For the second time in less than two years, AFTRA’s retirement plan has been forced to cut benefits to participants.
The plan, which is jointly administered by reps of the performers union and management, also announced that the former finance director of AFTRA’s health and retirement plans had pled guilty several months ago to embezzling $1.36 million from the fund. But a spokesman stressed Sunday that the embezzlement wasn’t related to the upcoming cut in benefits.
The AFTRA plan said in a notice to participants that the benefit accrual rate would be reduced on Dec. 1 to 1.5% of earnings from the current 2%. The plan had reduced that rate in June 2003 from 3% to 2%.
Development is the latest signal of the ongoing pressure on showbiz health and retirement plans, which have been forced to cut benefits in recent years due to soaring costs. In recent contract negotiations, AFTRA, the DGA and the WGA placed a primary focus on boosting employer contributions to their respective health plans.
The AFTRA retirement plan, in a notice to participants, cited “the difficult investment market and economic conditions.”
“The problem is that the annual cost of the plan (by cost we mean what it takes to pay for both benefits now being earned and benefits earned in the past that are not yet fully funded) exceeds its income, and this shortfall cannot be made up solely from investment income in the current investment market,” it said.
If a performer had covered earnings of $100,000 for the base year ending Nov. 30, 2005, the amount added to the performer’s pension would have been $2,000 previously but now will be $1,500.
“While it is never pleasant to take such actions, the trustees are committed to the security of your pension benefits, and the action described in this notice is intended to maintain the security and stability of your retirement plan,” the notice said.
The plan disclosed last year that it was seeking permission from the IRS to extend the period over which it can amortize its funding shortfall caused by investment losses from the current 15 years to 25 years (Daily Variety, Aug. 4, 2003). The notice to members showed that, as of November 2002, the fair market value of plan assets was $1.4 billion, about $280 million short of the $1.68 billion value of vested benefits.
A spokesman for the plan said Sunday that the IRS hasn’t ruled on AFTRA’s extension request.
AFTRA prexy John Connolly said he’s hopeful trustees will be able to boost the benefit rate to previous levels as the investment climate continues to improve. He noted that trustees were able to take such steps during the economic boom of the 1990s.
AFTRA’s Health and Retirement Funds also disclosed Sunday that former finance director Robert Cataldo has pled guilty to embezzling $1.36 million from the funds and will be sentenced Dec. 15. The funds said the embezzlement was discovered by independent auditors during their annual audit of the funds’ accounts.
The funds said Cataldo was terminated after a preliminary probe by their outside counsel and auditors. The orgs had notified the FBI, leading to Cataldo’s arrest and guilty plea in August.
The funds said Cataldo was responsible for financial and accounting processes, including development, implementation and monitoring compliance of internal financial, accounting and related controls.
“Among other things, he deceived the trustees by making improper entries into the funds’ financial records to make it appear as though the monies that he embezzled were actually used for legitimate fund purposes,” the funds said.
According to the announcement, the trustees commissioned a study by the independent auditors to identify and implement additional procedures to insure the integrity of the funds and subsequently took preventative actions.
The funds also said insurance companies have agreed to reimburse them for the full amount that Cataldo embezzled, so the theft will not have any material impact on the financial status of the funds or their ability to provide benefits to participants.
AFTRA’s national board was notified of the embezzlement at its meeting Saturday. That panel endorsed on a 75-1 vote a three-year deal with the networks on a new contract to cover much of its TV work outside primetime.
The OK triggers a ratification vote by AFTRA’s 80,000 members. The ballots will be mailed out after the Thanksgiving holiday.
Negotiators for AFTRA and the networks reached agreement on the net code pact on Oct. 29 after three weeks of negotiations. The net code covers about $400 million in work annually; AFTRA leaders had stressed the importance of hiking the health plan contributions in order to counteract soaring costs to the plan, which has been forced in recent years to cut benefits.
AFTRA announced Sunday that the pact includes $18 million in new employer contributions. Deal also provides that the existing 1% contribution amount paid into an individual savings plan will go into the health and retirement funds, resulting in an additional $9 million over the life of the contract.
“We did an enormous amount of work reaching out to AFTRA members via meetings with casts and constituency groups to identify their concerns and needs as we prepared our negotiating package,” Connolly said. “We put those concerns on the table, and naturally the employers resisted. However, when our working members showed up at negotiations en masse to express support for the union’s proposals, the employers listened.”
AFTRA said other highlights of the deal include program fee increases of 3%, 2.5% and 3% annually; increases in coverage of stunt coordinators and choreographers; background actor and stand-in rate increase; and additional notice and protections to serial performers when producers seek new terms at the expiration of the actors’ contract cycle.
“The priority of this negotiation was to ensure that AFTRA employers paid a significantly larger share of spiraling health care costs,” said AFTRA national executive director Greg Hessinger. “While the crisis is not over, we accomplished that goal.”
In other actions, David Hartley-Margolin of Denver was named trustee to the H&R Funds to fill the seat held by former AFTRA president the late Frank Maxwell; Bobbie Bates of Los Angeles was named to the administrative committee to fill the seat held by Maxwell; and the Public Radio Freelance Agreement was extended through September 2005 with increases in program fees and H&R contributions.
AFTRA’s board also passed two resolutions in support of the rights of journalists to protect confidential sources and conduct standard information gathering without fear of legal retaliation.
The next round of Hollywood labor negotiations will cover the film-TV contract for SAG and AFTRA, which expires June 30 and covers primetime series work. Those talks are expected to begin next month, but no date has yet been set.