The Musicians’ Voice

Volume 114, No. 10October, 2014

The Musicians’ Voice is an open forum for discussion about the state of union affairs. The letters here do not necessarily express the views of Local 802. E-mail letters to or write to Allegro, Local 802, 322 West 48th Street, New York, NY 10036. Letters must be no more than 300 words.


As a member of Local 802 who is nearing retirement, I am concerned about the financial health of the American Federation of Musicians and Employers’ Pension Fund as reported in the Annual Funding Notice and Notice of Critical Status (July 25, 2014). Specifically, will the fund be solvent when I retire in a few years, and how stable will it be in the coming 30 years? And also, why would a young musician join a union whose contributions invest in a fund that indicates endemic weakness and displays lackluster expectations for its future solvency?

In particular, I am astonished at the fund’s exceptionally poor recent stock market performance as evidenced in the report’s “Year-End Fair Market Value Of Assets.” By my calculation of the data in this report, it shows that the fund’s net annual gains were approximately 3.1 percent (for March 2012 to March 2013) and 3.6 percent (for March 2013 to March 2014), a period during which the Dow Jones Index gained 10.3 percent and 13 percent, respectively! As a participant in both Vanguard and TIAA-CREF Funds, I have seen corresponding growth in my personal investments and IRA during this period.

What is our fund manager doing? Why has the fund not taken advantage of this growth? Why must AFM-EPF participants suffer benefit reductions to accommodate the poor investment choices of the fund manager? How much does the manager charge the fund for its investment service? Has the union shopped around for another manager?

I am perplexed by and angry with the AFM-EPF fund manager, and the Board of Trustees who hires and is supposed to oversee the manager, for losing this investment opportunity and allowing the fund’s asset value, and its promise to its pensioners, to trail so far behind market value by such a large margin. What the heck is going on?

–Armen Donelian


Local 802 thanks Mr. Donelian for his thoughtful questions and would like to present the following reply by Local 802 president Tino Gagliardi and former Local 802 president Bill Moriarity, both of whom are union trustees of the American Federation of Musicians and Employers’ Pension Fund as well as members of the Fund’s Investment Committee. (Please note that in their reply below, Mr. Gagliardi and Mr. Moriarity are speaking as individual trustees and not on behalf of the Board.)

The most recent projections of the Fund by the Fund’s actuarial firm show that, if the Fund meets its current assumptions (including a 7.50 percent annual investment return), the Fund will not become insolvent over the longest period for which the actuary has made projections, which is through 2047, or for the next 33 years, as far into the future as was thought prudent to project. This shows that the stability of the Fund is not currently at risk, although the Fund’s demographics continue to pose challenges, as outlined below.

The “Year-End Fair Market Value of Assets” found in the Fund’s Annual Funding Notice for the year ending March 31, 2014 is information required by the federal government to be included in the notice. The Year-End Fair Market Value of Assets does not, nor was it intended to, depict investment earnings, since it takes into account the Fund’s income and expenses during the year.

To illustrate, we’ll use the year ending March 31, 2014 as an example. The Fund’s income derives entirely from two sources, employer contributions and investment earnings. The expenses fall into three categories: benefits paid, administrative costs and investment fees. The employer contributions for the year ending March 31, 2014 were $60 million and the investment earnings were $154 million (an investment return of 8.3 percent, gross of fees), for total income of $214 million. The benefits paid were $137 million, the administrative costs were $14 million, and the investment fees were $12 million or 0.56 percent of assets under management, for total Fund expenses of $163 million. The employer contributions cover only $60 million of this amount. The remainder, in excess of $100 million, is taken from the investment earnings to pay expenses, chiefly benefits. To calculate the Fair Market Value of Assets for the year ending March 31, 2014, start with the market value of assets as of the end of the previous March 31, 2013, increase that number by the percentage increase in investments (8.3 percent) then deduct the $100 million that was taken from investments to pay benefits: the resulting number is the Fair Market Value. This use of investment earnings to pay benefits where the benefit payments by the plan exceed employer contributions taken in (known as “negative cash flow”) is common in mature plans such as ours, where the number of pensioners has increased greatly over the years and the number of active participants has slowly decreased.

Trustees on boards such as the Fund, with significant annual pension obligations (ours is $137 million and growing) are pulled in two seemingly opposing directions. On the one hand all members of boards want the highest return on their investments. We all want more. On the other hand we realize that obtaining higher returns frequently means taking higher risks, which could, depending on the actual risks and returns, threaten the viability of a fund and call into question its ability to meet its benefit payment obligations. We struggle with this dilemma, as do all similarly situated pension boards. Our solution, in common with that of many boards, is to attempt to devise an asset allocation that maximizes returns while at the same time minimizes risks. Our current asset allocation includes the following: equities (domestic, international developed, emerging markets, private equity); bonds (investment grade, high yield and emerging market debt); treasury inflation-protected securities (TIPS); real estate; natural resources and infrastructure. We invest using concentrated strategies and index funds. Our domestic equities include core, value and growth in large-cap, mid-cap, small-cap and micro-cap classes. We believe the diversity provided by this allocation gives us the ability to meet the demands we face with regard to both our need to grow our assets and to continue to meet our benefit obligations into the foreseeable future.

