like the early retirement subsidies before the imposition of any reductions to participants' Regular Pension Benefit payable at the Plan's Normal Retirement Age of 65 (Regular Benefit). The Regular Benefit is the core promise of the Plan. Thus, the Trustees determined that it would be inequitable to continue to provide any subsidies to certain participants that would result in more significant reductions to other participants' and beneficiaries' Regular Benefits. This was particularly important because many active participants have been accruing benefits at only the $1.00 multiplier since 2010 and are expected to do so in the foreseeable future. Moreover, any perceived additional unfair allocation of reductions to active participants, who are not eligible for most subsidized benefits, could risk a loss of their support for the Plan, which would harm the Plan and its participants.

These unsubsidized (actuarially equivalent) multipliers will be further reduced by the flat 15.5% as described in the next section. The chart below shows for Benefit Period A the current subsidized multiplier at each age, the current multiplier after the subsidy is removed and then the unsubsidized multiplier with the flat 15.5% reduction described below.

All participants who earned contributions before January 1, 2010
The proposed reduction includes an across-the-board 15.5% reduction of 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 – the $1.00 multiplier is not being reduced. (Click here for an explanation on the FAQ page of what the multiplier is and how used to determine your 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.

The following chart shows a "before" and "after" column for each benefit period. The "before" column shows the current multipliers at each retirement age. The "after" column shows the multiplier at each retirement age under the Trustees' proposed reductions. The numbers in both the "before" and "after" columns already reflect the elimination of any early retirement subsidy (as described in the section above).



Monthly benefits for those already receiving their pension will be recalculated using the new multipliers for the retiree's age as of the date they began receiving their benefit (their Pension Effective Date) and the form of payment they chose at that time.

After considering the history of benefit reductions and the importance of the support of active participants, the Trustees concluded that the $1.00 multiplier payable at age 65 as the Regular Pension Benefit is the core promise of the Plan and that it should be protected, given that those who earned or are earning benefits at the $1.00 multiplier have already experienced significant reductions relative to others in the Plan and do not have subsidies available to them.

Keep in mind, participants who have only earned contributions in the Plan on and after January 1, 2010 are not affected by this part of the benefit reduction. For participants who earned contributions both before and after January 1, 2010, only the portion of the benefit earned during Benefit Periods A through D is subject to the 15.5% reduction in the multipliers.
Participants who have earned, or may in the future earn, Re-retirement Benefits
Those who began their pension benefit before age 65 but then earn contributions before reaching age 65 earn "Re-retirement Benefits." Upon reaching 65, a "Re-retirement Benefit" (based on contributions earned between the initial Pension Effective Date and age 65) is added to the Regular Pension Benefit.

Under the current rules, the amount of the Re-retirement Benefit is the amount of the total benefit using the age-65 benefit multiplier for all benefit periods, reduced by the value of benefits received expressed as a monthly benefit, and then reduced by the initial benefit. (For more detailed information on how Re-retirement Benefits are currently calculated, see page 27 of the Summary Plan Description by clicking here)

Under the proposed reduction, your Re-retirement Benefit will be recalculated using a revised formula consistent with the way Regular Retirement Benefits are calculated:
  • Each $100 of benefit contributions is multiplied by the age-65 benefit multipliers for the benefit period in which the contributions were earned (the multipliers used will be those that have been reduced by 15.5%).
  • The recalculated Re-retirement Benefit will then be adjusted for your elected form of payment.
In any event, the recalculated Re-retirement Benefit will not increase your current in-pay Re-retirement Benefit.

This new method of calculating Re-retirement Benefits applies to participants who are already receiving a Re-retirement Benefit, as well as to all Re-retirement Benefits payable in the future.
Participants who have earned, or may in the future earn, Re-determination Benefits
Those who began their pension benefit but also earn contributions after the later of age 65 or the Pension Effective Date earn "Re-determination Benefits."

