An application by the American Federation of Musicians and Employers' Pension Fund to reduce benefits to prevent insolvency will be denied, according to a letter sent by trustees to Treasury Secretary Steven Mnuchin, asking him to reverse the expected decision.
Treasury officials overseeing benefit suspension applications recommended denying the application, based on the "we believe, mistaken, conclusion that our mortality and new entrant assumptions are not reasonable," therefore the proposed benefit cuts would not meet the legal mandate of avoiding insolvency, as required by the Multiemployer Pension Reform Act, the trustees noted in Wednesday's letter.
Even using Treasury staff assumptions, the proposed reductions would satisfy the MPRA, the trustees said in their letter. The trustees called the conclusion "arbitrary" and said the Treasury staff substituted "its judgment of reasonableness for that of our actuaries."
"Too much is at stake for this to be the basis of a denial. Over 50,000 musicians across the country rely upon their pension benefits as an important part of their retirement security," and many would see drastic cuts if the plan was transferred to the Pension Benefit Guaranty Corp., with reduced guarantee levels, the letter said.
The application, submitted Dec. 30, proposes that about 53% of participants would see no benefit reduction, and 45% would have benefits reduced up to 19%. If approved, the benefit reductions would go into effect Jan. 1.
The pension fund is projected to be insolvent within 20 years.
As of March 31, 2019, 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%.