Our friends at Musicians for Pension Security have apparently all booked passage on the warp-capable MPS Reality Distortion Field. There is no other plausible explanation for their latest email blast.
In this surreal document, MPS states that they will oppose the rehabilitation plan proposed by the Trustees of the Fund. This, all by itself, is a profoundly irresponsible act; should the plan be voted down by the Fund participants, it would likely be the death-knell of the Fund. If, as I believe, the “solutions” proposed by MPS are fantasy, there really is no other option than the currently proposed rehabilition plan, given the very narrow needle that any such rehabilitation plan has to thread in order to receive the required approval by the Department of the Treasury.
Maybe those behind MPS would all get their full pensions and die before the Fund did if they do succeed in derailing the rehabilitation plan. That would certainly explain their actions. The pain would be reserved for everyone else.
From their document:
The fact is that our pension plan has plenty of active working participants to support the retired participants. Critical and declining plans on average have 16% active participants and 84% inactive participants.(1) Since the AFM-EPF is in critical and declining status, you would expect to see similar numbers. But at our plan, we have 41% active participants and 59% inactive participants. The average for healthy plans (Green Zone plans), according to Milliman our own AFM-EPF actuary, is 42% active and 58% inactive participants.(2)
This may actually be true. What MPS fails to note (although they’re far too smart not to know) is that this is irrelevant. Demographics might be a legitimate factor in assessing the health of the average Taft-Hartley multi-employer plan, although just how useful a measure of health is debatable. But it means very little for the AFM-EP Fund, at least without some very signification additional context.
Most of the money coming into the Fund, and most of the accrued benefits, are for a relatively small number of participants. We know from the Retiree Representative that 60% of the participants have accrued a benefit of less than about $1,100 per month. Even that understates the problem, though: I suspect that many of those 60% have an accrued benefit - and corresponding contributions - of far less than that.
The problems of the Fund lie with the benefits accrued by - and contributions made of behalf of - the remaining 40%. Even if the demographics of the Fund are a legitimate factor when contemplating the health of the Fund, what would matter would be the demographics of that 40%. And MPS provides nothing but crickets on that subject.
Given the clear underperformance on investments, the trustees now must get the money from the musicians or from the employers. Unfortunately, our trustees are choosing to get this money from the musicians… This is unjust, since employers have for years gotten away with abnormally low contribution rates that are out of pattern with other unions. From 2007 through 2017, the average annual contribution rate increase for employers at AFM-EPF has been 3- 4% per year. Compare that to the national average increase of 11.4% per year between 2009 and 2013, according to recent Congressional testimony.(3) Or to the 6% achieved annually by the very troubled Central States Pension Plan over ten years. Or to 6.6% per year achieved by the Baltimore Teamsters pension plan.(4) Or the 10% per year for five years for the Alaska Ironworkers.(5)
This is comparing apples to space debris. I suspect MPS knows this; footnote (3) reads “recent Congressional testimony from Joshua Shapiro, from the American Academy of Actuaries, confirms that between 2009 and 2013, the average contribution paid into multiemployer plans per active participant increased by an average of 11.4 percent per year.” Did you catch the sleight of hand? It’s in conflating “contribution rate” with “contribution paid.” Not the same thing at all.
It very well might be that “the average contribution paid into multiemployer plans per active participant increased by an average of 11.4 percent per year.” This could be because of contribution rate increases. In fairness, Mr. Shapiro suggests that in his testimony. But no evidence is provided. The 11.4% figure could easily be due to other factors, such as rising incomes in those industries.
Given the cyclical nature of much union employment (such as in industries that employ Teamsters and Ironworkers), and the fact that 2009 was the very bottom of the biggest economic collapse the US has experienced in almost 100 years, an 11.4% average increase doesn’t really prove anything about the AFM-EP Fund. I don’t recall orchestra musicians, or Broadway musicians, or recording musicians, being laid off en masse during 2008 and 2009, after all. Maybe our pension contributions didn’t increase much after 2009 because they didn’t fall much before then.
So, whether we get more employer contribution increases right away or over a period of years, it’s clear that there is plenty of opportunity to do so.
After a brief excursion to the land of debatable conclusions, we’re back in Tomorrowland.
There are three ways to get significantly more employer contributions into the Fund. The first is to increase participant incomes significantly. The second is for AFM locals (and, on media agreements, the national union) to negotiate significantly higher contribution rates. And the third is for the Fund to unilaterally raise the contribution rates.
Are we going to see the kind of wage increases for participants that would lead to the kind of contribution increases MPS seems to believe is possible? (“…the 6% achieved annually by the very troubled Central States Pension Plan over ten years. Or to 6.6% per year achieved by the Baltimore Teamsters pension plan. Or the 10% per year for five years for the Alaska Ironworkers.”) In a word - no. And no one believes otherwise. If we were able to negotiate such increases, we would have done so already. The only times we’ve ever been able to do so were when inflation rates were way above where they are now - which meant, of course, that the increases in real terms were similar to what they are now.
Are locals and the AFM going to be able to negotiate significantly higher pension contribution rates? In theory, they could - but only by sacrificing other goals to do so. That's simply the way labor negotiations work, and we all know it.
Given that rank-and-file musicians control most local negotiations, and have huge influence in how national negotiations are conducted, I am skeptical that’s the choice that negotiations committees will make. It’s far more likely that committees will listen to their constituents and devote whatever efforts they might make towards increasing retirement income into other channels. The $1.00 multiplier is a pretty lousy return on investment, after all. That's simply not where most bargaining units are going to want to put whatever new money they wrest from their employers. And, of course, the Fund doesn’t have a lot of credibility amongst the rank-and-file at the moment, regardless of whether or not that’s fair - and at least some of that is MPS’s doing.
Lastly, are the Trustees going to unilaterally increase employer contributions? I don’t think so. First of all, it’s not clear to me what are the legal limits on their ability to do so. I’d be shocked if there were none. But, even if they could legally do so, are the employer-side Trustees going to agree to the kind of contribution rate increases (ie the very large kind) that would make a difference in the Fund’s condition? To ask the question is to answer it.
Ah, but MPS has an even better solution - one might even call it far-out:
Another important factor is the class action lawsuit against the AFM-EPF trustees, which charges them with breaches of fiduciary duty. The plaintiffs are seeking hundreds of millions of dollars in damages. If they succeed in recovering this amount, this could lessen or eliminate the need for cuts.
The plaintiffs are going to recover hundreds of millions from the pockets of Laura Ross, Brian Rood, Ray Hair, Tino Gagliardi, and all the other trustees! And that will bail out the Fund! Mr. Sulu, engage! Raise the shields! Warp 1!
Apparently the Fund does have directors’ insurance, or whatever that’s called in the multi-employer pension world. Judging from the transcript of the last court hearing on the case, however, it’s not enough to cover the damages the plaintiffs are asking. So maybe the plaintiffs are only hoping to recover tens of millions of dollars from the pockets of Laura Ross, Brian Rood, Ray Hair, Tino Gagliardi, et al. Somehow that doesn’t seem like a realistic solution to the Fund’s difficulties.
And that’s assuming that the plaintiffs win, which to my non-legal mind seems a stretch. Perhaps a negotiated settlement (to be paid by the insurance company, of course) is not outside the realm of possibility. But it would have to be a really big one to make the rehabilitation plan unnecessary.
I wonder who MPS thinks will be willing to serve on the Board of Trustees in the future if they win this case? Not the biggest problem we all face as a result of the irresponsibility of MPS and the plaintiffs, of course.
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