Fears ease for US musicians pension fund

Fears ease for US musicians pension fund

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norman lebrecht

March 18, 2021

As a result of legislation championed by President Biden and approved by Congress as part of a Covid Relief package, it appears that prospective cuts to American Federation of Musicians pensions will be withdrawn from implementation.

Read more here.

 

Comments

  • Hayne says:

    All debts are paid.

  • DAVID says:

    This development, which is still vulnerable to the vagaries of future administrations as well as to the unforeseen possibility of a bear market, should not obfuscate the fact that for a vast majority of participants, the cut is not just prospective, but has already been implemented in a permanent manner for already quite a few years. What the messaging of the story doesn’t tell, rather conveniently, is that the multiplier — which is the magic number that determines pension benefits — was lowered to 1 from a high of 4.65 already 10 years ago. In fact, this pension is essentially a three-tiered system in which some participants’ benefits are calculated exclusively at 4.65, some on a graduated scale between 4.65 and 1, and some at a bare multiplier of 1. The difference between the highest tier and the lowest tier is, of course, a difference of 4.65 — concretely, this means that someone who should have earned $4,650 a month in the old multiplier now earns $1,000 instead, for exactly the same amount of contributions during their entire career. Those unfortunate who are finding themselves at a multiplier of 1 didn’t have to wait for a Treasury decision as to whether or not their benefits would be cut: they simply were, by the sheer power of conveniently lowering the multiplier — a stealth tactic that doesn’t use the word “cut,” a word rather unpleasant to hear, but which implies exactly the same result in real dollars. Despite the bailout, this pension does remain a Ponzi scheme, in that the younger generation is literally subsidizing the older generation by sacrificing almost 5-fold its own benefits so that the entire fund does not collapse. To present it otherwise and put a positive spin on it is an absolute travesty. One wonders indeed, if there is going to be a taxpayer bailout, why the old multiplier of 4.65 cannot be restored for ALL participants, so that they too can be made whole. There is absolutely no reason why an entire generation of musicians should unfairly suffer economically in order not to rock the boat and possibly upset an entire segment of participants who have clearly demonstrated, throughout this entire ordeal, that the oft-quoted concept of “union solidarity” was in fact an absolute sham, since such “solidarity” immediately vanishes as soon as money is involved. For shame.

    • Laura says:

      You are partly right, and partly wrong. The multiplier refers to different years that contributions were made to the fund. I have yet to reach retirement age, but I have had some contributions in the higher tier, some in the middle, and some in the lower. The fact is that the immediate threat of 30-40% cuts across the board has been rescinded by this new legislation.

      • DAVID says:

        I am exactly in the same position as you are, with contributions calculated with several multipliers in between 1 and 4.65. My point is that fairness would imply that everyone should be treated equally and the work of everyone computed at one single multiplier that remains the same for everyone — regardless of when work was performed. That way, we can ensure that benefits are indeed relative to one’s actual work and contribution to the fund, since contributions do not come out of thin air, but are in fact concessions made during collective bargaining in lieu of actual wages. There’s absolutely no reason that more recent work should be computed at a severely reduced rate compared to work done decades ago. That to me is just a shrewd tactic to covertly implement cuts without actually calling them what they are. Work is work — whether done on 2021 or in 1965. A lower multiplier means less dollars and is indeed a cut — in many cases almost a five-fold cut. Compared to an older participant, even without the cuts that might have been implemented, my own cut still remains a whopping 40%. I’d like someone to explain to me why I should be taking a 40% cut on my pension just because it was somehow decided that the multiplier should be lowered simply because the bulk of my career happened to fall within specific years. An even younger participant, at a multiplier of 1, would actually be much better served — should that option be open to them — by not participating in the fund and negotiate to have pension contributions replaced by actual wages which would then be invested in the stock market. The argument that this pension is a “defined benefit,” in light of recent developments, is an absolute insult to anyone’s intelligence, especially when the defined benefit can in fact be re-defined ad nauseam simply by lowering the multiplier — in other words, by conveniently changing the rules in the middle of the game.

        • Kyle says:

          You’re obviously invested in this issue and understandably upset about it. As I am a fellow union member, please believe that I’m sympathetic to your feelings and position. Still, you wrote a couple things I want to reply to:

          “There’s absolutely no reason that more recent work should be computed at a severely reduced rate compared to work done decades ago.”

