American Federation of Musicians and Employers' Pension Fund, New York, will be applying to reduce benefits, now that it has reached critical and declining status, according to a notice on the pension fund's website.
As of March 31, the pension fund had $1.8 billion in assets and about $3 billion in liabilities, with a funding shortfall of $1.2 billion and a funding ratio of 60%. The plan's actuaries advised the board of trustees in May that it had entered critical and declining status for the plan year that began April 1 and is projected to be insolvent within 20 years.
"Because the fund is entering critical and declining status, the trustees are now able to, and now intend to, apply to the government to reduce earned benefits in order to prevent the fund from becoming insolvent," the May 24 notice said.
"We are in this position because of the combination of investment losses during the Great Recession and rising benefit payments that increasingly exceed contributions," the notice said, adding that "there is no practical way that investment returns and contribution increases alone will be able to close the long-term, worsening gap between the money coming in and going out."
Rather than running out of money, the trustees decided to apply to the Treasury Department for approval under the Kline-Miller Multiemployer Pension Reform Act to reduce benefits for its 50,000 participants. The application is not expected to be filed until late 2019, and if benefit reductions are approved, they would not be expected to start until late 2020 or the beginning of 2021, at the earliest.
The trustees said they will also continue to actively push for multiemployer pension legislation, but that "the stakes are too high to avoid taking action while we wait for Congress to act."