American Federation of Musicians and Employers' Pension Plan, alleging mismanagement of the $2 billion pension fund that covers many union musicians in the United States and Canada.Two union musicians have filed a class-action lawsuit against members of the Board of Trustees of the
The American Federation of Musicians [AFM] is a union with more than 80,000 members in the United States and Canada. About 50,000 of those members participate in the pension plan, which was founded in 1959.
The fund has been in grave trouble since a catastrophic 40 percent drop in the fund's assets (a loss of about $800 million) during the recession between 2007 and 2009.
In the years since, the fund's trustees and managers have not succeeded in turning the fund around. In April 2010, the plan was certified by its actuary to be in "critical" status, meaning it has funding or liquidity problems, or both.
"Critical" status required its trustees to develop a rehabilitation plan. Each year since then, the plan has been re-certified to be in "critical" status. Its most recent rehabilitation plan in 2016 stated that the "plan cannot reasonably be expected to emerge from critical status by the end of a 10-year rehabilitation period."
In Dec. 2016, a letter to all AFM pension fund participants said that the plan's status was likely to be downgraded from "critical" to "critical and declining" (a federal designation meaning that the plan is projected to be insolvent and unable to pay benefits within a 15 to 20-year period), and that could happen "as early as next year." In May 2017, the AFM-EPF announced that, while the fund remains in "critical" status, "better than expected investment returns kept the Plan out of 'critical and declining' status for another fiscal year."
The lawsuit was filed July 14 in U.S. District Court in New York by AFM Local 802 (New York chapter) members Andrew Snitzer and Paul Livant on behalf of participants and beneficiaries of the American Federation of Musicians and Employers' Pension Plan. Read the full lawsuit here. The suit cites "breach of fiduciary duties and other violations of the Employee Retirement Income Security Act," alleging overly risky investments, over-dependence on expensive asset managers; and lack of transparency, among other allegations. The plaintiffs are seeking (see p. 64-65) a declaration that the trustees breached their fiduciary duty, as well an order that the defendants make payments to restore losses to the plan. They also seek to move the fund's assets from "emerging markets equities" to less risky, managed assets, such as index funds.
In a statement about the lawsuit, AFM Employer Pension Fund Executive Director Maureen Kilkelly called the lawsuit "entirely without merit," stating that the trustees "have consulted with respected and experienced investment experts in the industry, closely reviewed investment options, and always acted in the best interests of the Fund's nearly 50,000 participants and beneficiaries." She goes on to cite other causes for the fund's poor performance: "Many multiemployer pension plans across the nation are struggling with a similar 'perfect storm' of challenging factors. These include the volume of Baby Boomers taking retirement; more benefits being paid out to retirees and beneficiaries than contributions coming in from actives; and significantly longer pay-outs because participants are thankfully living longer. Additionally, two major recessions since 2000, the one in 2008-09 being of epic proportions and causing the collapse of financial markets worldwide, have profoundly impacted pension plans across the nation." Read the entire statement here.
Note: I am a longtime member of the AFM who has been contributing to the pension fund since 1996.Tweet
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