Musician pensions on brink of being slashed amid national crisis
Legendary Nashville guitarist Mark Casstevens and six other renowned musicians sent a letter in December to Sen. Lamar Alexander begging for help.
This wasn’t just a random collection of Nashville studio stars. They were once musical collaborators with Alexander, playing with him on Patti Page’s re-recording of her iconic hit “Tennessee Waltz.”
The musicians’ plea?
Casstevens, drummer Eddie Bayers, electric guitarist Brent Mason, steel guitarist Sonny Garrish, bass player Larry Paxton, electric guitarist Steve Gibson and pianist John Barlow Jarvis asked Alexander to do his part to save their pension accounts.
Nashville musicians are caught up in what many call a national crisis regarding multiemployer pension funds that has also ensnared truck drivers, teachers, utility workers and others. At least 121 multiemployer pension funds have taken steps to cut retirement benefits or soon could do so.
How the national musicians union pension fund ended up in its dire state is a matter of intense disagreement and the subject of a federal class action lawsuit in New York. But there is no dispute that the 11th hour has arrived and the musicians who served as the backbone for Nashville’s music industry could soon see their retirement accounts slashed to a fraction of their estimated value.
Pension fund advocates have lobbied Congress to intervene in recent years, but on the heels of hearings in 2018, there’s not a clear legislative path forward. That’s what prompted the letter from Casstevens, who was inducted into the Musicians Hall of Fame in 2016, and the other session players on Page’s updated version of “Tennessee Waltz,” on which Alexander famously played piano.
“Your fellow musicians all over Tennessee and the other 49 states are in serious jeopardy of having their hard earned pension benefits being radically reduced if not eliminated,” Casstevens and the musicians wrote in their Dec. 18 letter. “As one of the 121 endangered multiemployer pension plans, the American Federation of Musicians and Employer’s Pension Fund represents the best of American musicians and their families.
“Since 1902, the talented membership of Local 257 of the Nashville Association of Musicians has been standing up for Tennessee. Tennesseans and musicians need to stand up for each other. Now is the time.”
Pension fund blames recession, contribution gap for problems
In an email responding to questions for this story, the musicians union pension fund detailed how it arrived in financial distress in a lengthy explanation that mirrors issues that confronted other troubled funds.
Just 20 years ago, the musicians union pension fund was in good shape and even had more money on hand than it needed to pay out its benefits. According to the email, the AFM-EPF was 139 percent funded in 1999.
Two key financial market events — the dot com bubble burst and the 2008 recession — combined to take a major bite out of the fund. In response, the fund’s trustees lowered benefits on multiple occasions, but the impact was minimal since federal rules governing multiemployer pension funds at the time only allowed benefits to be cut going forward and protected benefits already earned.
Like many other funds, there were more retirees than new members, but this was especially pronounced, according to the fund's email to The Tennessean, because of “a decline in the number of musicians working under contracts requiring employer contributions, including those musicians who choose non-union employment.”
In response, the fund said that trustees mandated increases in employer contributions in addition to union striking a deal to increase pension contributions for digital media payouts.
But, despite those efforts a massive gap between annual benefit payments and annual contributions remains. For the fiscal year ending March 2018, the fund paid out $171 million in benefits and received $68 million in contributions.
And now with no Congressional solution in sight, the fund said in the email, the only way to keep the fund solvent is to "reduce benefits that participants have already earned."
Piano player turned pension activist
Renowned Nashville session musician Steve Nathan, has played piano in support Dolly Parton, Dobie Gray, Keith Urban and dozens of other A-list artists. Nathan dedicated his entire career to writing, recording and performing music. In recent years he’s become an evangelist for the musicians union pension crisis.
Nathan has hosted forums, launched an email newsletter, consulted with national pension experts, advocated for help from Congress and told anyone who will listen about the plight of the musicians union pension. He’s become active with an organization called Musicians for Pension Security, which formed when musicians learned there was a problem with their pension.
The promise of a comfortable retirement, combined with guaranteed minimum rates that match the talent of professional musicians, are the two reasons Nathan said he joined the union.
"A lot of the public thinks pensions are like a gift from your employer," Nathan said. "That it's a perk of your job. People don't understand that every contribution in my name was made with my money that I made doing my work."
"I don't think playing the piano is the same as going down in a coal mine or climbing up the side of a skyscraper at a construction site. But in all cases our union has negotiated for us that they will hold back a small percentage of our wages and invest it for us so when we get too old to work we'll have the money there."
Nathan paints a different picture for how the union’s fund ended up in trouble.
Nathan said the fund took on far too many risky investments as a hail Mary strategy to recoup its lost investments from the recession. And he blames union leadership, especially national musicians union president Ray Hair, for failing to respond quickly to the crisis.
“We feel like only since they have come under enormous public scrutiny from groups like us and other musicians have they begun to cover the optics of supporting laws and legislation,” Nathan said. “I haven’t seen much evidence they put their money where their mouth is.”
