Most everyone can agree that musicians face some challenging times. We’ve seen the music business become much more complex and a much more difficult place to make a living. But for those of us still grinding away, there is one thing to be thankful for, and that is the American Federation of Musicians and Employers’ Pension Fund (AFM-EPF). Fewer and fewer workers these days have pension benefits available to them, but not only is the AFM-EPF still here, it is one of the healthier funds around. It’s in every musician’s best interest to keep it that way and to do what we can to enable as many musicians as possible to participate. There are ways we can do that, but first let’s talk about why it’s an important benefit.
There has been some talk about using a 401(k) or a 403(b) to replace the AFM-EPF as a retirement tool, but this suggestion is misguided. A report called “The Failure of the 401K” by the public policy group Demos calls 401(k)’s and similar retirement plans “…inadequate and unsafe vehicles for workers’ private retirements savings.” 401(k)’s, the report explains, are subject to more risks and overhead costs than traditional pension plans for one thing. It emphasizes, “The significant possibility of outliving retirement savings or losing them to a turbulent market, high fees, or poor investment decisions make 401(k)’s and other individual retirement plans unfit to be the private supplement to Social Security.”
The retirement system put in place in the 20th century was meant to rely on what was known as the “three-legged stool,” which included income from social security, pensions and private savings. But this system has been eroded in the past few decades. The tax code was revised in 1978 to allow for employees to set aside a part of their salary to a tax-deferred account. This change, over the years, contributed to a shift of retirement resources from defined benefit plans to private retirement plans.
There are several problems with this shift. Employers are not obligated to make contributions of any sort. The risks involved for the employee makes this method of retirement dubious. Recent literature has warned us that managers of 401(k)’s have an interest in making money off their clients and don’t always make decisions based on the client’s best interest.
Traditional pensions, like the AFM-EPF, are better for employees in many significant ways: they ensure that employers contribute to employees’ retirement, and insulate those employees from a variety of risks. So when you hear someone suggest that you’re better off with 401(k) contributions, make sure you have your hand over your wallet.
Of course, employers love 401(k)’s because it transfers the risks and costs to the employee. Most of our music employers would probably like to get rid of their obligation to contribute to the AFM-EPF, but that inclination is not based on the interests of working musicians. The best path for musicians is to keep our pension fund, increase the percentage of contributions, and get more employers to participate. The more we do, the stronger the pension fund will become, and the better chance the payout formula will improve.
AFM members often react to the letter they receive each year advising them of the “critical status” in which the pension fund finds itself. The pension fund, under the Pension Protection Act, is required to send out these notices. To some, it makes the situation seem dire. But the situation is more or less the same as it was last year when I wrote in these pages that the AFM pension remains perhaps the best benefit that our years of collective bargaining with employers offers. In spite of the fact that the payout multiplier has decreased, the fund is projected to be solvent for at least 40 years.
Many union members understandably bemoan the fact that the multiplier is not what it used to be in the late 90s and early 2000s, but we often forget that the fat payout rates of that era were the result of the performance of a stock market on steroids, which resulted in a great big crash in 2008. Nevertheless, the pension fund continues to operate efficiently and pay pensions to thousands of musicians and will continue to do so for as long as anyone can figure.
AFM members should know that it is in our interest to fight for pension at the bargaining table and in our organizing drives. Over the decades, our pension plan has had its ups and downs. We’re in a period now when the payout formula is lower, but pension remains an important part of our standards and it needs to be defended and built upon. Every time Local 802 renegotiates one of its contacts, we should always attempt to increase pension contributions from the employer. Also, organizing new members should be done with the pension benefit in mind. Not all unions have this tool in their belt and we should not dismiss it or undervalue it. For every musician who vests in the pension fund, the day will come when he or she will have every reason to thank their union.
And what if you don’t work steadily in music employment covered by the pension plan? Over the past two decades Local 802 has worked with musicians to find ways to get more and more of their work under contract in order to take advantage of this valuable benefit. The union has worked with hundreds of musicians to look at the options, especially in freelance work. There are plenty of so-called dark dates that can be brought under a myriad of union contract options in order to make a meaningful pension possible for musicians. (AFM Local 1000, the traveling folkie local, largely built their union this way.) All you have to do is pick up the phone and call Local 802’s Organizing Department at (212) 245-4802. Imagine your 65-year-old self talking to your 30-year-old self. If you didn’t take advantage of the pension benefit when you could have, your 65-year-old self is going to give your 30-year-old self a good talking to.
Editor’s note: See also “What’s up with our pension?” in The Musicians’ Voice. The opinions expressed in this article are the author’s own.
I’M NEW TO THE UNION. HOW DO I EARN A PENSION?
Here’s how the pension fund works. Every time you play a union job – such as a Broadway show, a union freelance classical performance or a union club date – your employer puts an amount of money into the AFM pension fund on your behalf. This money does not come out of your wages. It is a separate payment, and over time it adds up. Once you “vest” in the pension fund, you’re guaranteed a monthly check when you retire. The rules for vesting and the payout formulas can be found on the pension fund’s web site at www.afm-epf.org. Remember that this pension money is guaranteed. If the stock market crashes, you are still guaranteed your monthly check. That’s how this fund – which is called a “defined benefits fund” – is different from a 401(k) savings program.
In summary, the way to build up a good pension is to play union jobs. The steady union gigs include Broadway chairs and positions in union orchestras. There are also freelance orchestra jobs, club dates, wedding gigs and recording work, all of which can pay pension.
What if you can’t get a union gig? Local 802 has an excellent track record of turning nonunion jobs into union jobs. So when you get called for nonunion gigs, call us. Wouldn’t you like those gigs to pay into your pension? Call (212) 245-4802 and ask for the Organizing Department.