NEW LEADERS. NEW DIRECTION.
MPS Proposal on Increasing Employer Contributions
Under the MPS Action Plan, any cuts in our pensions would be much lighter and would occur three years later than what the trustees are now contemplating. Our actuary, Tom Lowman, has said that a three-year delay on a present value basis would produce cuts of 13% vs. trustees’ planned cuts of 23.3%. That’s a 56.7% difference.
As part of its Action Plan, MPS has proposed contribution increases to help stabilize the AFM-EPF.
Contrary to what the Members Party claims, this is a very realistic proposal.
MPS is asking for 6% contribution increases over the next five years and 2.9% thereafter. Of the 6% we ask for, 2.5% growth in employer contributions are automatic because employer contributions are percentages of wages. If wages go up 2.5% per year, this raises employer contributions 2.5% per year automatically. So what MPS is asking for is a five-year annual additional 3.5% over and above the normal 2.5% increase: 3.5 + 2.5 = 6%. This additional annual 3.5% is to catch up from a decade of meager contribution increases. The rate of employer contribution increases at AFM is less than half the national average and has been for some time now.
Five years of catch up 3.5% increases yields an 18.28% increase overall. At an orchestra where the employer contributions are 11% of wages, an 18.28% increase would raise its employer contribution to 13.01%. The burden on such an orchestra would be even lighter due to the one time 10% increase in employer contributions the trustees announced in the Spring of this year.
The 2.9% increases thereafter are meant to track the current rate of wage inflation. That means that wages should increase 2.9%, which means so will employer contributions, without any increase in the employer contribution percentages.
Pretty modest proposal, considering that, according to recent Congressional testimony, employer contributions are increasing at the rate of 6.9% per year, and have been over the past five years.
We need to remember that there are only three possible sources of money to fix the AFM pension issues: employer money, government money and worker money. It’s a zero-sum game. We are hoping for government money – that’s the Butch Lewis Act. If it passes, wonderful, problem solved. But if it doesn’t, it becomes a question of whether the musicians should be taking 25-30% reductions, with employers taking no pain whatsoever; or, employers take a little pain (very little) and musicians get much lighter cuts and a three- year reprieve. This is against a backdrop of employer contributions at AFM being less than half of the national average. In other words, employers have been getting away with under-contributions for better part of a decade.
For the complete MPS Action Plan click here.