In January participants in the AFM-EPF, the musicians’ union pension fund, received a letter about a petition to the US Treasury Department under the Multiemployer Pension Reform Act to reduce benefits. The pension trustees decided to do this because the pension is in critical and declining status and if cuts were not made the pension would run out of money within the next 15-20 years.
Communications from the AFM-EPF on this topic can be long and complicated. Member John O’Connor has prepared a summary to explain what’s happening:
What Does the Application for Benefit Reductions by the AFM Pension Mean?
In January participants in the AFM-EPF, the musicians’ union pension fund, received a letter about a petition to the US Treasury Department under the Multiemployer Pension Reform Act to reduce benefits. The pension trustees decided to do this because the pension is in critical and declining status and if cuts were not made the pension would run out of money within the next 15-20 years.
Communications from the AFM-EPF on this topic can be long and complicated. So, in attempt to summarize, here is what is happening. Each participant will have been sent a letter with an estimate of what the cuts will mean to each of them. The cuts are determined by a formula applied to benefits according to the credits earned during different time periods with different “multiplier” calculations.
What is a multiplier? It is the number that is applied to a formula to determine each musician’s pension. The current multiplier is the number 1. The formula takes the total dollars contributed to the fund at the time that a musician applies for her pension and divides that number by 100, then multiplies the quotient by the “multiplier”. That product is the monthly benefit that the pension will receive for life. So as an example, if a musician has $50,000 total contributions, her monthly pension benefit under the current multiplier would be $500 per month(50,000/100X1).
The plan that the trustees sent to the Treasury would cut benefits earned during periods when the multiplier was higher than 1. Those who began collecting benefits at the full retirement age of 65 would have their benefits for those periods reduced by 15.5%. Pensioners who applied for benefits before age 65 would have larger reductions.
So as an example, let’s say Sue earned $50,000 in total contributions when she filed for pension at age 65. $30,000 of those contributions were earned during the years in the 90s when the multiplier was the exceedingly high 4.65. Then she earned in the early 2000s $10,000 in contributions when the multiplier was reduced to 3. Finally, she earned $10,000 in contributions when the multiplier was reduced to 1. Using the formula for benefits, Sue’s monthly pension is $1395 for her 4.65 multiplier years plus $300 for her 3 multiplier years plus $100 for her 1 multiplier years. Her total monthly pension is $1795.
Should the Treasury Department accept the trustee’s petition as calculated, Sue’s pension will be reduced for her 4.65 and 3 multiplier years by 15.5% but her 1 multiplier years will not be cut. Her pension based on the above will be reduced to $1532.12.
The petition made to Treasury is calculated in order to comply with the law, specifically to reduce benefits sufficiently enough to be able to restore the fund but not more than that. If the petition is successful, the trustees hope to stabilize the fund so that the fund becomes healthy again and the benefits paid under the 1 multiplier are secure in order to provide a valuable benefit to musicians in the future.
To support efforts in congress to assist troubled worker pension funds, including ours, please go to this page to find out how you can support current legislative efforts: https://afm-epf.org/Participants/ContactCongress.aspx. The current bill before congress, if passed, would restore benefits to their current state.
For more information regarding the pension fund contact the Local 1000 office at 212.843.8726.
