Screen Shot 2018-08-22 at 11.39.50

MFC Corrects the Record on the Pension Crisis


Tino Gagliardi and three Local 802 Executive Board members Martha Hyde, Wende Namkung and Sara Cutler have been talking incessantly about the pension crisis for the past year. And what they say is mostly inaccurate and misleading.

We want to correct the record, so we put together this analysis of the more misleading things they have said about our pension. We have extensively footnoted our analysis with references to Government filings and other statistical and financial information from objective sources.

Local 802’s Official Website: Your Pension Is “Secure”

Here’s what the official 802 website says today about our pension:


“AFM-EPF means big benefits.”


“Being ‘fully vested’ means that a participant has earned a right to a regular pension that cannot be forfeited.”


The AFM-EPF provides “a secure and financially sustainable retirement.”

The AFM-EPF provides “a secure return on pension investment and paying in monthly installments throughout your lifetime.”

Every single one of these statements is false. Our pensions are about to be cut by as much as 30%. The Funded Ratio of our pension plan has fallen to 69%, which means the plan has only 69 cents for every $1.00 of pension obligations it owes in the future. The trustees are already in discussions with the US Treasury about how best to frame their cut application.


Gagliardi: Our Crisis Was Caused by Factors Beyond the Trustees’ Control


President Gagliardi said that the pension fund has been “hit by a tsunami of negative factors within a short timeframe,” including the stock market crashes of 2001 and 2008, declining demographics, and bad industry dynamics. He even blamed the musicians themselves: “Every time a musician plays a dark date, that’s less money coming into the fund.”[1]


What Gagliardi won’t say is that the AFM-EPF is demonstrably the worst run pension fund in our peer group of pension funds. Its expenses,[2] its investment performance [3] and its employer contributions[4] severely lag objective benchmarks.

As Tom Lowman, our consulting actuary and one of the foremost pension actuaries in the United States said: “If the Trustees declare the Plan to be in critical and declining status, and then decide to make application to the U.S. Treasury to reduce benefits, they place the Plan in a very small minority of highly dysfunctional multiemployer plans.”[5] That small minority equals 1.1% of all multiemployer plans in the country.


AFM-EPF is about to become part of the 1.1% of “highly dysfunctional plans.”


Gagliardi: Investment Performance "Has Been Good"


President Gagliardi calls the AFM-EPF’s investment performance “good.”[6] According to President Gagliardi, “We are in a difficult situation, but the returns have not been so bad.”


AFM-EPF’s record is near worst in its peer group,[7] and a Federal Judge called its investment strategy “extraordinarily risky.” According to the investment report prepared for the trustees by Meketa, AFM-EPF underperformed the benchmark indices in five of the last eight years.[8]



Gagliardi: Expenses Are Under Control


President Gagliardi has stated as follows: “Our expenses compare favorably to those of other entertainment industry funds.”[9]


We have repeatedly shown – with the trustees’ own numbers – that the AFM-EPF expenses are vastly greater than the expenses of peer pension plans in the entertainment industry, and those of our sister fund in Canada.


Mr. Gagliardi, Martha Hyde and other Members Party argue that these comparisons are thrown off because several of the peer entertainment funds are administered along with related health funds serving generally the same participants. But the comparisons are valid, because we are taking the trustees’ own numbers that adjust for that fact. [10] Taking these adjustments, AFM-EPF expenses are 26.8% higher than the average for the peer group.[11]


Mr. Gagliardi also argues that the entertainment industry funds do not constitute a “peer group” because “we actually do not know enough about these other funds to know if the comparison makes sense.” This contradicts what the trustees said in March 2017 in their Roadshow Presentation where they devoted no less than five slides to detailed comparisons with these very entertainment industry funds, stating that they are “similar” to ours. The trustees made all the adjustments to these numbers they felt were necessary to account for shared expenses.


Executive Board member Martha Hyde has said this about our pension’s expenses: “Unfortunately whatever could still be cut would be a drop in the bucket and would, in no way, provide a solution to the fund’s problems.”


Of course, expenses do matter – a lot. Over decades meaningful expense control can add millions and even tens of millions of pension dollars.



Cutler: The Ratio of Active to Retired Musicians Spells Doom

Executive Board Member Sarah Cutler asserts that the crisis at AFM-EPF was caused by the “dangerously low ratio of actively working participants to retired participants in pay status… The current ratio for our plan is 42%, among the lowest for all multiemployer plans. This means that only 42% of our plan’s participants are still working and paying for the other 58% retirement benefits.” [12]


But Sarah Cutler is incorrect. The ratio of 42% active participants to 58% inactive participants is quite normal for healthy multiemployer pension plans.[13]


Hyde: Today’s Trustees Are Different Than 2009


Executive Board Member Martha Hyde tells us not to blame the current trustees because “it was a different board of trustees in 2009.”


We don’t have the list of trustees from 2009. But as of August 2010, six of the eight union side trustees were all the same as today except for Phil Yao (who resigned in May 2018) and Vince Trombetta. So it’s pretty much the same folks. Anyway, plenty of mismanagement took place after 2009, whether in investment performance, employer contributions or expenses.


Hyde: The Financial Crisis Caused All Our Trouble

Martha Hyde stated our pension fund “flipped upside down in the financial crisis when it lost $560 million in the market.” Not true. From 9/30/07 through 3/31/09, its realized losses were $200,748,766. Hyde confuses realized and unrealized losses.


