# AFM Pension Cuts



## patrick76 (May 31, 2019)

https://www.npr.org/2019/05/31/728059679/americas-largest-musicians-union-announces-pension-cuts


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## Nick Batzdorf (May 31, 2019)

Oy.


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## wst3 (Jun 1, 2019)

I feel really bad for anyone who has their future diminished like this, and the AFM is not the only pension fund to run into problems (many/most public education pension funds are equally in danger.)

We can point fingers at this person or that idea (and yeah, some of ideas were really stupid - let's stop paying into the fund for 10 years to see what happens!) - but the bottom line is defined benefit funds depend on more people contributing the same, or fewer people contributing more. I know it is an unpopular, maybe unfair comparison, but there is a similarity to the old pyramid scheme.

Defined Benefit plans may have run their course - fair enough - but it is not fair to penalize those who contributed according to the rules. I do not know where the money comes from (a common enough problem) but something does need to be done.

Maybe it is my age - I left the last job that offered a pension in 1988, at which time they were switching over to a defined contribution plan. Having just a tiny distrust of others managing my future I was ok with defined contribution, in fact I prefer it.

But I went into it with my eyes open, and it was my choice. If you've promised someone a pension I don't believe you should be able to pull the rug out from under them anymore than you should be allowed to reduce benefits, or become insolvent.

I know I sound like one of those folks that wanys everything for free, trust me, I'm not. But I'm also not one that sees a pension or Social Security as an entitlement - these are benefits for which people invested, and the fact that those responsible for managing the funds were idiots (or worse, thieves) should not be taken out on pensioners.

OK, too early to get too worked up...


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## AllanH (Jun 1, 2019)

That's pretty sad, but to a large extent predictable. Most defined benefit plans makes long-term commitments based on predictions. Most of the pension funds still assume a long term returns of 7% to 9% annually and that their membership base stays or grows. The only "reasonably safe" pension plans are the government plans, as they are backfilled by the taxpayers when needed.


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## C.R. Rivera (Jun 1, 2019)

AllanH said:


> as they are backfilled by the taxpayers when needed.


Yea, that is working well in California, for example. CALPERS has neither the membership nor the deep funds, so it is left to the taxpayers to make up the huge deficits. It is happening in other states and other plans. At this rate every existing pension/retirement plan made be billed to taxpayers permanently. When needed becomes always required!


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## JT (Jun 1, 2019)

I'm one of the AFM members who's directly affected by this. It's more than just the economy or AFM membership declining. We've seen this possibility coming for a number of years, and putting it mildly, the AFM Pension Fund has been less than transparent when it comes to allowing independent oversite of the books. Including bad management decisions where the funds loses a millions in a year in investments (I'm not sure but I think it was 20 million) and during that same year the fund paid 20 million to a team of investment professionals. They would have been better off firing the investers and putting it in a CD. This is the ultimate betrayal from a union to its members.


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## AllanH (Jun 1, 2019)

Sorry to hear that @JT. That is difficult to recover from, especially later in life.


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## JJP (Jun 1, 2019)

There has been a lot of hype and accusations around this. It wasn't a simple case of gross mismanagement. It was a number of complicated factors, including declining contributions, some bad investments, unique economic situations, longer life expectancies, and even government mandated rules that are unique to pension funds in the USA.

I am directly affected by this. I've been following it for years and was aware of the looming problems a decade ago. I know a number of fund trustees. I know people who are fighting the fund and suing.

In a sad way, the declaration of "critical and declining" status is a relief because it means the fund now has the legal means to take hard action, swallow the bitter pill, and set about the task of correcting the fund by reducing payouts so that the fund can survive.

It's easy in hindsight to analyze what should have been done. It's much more difficult to predict the future.