The Fund retains professional investment managers with proven long-term track records (there are currently 25 managers that manage 29 portfolios) to manage these assets. To facilitate its oversight of investments, the Board has established an Investment Committee composed of five management trustees and five union trustees, which supervises the Fund’s investment program.

The Investment Committee relies heavily on the Fund’s independent investment advisor and fiduciary, Meketa Investment Group, in selecting and monitoring each of its investment managers. Meketa is responsible for reviewing the Fund’s asset allocation, and providing ongoing advice and specific recommendations to the Investment Committee and the Board with respect to overall performance and the performance of the managers. Meketa has been in the investment advisory business for nearly 40 years and advises on almost $300 billion in client assets for 94 clients, including Taft-Hartley funds with over $40 billion in assets.

The Fund lost about $900 million in the recession of late 2007 through mid-2009. Since then the Fund has experienced gross returns of 32 percent, 12.6 percent, 1.0 percent, 8.8 percent and 8.3 percent for its fiscal years ended March 31, 2010, 2011, 2012, 2013 and 2014, respectively. Despite these positive returns, our negative cash flow (requiring the $100 million in outlay from our investment earnings to pay benefits) has played a significant role in preventing us from fully recovering from our losses. But we are making slow progress and will continue to work to help provide decent retirement income for musicians.

Local 802 member Frank Vaccaro, second from the left in the back row, died on June 30.

Local 802 member Frank Vaccaro, second from the left in the back row, died on June 30.


I was sad to read that trombonist Frank Vaccaro passed on June 30. In 1955, I was playing sessions in the Bronx. One night, a young trombone player came in wearing a uniform. He blew us away with his playing. I talked with him during the breaks. He told me about the First Army Band at Governors Island. He said it was a great band and you could live at home and even work in the city every night. Band duties required some rehearsals, concerts, marching and so on. It was a terrific group of great musicians and even had a jazz band. Since I was going to be drafted in August, Frank talked me into auditioning for the First Army Band, which I passed. After basic training, I reported to the band. Frank and I hung together a lot. He was a body builder and took me to the YMCA gym a lot. We also would roam the city and wind up at some Italian restaurant in Little Italy where everyone knew Frank. Once, he knocked on the door of this small restaurant late at night. A lady opened the door, hugged Frank and made just the two of us one of the finest Italian meals I ever had (not counting my mother’s).

I left the First Army Band to go to Europe. Once out of the Army, I moved in with Don Ellis in an apartment in NYC. Eventually I traveled and lived in several different countries. I didn’t keep in touch with Frank, but through friends I followed his career. He lived on Long Island, became a teacher, played Broadway shows, played a lot of piano and was a first-call trombone player around the city for many types of music. I know he played at Radio City and was a good friend of Warren Covington.

I will always be in Frank’s debt for letting me know about the First Army Band.

–Gabe Villani

I knew Frank Vaccaro from the First Army Band, circa 1955. A happy-go-lucky guy, always with a smile. A great professional player.

–George Dobrin

I’m an old music acquaintance of Frank Vaccaro, from our Army days together on Governor’s Island. Frank was the first person to greet me when I arrived in the barracks of the First Army Band. He was kind and gentle with me, a kid from Brooklyn with a trumpet who did not know what to expect!After taking me under his wing, I soon realized what an incredible musician he was. We spent the next year or so hanging out together, playing jam sessions in the city at Nola Studios, and of course making some incredible music together under the baton of Vincent LaSelva and the incredible First Army Band. Frank was a marvelous trombone player and someone who knew how to enjoy life to its fullest. I am thankful to him for paving the way for me in the Army, for introducing me to some wonderful people, some incredible musicians and to people I would remain friends with throughout my life. Unfortunately, aside from a short stint with Frank in the Radio City Music Hall Orchestra several years after our discharge, we lost contact. I will however never forget this kind, gentle talented man.

–Fredrick Kaufman

Editor’s note: Trombonist Frank Vaccaro died on June 30 at the age of 82 after being a member of Local 802 since 1952. According to his bio at, Mr. Vaccaro not only premiered many Broadway classics such as “Mame,” and “Hello Dolly!” but also performed with the Glenn Miller Orchestra under Ray McKinley, as well as with Fred Waring and His Pennsylvanians, the Tommy Dorsey/Warren Covington Orchestra, and countless other famed groups. Mr. Vaccaro’s standing as one of the top New York City studio players of his time afforded him the opportunity to perform on countless jazz and pop albums as well as television, radio and movies.