Disagreement over the pension fund was at the center of the election to choose leadership for the New York chapter of the musicians union. The incumbent president and other officers there were toppled by a slate of candidates backed by Musicians for Pension Security.
Dave Pomeroy, president of the Nashville chapter of the musicians union, touted the benefits union membership provide and downplayed the role the pension instability has played in recruiting new members. Membership is up over the last five years, he said.
At a rally in Ohio last year, Pomeroy, an accomplished bass player, performed a song he wrote about the issue. He said any musician who's been paying attention to the growing problem should be concerned.
"Over the past few years, both the AFM and Local 257 have been negotiating additional pension contributions at every opportunity, and speaking for Nashville, our level of signatory work remains strong and steady," Pomeroy said. "We have been lobbying and trying to educate our elected Tennessee representatives in D.C. about this problem for several years now. We will continue to encourage them to do the right thing and help us address this very important issue for working musicians."
About 50,000 people covered by union’s pension fund
But, while there’s disagreement for who’s to blame for the situation, there’s no debate that the situation is bleak.
The American Federation of Musicians and Employers’ Pension Fund covers about 50,000 people, including current employees, retirees and deceased workers whose survivors are entitled to benefits.
As of last March, it had enough assets to cover less than 65 percent of what it owes to current and future retirees. That lands the musicians into a category of pension funds the federal government deems in “critical” status.
But it could be getting worse soon.
The musicians received an email in February with a warning: It is expected to run out of money in 20 years and join the “critical and declining” category. Federal law allows pension plans in this group to reduce benefits in order to keep the plan solvent. The musicians’ plan’s actuaries expect to hit this milestone in the fiscal year beginning this April.
About 130 other multiemployer pension plans, covering 1.3 million workers and retirees, fall into the “critical and declining” category and risk insolvency.
Trustees of these plans can apply to the Treasury Department for permission to reduce pension payments. Federal law sets a floor for the minimum annual payment based on how long a person worked. Someone who retired after 30 years would receive a minimum of roughly $14,000 annually, for instance.
If the trustees don’t cut benefits and the pension fund ran out of money, retirees might still get paid through a federal insurance program. Under that scenario, however, they would get even smaller checks. The guaranteed minimum payment for a 30-year worker is less than $13,000 a year.
When a Teamsters plan in New York recently went belly-up nearly half of the retirees had their promised pensions cut by 50 percent or more.
“This is what I wake up at night thinking about,” said Tom Reeder, director of the Pension Benefit Guaranty Corp., the federal agency that insures multiemployer pensions. Reeder spoke late last year at the National Press Foundation.
To compound the situation, the PCBC is also expected to be insolvent by the end of 2025.
Congress has been working on a fix that would allow multiemployer pension funds and the PBGC to remain solvent, but those deliberations have seen fits and starts. The latest bipartisan proposal by Rep. Richard Neal, D-Mass., the new chairman House Ways and Means Committee, would create a new federal agency that could make loans to multiemployer pension funds nearing insolvency. The loans would be backed by government bonds.
Some Republicans have resisted past legislation aimed at rescuing the pension plans, calling the idea a labor “bailout.” Neal’s proposal would require the funds repay loans over 30 years, although the federal government would be the ultimate backstop.
Many advocates for multiemployer pension funds backed the Butch Lewis Act, which would have allowed funds to receive government-backed low interest loans.
The U.S. Chamber of Commerce opposed the Butch-Lewis Act, and didn’t endorse the draft proposal by the Joint Select Committee on Solvency of Multiemployer Plans. The committee’s draft plan would have increased businesses’ pension contributions, according to Aliya Robinson, a retirement policy expert at the U.S. Chamber of Commerce.
“There is no more money left in the system. ... At some point, if there’s not enough money coming in, you can’t put any more money out,” Robinson said at the National Press Foundation in December. Robinson has since left the Chamber.
Generally, the chamber supported cuts to retirement benefits, she said: “But we don’t see that as the only solution. The only solution shouldn’t fall on retirees. ... It should really be a shared solution.”
A spokeswoman for Alexander said he has heard from constituents regarding the musicians union pension issue. Alexander met with Nathan and other musicians in Nashville a few weeks ago to discuss the issue.
"The senator – who chairs the Senate pensions committee – served on a special committee that held hearings, briefings and member meetings to address the issue, and has said that he will continue working with his colleagues this Congress to identify bipartisan solutions that will help protect taxpayers, workers and retirees," Alexander's spokeswoman said.
The hope among musicians and other union groups facing slashed retirement benefits is that the crisis spurs action in Congress.
“Unfortunately I think Congress finds resolutions in crisis,” Robinson said. “Once we see employers going bankrupt and blaming it on multiemployer plans it will become a congressional crisis."
Reach Nate Rau at 615-259-8094 or nrau@tennessean.com and on Twitter @tnnaterau. Reach Mike Reicher at mreicher@tennessean.com or 615-259-8228 and on Twitter @mreicher.