Hyde also leaves out the key fact: the overwhelming majority of pension funds recovered from the financial crisis. According to a recent study by Milliman, the funded percentage of all multiemployer plans have completely recovered from the financial crisis and are back to their pre-financial crisis levels with funded ratios averaging 81%.[14] Not ours.


Namkung: Our Trustees Did Their Best on Butch Lewis

Executive Board member Wende Namkung states: “There are some people myopically blaming that on the NCCMP as it struggles to get some kind of loan program passed along with a more permanent voluntary fix that some funds are asking for. We may need to re-evaluate attitudes towards the NCCMP, a group that is trying to find a way to prevent utter disaster in a hostile political climate.”


Ever since it was introduced in late 2017, Butch Lewis has been under attack from the NCCMP, a powerful Washington lobbying group that played a key role in the formulation of MPRA, the 2014 law that allows trustees to cut accrued pension benefits. NCCMP wants to put the loan assistance program under Butch Lewis out of reach for plans like AFM-EPF.

AFM-EPF is an important member of the NCCMP and has long been in its inner policymaking circle. Our trustees refuse to oppose the NCCMP.[15]  In a January 2018 Allegro article, Mr. Gagliardi made the following statement: “As an international executive officer, I participate fully in the AFM’s legislative and political activities.” Too bad those activities don’t include opposing the NCCMP.



[1] October 18, 2017 Statement at the Local 802 Membership Meeting


[2] The peer group consists of five other pension plans, all in the entertainment industry. We used a standard measurement for cost efficiency, comparing the administrative expenses to assets under management. We found that the average in the peer group was 0.73% whereas the AFM-EPF is 1.21%. (Peer group was: Screen Actors Guild (SAG). International Alliance of Theatrical Stage Employees (IATSE), Producer-Writers Guild of America Pension Plan (PW), Directors Guild of America (DG), American Federation of Television and Radio Artists (AFTRA), and American Federation of Musicians (AFM).)


[3] The comparison group is 23 multiemployer pension plans similar to the AFM-EPF with assets over $1 billion.  The comparison was done by Meketa, AFM-EPF’s investment advisor.


[4] "Aggregate contributions to multiemployer pension plans from 2009 to 2014 increased by 6.9 percent per year, significantly outpacing the average inflation rate of 2.1 percent over this period.” Lisa A. Schilling and Patrick Wiese, Multiemployer Pension Plan Contribution Analysis, Society of Actuaries, March 10, 2016, The AFM-EPF trustees have calculated that between 2010 and 2016, sustainable employer contributions at AFM-EPF, factoring out what they called “noise,” have been increasing annually at 2.2%. Milliman, Presentation to AFM-EPF Trustees, May 16, 2017, page 6.


[5] Lowman, Opinion Letter to MPS, April 4, 2018, page 1, available on MPS website.


[6] October 18, 2017 Statement at the Local 802 Membership Meeting


[7] According to Milliman, “the primary driver of multiemployer health continues to be asset performance.” And this is precisely where the trustees of the AFM-EPF underperformed the most. The trustees had the fund consultant Meketa prepare a comparison of 23 multiemployer pension plans’ investment performance, including our own. The plans are ranked by percentile, with 99th being the worst and first being the best. Our 10-year investment performance is 99th percentile, the worst in the peer group, the five-year performance is 91st percentile, and the three-year performance is 87th percentile.


[8] Meketa Investment Report, 6/30/17, page 35


[9] Statement at 802 membership meeting on October 18, 2017


[10] As the trustees said in their February 2017 Roadshow presentation: “These numbers do not come directly from the other funds’ Forms 5500 because they had to be adjusted to reflect that funds with one office administer multiple funds.”


[11] Here are administrative expenses compared to assets under management for each of the plans:


SAG .74%

Producers-Writers .384%

Directors Guild .593%

AFTRA .348%

IATSE .133%

Average .439%

AFM-EPF .575%


[12] She explains: “Ours is a relatively large and old plan. When a plan is new, all or virtually all vested participants are still working and getting contributions from employers into their accounts. The ratio of working participants to retirees is very high. Over time, as industries change, legislation is passed or amended, and populations shift, that ratio changes.”


[13] According to a recent study by Milliman (the actuary for the AFM-EPF), the ratio of 42% actives to 58% inactives is the average ratio in Green Zone plans (that is, plans that are healthy). According to Segal, another large actuarial firm, critical and declining plans (unhealthy ones) have 87% inactives and all other plans (healthier ones) have 63% inactives. Cutler’s assertion that the AFM-EPF’s ratio of actives to inactives is “among the lowest for all multiemployer plans,” is flat out wrong.


[14] Milliman Fall 2018 Multiemployer Pension Funding Study


[15] The trustees have made only meaningless statements in public, like this statement they made on July 8, 2018: “While the Trustees support the Butch Lewis Act, we will be advocating that the Joint Select Committee forge a bipartisan solution that fully addresses the financial issues facing our Fund, while also treating our participants fairly.” The trustees have never criticized or repudiated the NCCMP’s lobbying efforts, despite being called upon numerous times to do so by MPS.


Screen Shot 2018-08-22 at 11.39.50