Tax authority OKs 5-year program to fix health plan fund
In the latest evidence that showbiz health and pension plans are facing funding woes, the Internal Revenue Service has granted AFTRA’s Retirement Plan five more years to improve the plan’s hobbled finances.
The AFTRA plan had sought permission from the IRS to extend the period over which it can amortize its funding shortfall — estimated at $644 million as of Dec. 1, 2008 — caused by investment losses from 15 years to 20 years.
The losses mirror hits taken by other health and pension plans, both in and outside of Hollywood, last year due to the market meltdown. The AFTRA plan, which paid $102.4 million in the 2008 fiscal year in benefits to more than 7,000 members, disclosed last March that its plan lost 23.4% of its value and tightened eligibility requirements for vesting, accrual and participation.
SAG’s pension plan took a similar hit of 22.7% in 2008, forcing a 43% reduction in benefit accrual rates. But the trustees of the SAG plan did not apply to the IRS for an extension on the amortization.
Dick Moore, a spokesman for the AFTRA fund, confirmed Monday that the IRS had granted the five-year amortization extension. He noted that the plan’s finances appear to have improved this year but cautioned that no specifics are yet available.
In 2009, the fund seems to have benefited from the rebound of the markets, although the administrators haven’t nailed down how much because the fiscal year just ended,” Moore added.
In a notice to members, AFTRA noted that amortization extensions are “automatically available” to multiemployer plans that meet specific requirements to help fulfill their funding requirements in the wake of the 2008 market declines. And it sought to prevent participants from being alarmed about the possible impact on their benefits.
It is important that you understand that these notices do not affect your benefits,” the notice said. “They are provided for informational purposes only and do not require that you take any action.”
The notice disclosed that as of Dec. 1, 2008, the market value of the assets in the plan totaled $1.507 billion while the value of the benefits in the plan was $2.151 billion — or $644 million short.
As with the SAG, DGA and WGA health and pension plans, the AFTRA retirement fund is a separate entity from AFTRA and is operated jointly by trustees representing AFTRA and the industry.
In 2003, the AFTRA retirement fund made a similar request to the IRS to extend the amortization period from 15 to 25 years because of “substantial” stock market investment losses during the previous three years which had seen the fair market value of plan assets hit $1.4 billion, about $280 million short of the $1.68 billion value of vested benefits.
The recent AFTRA notice is the latest in a long line of troubling developments for Hollywood’s health and retirement plans. In September, the “Take II” newsletter for SAG participants contained the bracing news that employer contributions were down 10% in 2009.
This represents the largest drop in plan history and does not account for the full impact of the decrease in SAG-covered television pilots, which has yet to be realized,” the plans said in their newsletter. “The health plan also faces a continuing threat of inflation as the cost of health care continues to rise about 9% annually.”
As of January, the SAG Plan I monthly premiums will hike from $50 to $83, with Plan II rising from $65 to $98. The plan will also charge senior performers a premium, for the first time, of $25 a month.
The DGA’s basic pension plan disclosed in early 2009 that its assets were down 26.6% last year; IATSE agreed in March to cuts in health plan by OK’ing a 33% hike in the eligibility threshold during the final year of its three-year pact. In July, the Writers Guild of America West disclosed that member earnings had plunged nearly 18% to $801.4 million for the fiscal year ended March 31; that meant a corresponding decline in employer contributions to the pension and health plans.
Currently, employers pay 14% (8.5% to health, 5.5% to pension) for the DGA, 14.5% (8.5% health, 6% pension) for the WGA, 15% (9.25%, 5.75%) for SAG and 15% (9.75%, 5.25%) for AFTRA on top of every dollar of compensation into the pension and health plans.