An application by the American Federation of Musicians and Employers' Pension Fund to reduce benefits to prevent insolvency does not distribute cuts properly and should be denied, the Pension Rights Center in Washington said in comments filed with the Treasury Department.
The comment letter, filed Monday on behalf of 14 retired musicians facing 40% pension cuts, questions the legality of the application, which PRC said does not comply with the Multiemployer Pension Reform Act's requirement that benefit cuts, known as suspensions, be spread as widely as possible over all participant groups.
The letter was written by PRC Fellow Terrence Deneen, an attorney and a former Pension Benefit Guaranty Corp. official. In it, he cites 180 retirees who face 40% cuts and 800 who stand to lose 20% to 40%. Of the 50,000 plan participants, the 180 retirees, who had taken partially subsidized early retirement benefits, "are less than 0.5% of the at-risk group, but this group was arbitrarily saddled with 10% to 15% of the total benefit cuts," the letter said.
The application, submitted Dec. 30, received more than 700 comments before the comment period ended Monday. Under the proposal, about 53% of participants would see no benefit reduction, and 45% would have their benefits reduced up to 19%.
If approved, the benefit reductions would go into effect Jan. 1, 2021, for the pension fund, which is projected to be insolvent within 20 years.
As of March 31, it 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%. For the fiscal year ended March 31, the plan paid out $185 million in benefits but received only about $76 million in contributions.