Under the current rule, the Re-determination portion of the benefit is based on contributions received in the prior calendar year, reduced by the value of the Re-determination Benefit received in the previous year. (For more detailed information on how Re-determination Benefits are currently calculated, see page 30 of the Summary Plan Description by Clicking here)

Under the proposed reduction, Re-determination Benefits will be offset by the total amount of all benefits that the individual has already received from the Plan, including both Regular Pension Benefits and Re-retirement Benefits. This offset applies to participants who are already receiving a Re-determination Benefit, as well as to all Re-determination Benefits payable in the future.
Participants with benefits limited by the $195,000 annual benefit maximum
The Plan limits the annual age-65 benefit to $195,000. Currently, this maximum is not reduced to account for benefits taken in a joint and survivor form of payment. Moreover, it is not fully actuarially reduced to account for early retirement (because the reduction currently begins at age 62, rather than age 65).

Under the proposed reduction, these benefits will be fully actuarially reduced for any Pension Effective Date before age 65 to be actuarially equivalent to the age-65 benefit and reduced for joint and survivor forms of payment.

The $195,000 annual benefit limit will continue to be applied on an employer-by-employer basis for benefits earned through December 31, 2007.
Participants who began or will begin receiving benefits later than age 65
For a benefit paid starting after age 65 to be equivalent in value to the normal retirement benefit that would be payable at age 65, the monthly benefit for a late retirement needs to be increased to reflect the fact that it will be paid later and for a shorter period of time.

The Plan's current method of calculating benefits earned after normal retirement age is performed annually. Each year, the Plan determines the benefit increase based on the greater of:
  • The benefit you earned, or
  • The actuarial increase to the benefit at the start of the year.
For example, the benefit at age 66 is the greater of the age-65 benefit actuarially increased to the age-66 benefit, or the benefit using all contributions through age 66. Similarly, the benefit at age 67 is the greater of the age-66 benefit actuarially increased benefit to age 67 or the benefit using all contributions through age 67

Under the proposed reduction, benefits that had or will have an Initial Pension Effective Date later than age 65 will be recalculated. You will receive the greater of:
  • Your benefit calculated using your total contributions as of your Pension Effective Date, or
  • Your benefit calculated using your contributions to age 65, with an actuarial increase to your Pension Effective Date.
Participants with a pre-merger AFM-EPF Staff Plan benefit
In 1999, the American Federation of Musicians and Employers' Pension Plan Staff Plan merged with the Plan. Before the merger, the Staff Plan had its own formula for calculating benefits, which was different from the Plan's formula. At the date of the merger, the pre-merger benefits were increased by 7% for participants who were actively working at the time of the merger to align with the multiplier increase that participants in the Plan had received.

The 7% increase in pre-merger benefits will be eliminated in the proposed reduction. Benefits earned by these participants based on contributions to the Plan will be reduced the same as the benefits earned by all other Plan participants.
Participants with a pre-merger AFM Retirement Plan benefit
On April 1, 2000, the American Federation of Musicians Retirement Plan (AFM RT Plan) merged with the Plan. Before the merger, the AFM RT Plan had its own formula for calculating benefits, which was different from the Plan's formula. Participants receiving pre-merger benefits have had an annual cost of living increase on the portion of their benefit earned as of March 31, 2000.

Going forward, there will be no cost of living increases as long as the individual's benefit is greater than 110% of their PBGC-guaranteed benefit amount (Click here for an explanation on the FAQ page of how this amount is calculated). Benefits earned by these participants after March 31, 2000 based on contributions to the Plan will be reduced the same as the benefits earned by all other Plan participants.
Participants with a Retirement Account Benefit (pre-1968 contributions)
Participants with qualified contributions earned before 1968 earned a Retirement Account Benefit (RAB). That benefit could be paid in the same manner as a Regular Pension Benefit. Prior to June 1, 2010 the participant could instead elect to receive the RAB portion of their benefit as a lump sum. For those who elected to receive the RAB portion of their benefit as a lump sum, the proposed reduction will be calculated based on the participant's entire benefit (the RAB lump sum already paid, plus the portion paid as a monthly benefit). This is to ensure that all participants' benefits are treated the same way, whether or not they took a lump sum.
Participants whose reduction is limited by 40% maximum
Under the proposed reduction, the Trustees have limited the amount of any one person's total benefit reduction on January 1, 2021 to a maximum of 40% before taking into consideration the MPRA limits.




American Federation of Musicians and Employers' Pension Fund