          There is a perfectly rational reason. It’s that the actuarial assumptions used in determining the 4.65 multiplier were wrong. Like, by a lot. That stinks, but it’s a very good reason.

          “I’d like someone to explain to me why I should be taking a 40% cut on my pension just because it was somehow decided that the multiplier should be lowered simply because the bulk of my career happened to fall within specific years.”

          The 4.65 multiplier was not advisable at the time it was effective, though it was actuarially justified. (That’s the real underlying systemic problem, as I see it, but a whole different conversation.) What would be even crazier, would be to continue to use that multiplier now. Your familiar with the definition of insanity, right?

          You shouldn’t get less, the people who got/are getting more shouldn’t have gotten more. Obviously, it’s now too late not to promise too much, and we’re dealing with the consequences. At this point, the definition of fairness will never be agreed upon – though each person may formulate their own – and the implementation of a fair solution, by definition, can only be based on one definition.

          Warm regards, and I wish you well.

          • DAVID says:

            Thank you, I appreciate the thought. I agree with you that the 4.65 multiplier was unrealistic to begin with — however fairness would still mean, in my opinion, finding a single multiplier that is equitable for all. This, of course, would mean enacting deeper cuts for many participants. Just because the 4.65 multiplier is unsustainable going forward, does not mean that a large segment of participants should alone be carrying this burden — which is exactly what they are expected to do by being switched to a much lower multiplier. By doing so, they are literally funding the pensions of other participants whose benefits are for the most part are being computed at the higher multiplier, because without their implied agreement and continued contributions to the fund, the entire fund collapses.

            It’s interesting to me that somehow, the multiplier was able to be lowered years ago, although not in such a way as to enable a more level playing field and more equitable sharing of sacrifice. I completely agree that the current course was unsustainable, but that does not mean that the balance should have been so skewed on one side. Not only is this not an equitable solution, but it remains highly vulnerable to possible changes in the law in future administrations, as well as market fluctuations.

            I just don’t see how it can be equitable for someone who contributed almost 5 times less to the fund than someone else to get the exact same benefit, just because they happened to work in a different time period. A pension fund truly worthy of the name does not divide its participant base by creating a caste system whereby standards are not the same for everyone.

    • FrankUSA says:

      There are many other investment opportunities where orchestra employees can invest their present income for future purposes. The “old” model of the management of orchestras needs to be completely relooked at and I am referring to not only strictly business(pensions) but also everything about the programming of music etc. The Covid pandemic forced more orchestras to find new ways of reaching out to more diverse audiences. The old artistic and business models no longer work.

  • Old Man in the Midwest says:

    At a time when unionized labor in the USA has been taking it on the chin time and again, this is welcome good news.

    The real test is for the AFM to grow membership going forward. The pension is an important part of that goal but it will have to be managed with better care.

  • Music fan says:

    Passed without a single Republican vote. Just saying, since many here seem to believe the left is anti-culture.

    • Kyle says:

      American Rescue Plan Act of 2021 = $1.9 trillion

      – including –

      Butch Lewis Emergency Pension Plan Relief Act of 2021 = $86 billion or 4.5%, a portion of which is arts related.

      Maybe we shouldn’t read too much into either party’s support for the arts based on this small portion of a much larger vote.

      • Peter San Diego says:

        But when the GOP wants to complain about alleged pork, it points to the $20 million (0.001% of the 1.9 trillion) devoted to preserving indigenous cultures and languages in danger of extinction. Either the 4.5% devoted to arts pension relief is not significant evidence of the left’s support of the arts, OR the 0.001% devoted to rescuing/preserving dying languages is pork. Can’t have it both ways…

    • jaypee says:

      Since when is the democratic party “the left”?

  • J Barcelo says:

    Here we go, the US taxpayers bailing out mismanaged pensions and bankrupt cities just so politicians can buy votes. Sickening. We’re already $30 TRILLION in debt; an amount so massive that it will never be paid off. This will not end well.The AFM has only itself to blame for their situation. Those of us who saved and invested wisely – will we get a bail out when the stock market tanks?

    • Hayne says:

      Barcelo, I’ll explain it for you. Corruption in the name of the “arts” is of a much higher, more noble level than your typical run of the mill corruption. Hope this helps:)

    • HR says:

      Why are we in debt? So the uber-wealthy could have a huge tax cut. Republicans only hate debt when a Democrat is president.

  • Alex says:

    Thank you bailout! Now, watch the AFM and the fund’s trustees screw this up again!

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