3 Discussion

There are only two knobs that trustees can adjust in a pension plan: one is contributions (money coming in), and the other is benefits (money going out). Getting more money into the fund is always a great idea and would certainly help to prevent insolvency and possibly reduce required benefit cuts. Increasing employer contributions is the standard method for doing that. Mr. Lowman feels increases of 6% a year are reasonable based on a 2011 report from Milliman. Here are the figures from that report (page 3):


Table 1: Contribution history from Milliman 2011 Report



Year AmountPercentage Change



2003$44,666,735 -
2004$48,275,199 8.08%
2005$48,869,306 1.23%
2006$53,241,312 8.95%
2007$56,879,951 6.83%
2008$54,197,798 -4.27%
2009$51,420,676 -5.12%
2010$50,936,832 -0.94%




As you can see, when things were good, and the housing bubble was in full swing (2003-2007), the average contribution increase was 6.23%, indeed in line with Mr. Lowman’s recommendation. Undoubtedly the global financial collapse in 2008 caused not only the stock market to collapse, but pension contributions as well. The average pension contribution increase for the years of 2003-2010 is only 1.89%, which is 35% below Mr. Lowman’s required “maintenance” contribution of 2.9%. We don’t have the data to be certain1, but we believe that the cause of the 2008-2010 drop is from work lost due to the financial catastrophe and not from contract reductions. We don’t know why Mr. Lowman didn’t use the available data from the forms 5500 to get a complete picture, but here are the total contributions from 2010-20162:


Table 2: Contribution History from 5500’s



Year AmountPercentage Change



2010$51,566,506 -
2011$55,734,886 8.1%
2012$57,885,547 3.9%
2013$61,213,724 5.7%
2014$61,974,622 1.2%
2015$63,799,631 2.9%
2016$67,659,110 6.0%




This is an average yearly increase in contributions of 5.2%, only 0.8% short of Mr. Lowman’s recommendation. It would be a great help if we knew the source of these increases since we could then have some idea of how sustainable they might be. There are several possibilities: increases in the amount of work, new benefit streams, wage increases or a negotiated increase in the amounts of employer contributions.

Regarding negotiating higher contributions, it’s important to remember that these do not come for free. “Employer contributions” is a misleading term because they really come out of your pocket. Pensions are loans made by an employee to their employer. If you loan a friend five bucks, that’s less money for you and employer contributions work the same way. Historically, musicians have given up wages or accepted reduced benefits in other areas in return for higher “employer contributions”. Back then, with a benefit multiplier as high as $4.65 (the “interest” paid on your loan to the employer) and the protection against a default on your loan “guaranteed” by ERISA, this seemed like an acceptable risk. Today, the benefit multiplier “interest rate” is $1.00 and we have all learned that ERISA did not protect us against default.

In this environment, is it any surprise that younger musicians are reluctant to support increased “employer contributions”? People familiar with the matter have told us that recent symphonic contracts (which provide 50% of the funding of the pension) have generally kept pension contributions level in preference to increasing contributions to 403 type plans. This excellent article, by Peter de Boor of ICSOM, discusses these concerns from the symphony orchestra perspective. Even though 401(k) and 403(b) plans are retirement options which have been great for Wall Street but failed to deliver on their promises to retirees, given all the bad press about pension funds, we can certainly understand why younger players would find them more attractive than the AFM-EPF.

Also, people familiar with commercial work in the U.S. have expressed concern that increased employer contributions could potentially create competitive disadvantages which could lead to more non-union work or even lead to foreign work replacing U.S. commercial work. Even with higher negotiated amounts, this could cause a net decrease in contributions.

1We have repeatedly requested wage and contribution data from the AFM-EPF, but they have refused to provide it.

2The amount for 2010 differs from the Milliman report because we include the rehabilitation plan surcharges and contributions.