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## Daryl (Jun 2, 2019)

Pensions are the elephant in the room. It used to be assumed that a pension was for 7-8 years and then death. We are seeing more and more of people living well into their eighties, and the latest research suggests that realistically people now in their 20s will work until they are 83, and have 10-17 years retirement. Society is not in the least prepared for this. Couple that with automation taking away many, what used to be, middle class jobs, and there are huge changes that will undoubtedly happen. So far most Governments still have their heads in the sand.


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## Nick Batzdorf (Jun 2, 2019)

wst3 said:


> I know it is an unpopular, maybe unfair comparison, but there is a similarity to the old pyramid scheme.



There are similarities, but I do think it's an unfair comparison, just as comparing Social Security to a pyramid scheme is.

Pyramid schemes work by lying to investors, who are told they're investing in something tangible but are instead paying other investors. They need more and more investors to hold up the pyramid.

Pension funds are legitimate, not fraudulent!


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## wst3 (Jun 3, 2019)

I was thinking about premise, not intent @Nick Batzdorf - I'm sure some con men are "wise" enough to realize it can't go on forever, but I'll wager some think it can. Amway and new energy companies and Pampered Chef and hundreds of other businesses use network marketing - there's actually a term for it but I don't remember it - and some of them do so successfully because they've built a large enough network. Most fail for the same reason the teacher's pensions and the steel workers pensions and yes, the musicians pensions will fail - return on investment shrinks, participation shrinks, and all of the sudden there is not enough to sustain the program. When pensions (and social security, which has other problems) were first started there was no end in sight to the growth of the economy, nor should there have been. There was no malice in any of these programs.

Anyway, I wish I was smart enough to see the solution to pension fund problems, the optimist in me thinks there is still a way out that does not require pillaging benefits.


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## SchnookyPants (Jun 3, 2019)

Pension? Must be nice.


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## Nick Batzdorf (Jun 3, 2019)

wst3 said:


> Amway and new energy companies and Pampered Chef and hundreds of other businesses use network marketing - there's actually a term for it but I don't remember it - and some of them do so successfully because they've built a large enough network.



They rely on salespeople recruiting salespeople below them. Real companies make profits by selling things; scammers make money by selling hot air.

That's why I say pensions are quite different.



> Most fail for the same reason the teacher's pensions and the steel workers pensions and yes, the musicians pensions will fail - return on investment shrinks, participation shrinks, and all of the sudden there is not enough to sustain the program.



That does happen, but it's not a given that it invariably will.

There's probably more to the story with the AFM pension fund (I don't know), but I have a hunch: its problems stem from the fact that the music industry isn't the music industry anymore.



> When pensions (and social security, which has other problems) were first started there was no end in sight to the growth of the economy, nor should there have been. There was no malice in any of these programs.



Social Security is a public pension plan, and the problems people talk about are almost always zombie lies.

https://www.latimes.com/business/hi...al-security-fiscal-health-20190422-story.html



wst3 said:


> Anyway, I wish I was smart enough to see the solution to pension fund problems, the optimist in me thinks there is still a way out that does not require pillaging benefits



Indeed.

Of course, it's all part of the woes that affect our whole society. All the money goes to the top.


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## AllanH (Jun 3, 2019)

Pensions can certainly work, it's just far more expensive that most employees and employers are willing to contribute. I don't know of any private pension plan that contributes as much as e.g. CALPERs in California. For instance, the employer contribution rates for state employees is between 20% and 50% of pay. The notion that a pension can be provided based on an nominal contribution, such as 10%, is simply naive and will not work in the long run. For schools, the contribution rate mid 20% as that plan is better funded.

EDIT: fixed a typo in the state rate.


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## Nick Batzdorf (Jun 3, 2019)

AllanH said:


> Pensions can certainly work, it's just far more expensive than most employees and employers are willing to contribute..



The truth is that employers wouldn't contribute anything and they'd pay less if they weren't forced by collective bargaining!

Pensions are just earned benefits - they're part of an employee's pay. Employees accept less money up front in exchange for the pension.


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