The American Federation of Musicians and Employers Pension Fund (AFM-EP Fund) has posted the following important announcement on its website at www.afm-epf.org/.
“IMPORTANT ANNOUNCEMENT – At its October 15, 2009 meeting, the Board of Trustees concluded that the residual effects on the Fund of the collapse of the financial markets will require another reduction in the future rate of benefit accrual effective January 1, 2010, along with immediate restrictions on the ability to reduce employer contribution rates.
Additional information will be forthcoming, including notices to participants and dates of participant information sessions.”
The full text of the Trustees’ resolution as signed is here, and we have also attached a transcription below.
We will keep you informed as additional information becomes available.
President RMA International
RESOLUTION OF THE BOARD OF TRUSTEES
WHEREAS, the Trustees are committed to maintaining the Fund’s long-term viability so that it may continue to provide retirement benefits to participants and beneficiaries for many years to come; and
WHEREAS, Congress enacted the Pension Protection Act of 2006 (“PPA”) to ensure that pension plans are funded sufficiently to provide all ofthe promised benefits; and
WHEREAS, over the past two years the u.s. economy has experienced the worst financial downturn since the Great Depression, resulting in unprecedented losses for virtually all multi employer funds, including this Fund; and
WHEREAS, as a result, the Fund’s actuaries have advised that the Fund has a long-term funding deficiency and a declining funded percentage, and recommend that the benefit multiplier be reduced to $1.00 as soon as such decrease can be effectuated; and
WHEREAS, the Fund is expected to enter “critical” status under the PPA effective April 1, 2010, even ifthe recent rebound ofthe markets continues through the end ofthe current plan year (March 31, 2010); and
WHEREAS, a plan that is in critical status is required under the PPA to develop and submit to the Internal Revenue Service a rehabilitation plan that would allow the plan to emerge from critical status in 10 years, if possible; and
WHEREAS, the Trustees acknowledge that the Fund’s rehabilitation plan is likely to require a reduction in the benefit multiplier to $1.00; and
WHEREAS, the PPA also prohibits employers from reducing contribution rates once a plan enters critical status; and
WHEREAS, the Fund’s actuaries have advised that reductions in future employer contributions before the Fund enters critical status will exacerbate the Fund’s financial condition; and
WHEREAS, the Trustees recognize that it would be imprudent to wait to implement measures that will be inevitable under the PPA and that would help restore the Fund to a more sound funded status so that it can continue to provide all benefits earned; and
WHEREAS, the Trustees had previously reached a deadlock in March 2009 on a motion to reduce the benefit multiplier to $1.00 and had scheduled an arbitration hearing to resolve that deadlock; and
WHEREAS, the Trustees wish to avoid imposing the expense and burden of such arbitration on the Fund; and
WHEREAS, the Trustees recognize that reducing the multiplier to $1.00 will cause hardship to participants because future pensions will be significantly reduced ifthis multiplier remains in place for a long period oftime, and are committed to restoring the multiplier as soon as the Fund’s financial condition permits them to do so;
NOW, THEREFORE, the Trustees of the Fund agree as follows:
1. The benefit multiplier for future benefit accruals will be reduced from $2.00 to $1.00 effective January 1, 2010.
2. The procedures adopted by the Board regarding the acceptability of employers and collective bargaining agreements shall be revised to provide that an employer and a collective bargaining agreement is not acceptable to the Board in the event that the effective contribution rate is reduced, by agreement or otherwise on or after October 16, 2009, to a rate that is lower than the greater of (i) the effective contribution rate in effect on October 15, 2009; or (ii) the contribution rate applicable to any period on or after October 16, 2009 as set forth in the collective bargaining agreement in effect on October 15, 2009.
3. Immediately following execution of this Resolution, the Employer Trustees will withdraw their demand for arbitration ofthe former deadlock regarding the benefit multiplier.
4. The Fund office shall be directed to issue 204(h) notices and any other required notices to effectuate this Resolution.
5. The Trustees will regularly re-evaluate the condition ofthe Fund and will consider raising the benefit multiplier as soon as it is possible and prudent to do so.
IN WITNESS WHEREOF, the Board of Trustees has adopted this resolution on the 15th day of October, 2009.