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Musicians’ Pension Plan Seeks to Cut Benefits Musicians’ Pension Plan Seeks to Cut Benefits
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The largest musicians’ pension plan in the United States is seeking to cut retirement benefits that have already been earned by thousands of musicians, in an effort to keep the plan from running out of money.The largest musicians’ pension plan in the United States is seeking to cut retirement benefits that have already been earned by thousands of musicians, in an effort to keep the plan from running out of money.
The plan, the American Federation of Musicians and Employers’ Pension Fund — which covers more than 50,000 people, including Broadway musicians, players in some orchestras, and freelance musicians and recording artists — declared over the summer that it was in “critical and declining status” and would run out of money to pay benefits within 20 years.The plan, the American Federation of Musicians and Employers’ Pension Fund — which covers more than 50,000 people, including Broadway musicians, players in some orchestras, and freelance musicians and recording artists — declared over the summer that it was in “critical and declining status” and would run out of money to pay benefits within 20 years.
The fund calculated that it had, as of last March, roughly $1.8 billion in assets and $3 billion in projected liabilities — a severe shortfall. Now its trustees are taking the rare step of trying to cut benefits that have already been earned by many of the plan’s participants.The fund calculated that it had, as of last March, roughly $1.8 billion in assets and $3 billion in projected liabilities — a severe shortfall. Now its trustees are taking the rare step of trying to cut benefits that have already been earned by many of the plan’s participants.
“We faced two challenging options — to allow the plan to run out of money within 20 years or try to prevent that from happening by applying to the government for approval to reduce earned benefits,” plan officials wrote in an email to participants on Tuesday. The email said that if the plan did nothing and ran out of money, the federal government’s insurer, the Pension Benefit Guaranty Corporation, would likely step in and pay retirees even less than the new proposal calls for.“We faced two challenging options — to allow the plan to run out of money within 20 years or try to prevent that from happening by applying to the government for approval to reduce earned benefits,” plan officials wrote in an email to participants on Tuesday. The email said that if the plan did nothing and ran out of money, the federal government’s insurer, the Pension Benefit Guaranty Corporation, would likely step in and pay retirees even less than the new proposal calls for.
Under the proposal that the plan filed with the Treasury Department late last month and shared with members on Tuesday, more than half the plan’s participants would see no reduction in their benefits; about 45 percent would see their retirement benefits reduced by up to 19 percent of what they have been promised; and a little under 2 percent would have their benefits cut by 20 to 40 percent. Benefits would not be cut for retirees over 80, and cuts would be reduced for those over 75.Under the proposal that the plan filed with the Treasury Department late last month and shared with members on Tuesday, more than half the plan’s participants would see no reduction in their benefits; about 45 percent would see their retirement benefits reduced by up to 19 percent of what they have been promised; and a little under 2 percent would have their benefits cut by 20 to 40 percent. Benefits would not be cut for retirees over 80, and cuts would be reduced for those over 75.
If approved, the cuts would go into effect next year.If approved, the cuts would go into effect next year.
Several musicians expressed concern about the proposed cuts. Adam Krauthamer, the president of the union’s largest local, Local 802 in New York, said in an email to The New York Times that it was “a tough day for unionism, for the A.F.M. and for my fellow musicians across the country.”Several musicians expressed concern about the proposed cuts. Adam Krauthamer, the president of the union’s largest local, Local 802 in New York, said in an email to The New York Times that it was “a tough day for unionism, for the A.F.M. and for my fellow musicians across the country.”
The executive board of Local 802 wrote in an email to its members that many musicians “will be severely impacted by the impending cuts.” Officials at the local pledged to scrutinize the proposed cuts and the application process; work to help Broadway musicians implement a new 401(k) plan to help them prepare for retirement; and push for more accountability from the pension fund and the board of trustees that oversees it.The executive board of Local 802 wrote in an email to its members that many musicians “will be severely impacted by the impending cuts.” Officials at the local pledged to scrutinize the proposed cuts and the application process; work to help Broadway musicians implement a new 401(k) plan to help them prepare for retirement; and push for more accountability from the pension fund and the board of trustees that oversees it.
The American Federation of Musicians, both nationally and among its local chapters, has been pushing for federal legislation to help address the growing national problem of underfunded multiemployer pension plans. But there have been few signs of action in Washington.The American Federation of Musicians, both nationally and among its local chapters, has been pushing for federal legislation to help address the growing national problem of underfunded multiemployer pension plans. But there have been few signs of action in Washington.
The underfunded musicians’ plan and the prospect of benefit cuts have roiled the union in recent years. Mr. Krauthamer was an insurgent candidate who was elected president of Local 802 in 2018 in a major upset that was driven largely by concerns about the plan. Some musicians have sued the plan’s trustees, claiming mismanagement of the fund, which the trustees have denied. Many rank and file musicians are becoming activists when it comes to their pensions.The underfunded musicians’ plan and the prospect of benefit cuts have roiled the union in recent years. Mr. Krauthamer was an insurgent candidate who was elected president of Local 802 in 2018 in a major upset that was driven largely by concerns about the plan. Some musicians have sued the plan’s trustees, claiming mismanagement of the fund, which the trustees have denied. Many rank and file musicians are becoming activists when it comes to their pensions.
A number of factors have contributed to the fund’s shortfall, plan officials and musicians said. It enacted a series of expensive benefit increases before 2000, and then suffered major losses in the recessions since. It made a series of bad investment decisions in recent years, which are now the subject of the lawsuit brought by the musicians. And the fund now pays out more in benefits to retirees — whose ranks have swelled — than it receives in contributions from currently working musicians and employers, draining the fund. A number of factors have contributed to the fund’s shortfall, plan officials and musicians said. It enacted a series of expensive benefit increases before 2000, and then suffered major losses in the recessions since. The lawsuit brought by the musicians describes a series of bad investment decisions in recent years. And the fund now pays out more in benefits to retirees — whose ranks have swelled — than it receives in contributions from currently working musicians and employers, draining the fund.
The plan is seeking to cut benefits under a recent federal law, the Multiemployer Pension Reform Act, which was enacted in 2014. The Treasury Department will accept comments on the proposal and has until mid-August to review it. If it approves the plan, the proposed cuts will be put to a vote of the membership. But the law makes it difficult to reject cuts: Such a rejection would require a majority of all the plan’s participants, not just a majority of those who vote.The plan is seeking to cut benefits under a recent federal law, the Multiemployer Pension Reform Act, which was enacted in 2014. The Treasury Department will accept comments on the proposal and has until mid-August to review it. If it approves the plan, the proposed cuts will be put to a vote of the membership. But the law makes it difficult to reject cuts: Such a rejection would require a majority of all the plan’s participants, not just a majority of those who vote.
“This means that not voting counts the same as a vote to approve the reduction,” the plan noted in its email to members.“This means that not voting counts the same as a vote to approve the reduction,” the plan noted in its email to members.