Beneficiaries of the American Federation of Musicians and Employers’ Pension Fund are not jazzed about their wobbly retirement plan’s decision to reduce benefits as a means to fight insolvency.
The $1.8 billion organization announced its “critical and declining status” earlier in the month, and said that it will apply to the US Treasury for the reductions. The fund, holding $3 billion in liabilities, is projected to run out of money in 20 years. It is now 60% funded.
The pension plan caters to some 50,000 musicians who’ve played in Broadway and other theater productions, performed on TV, in orchestras, and on the soundtracks of countless films and shows.
How did things go so wrong? According to a statement on its website, the plan’s sad tale mirrors that of many other underfunded pension programs. It suffered the staggering one-two punch of investment losses incurred during the Great Recession, combined with rising benefit payments that contributions can’t cover.
The plan had also seen significant drops in membership in recent years coupled with less contract work available to members.
So it has chosen to cut benefits, which is allowed under the Multiemployer Pension Reform Act of 2014. “There is no practical way that investment returns and contribution increases alone will be able to close the long-term, worsening gap between the money coming in and going out,” the musicians’ plan said in a statement.
It also will actively push for legislation to better aid its insolvency, as well as that of the more than 120 other multiemployer pension plans across the nation in the same boat.
Out of the 50,000 members participating in the pension plan, about 20,000 are doomed to see eventual benefit clawbacks. Those that are safe from cuts are due to age restrictions within the law. The only silver lining is that the cuts won’t happen right away. The fund will continue to pay what its retirees are owed until it can’t. If the plan runs out of money, beneficiaries can get paid by the federal Pension Benefit Guaranty Corp.
However, the process takes at least a year, and the labor federation doesn’t have time on its side.
“The stakes are too high to avoid taking action while we wait for Congress to act,” the fund said. “We have a responsibility to do everything in our power to ensure that the Fund is able to pay benefits for the long-term.”
Related Stories:How Michigan’s Treasury Has Benefited from Paul McCartney, Ariana Grande Song Owner
Can Annuities Save Multiemployer Pensions?
Congress Mulls Multiemployer Pension Bailout