Posted October 27, 2008
Pension & Health Trustees Report to Council
Pension Plan Remains Robust; Health Fund Currently Stable
The Trustees of the Equity-League Pension and Health Funds offered the following report to the Council on September 16, 2008. (Note that while the Fund Office also administers the Equity-League 401(k) plan, that fund is governed by a separate board of trustees. This report focuses on pension and health only.)
The Pension Protection Act of 2006 has set new criteria for pension funds to follow. Our fund is in full compliance and is safely in what is known as the "green zone." Using the funding measures of the PPA 2006, we are currently funded at 117%. Our pension fund has the assets to cover the pensions of all participants who are already receiving pensions, all those who are vested but have not yet begun to receive a pension and all those working members who are expected to become vested during their lifetime. We remain confident that, despite a downturn in the market, the state of the pension plan will remain robust.
In the current quarter, which began July 1, there were 9,098 members eligible for coverage through employment. A total of 6,467 members, which represents 70% of those eligible, paid the $100 premium and enrolled in the plan. Each quarter the Fund Office surveys those who did not elect coverage. Of this group, 58% said they had other coverage, 14% were deferring coverage in order to qualify for one year's health coverage by attaining 20 weeks of work, 3% said they did not know that the premium was due and 1% said that they did not receive the bill or that they did not think the coverage was a good value. In addition, there were 11% who said that they couldn't afford the $100 premium. Personally, I find that last statistic distressing. $100 quarterly represents $7.70 per week. The Trustees are planning an initiative to encourage our members to put aside at least that amount for future premiums.
It is equally distressing that some members postpone coverage in the hope of achieving 20 weeks of work. Some of our members have been on the losing end of this gamble and the Trustees plan to try to educate our members of the risks involved.
Things You Should Know
About AEA's Health Fund
Because there are a number of new Councillors since the last health update was given, it may be helpful to give an overview of the fundamentals. Employers pay health contributions in to a pool. The contracts which generate these contributions range from the SPT and similar small agreements to the Production Contract. It is the job of the Trustees to use these contributions to provide health benefits.
The goal of the Equity-League Trustees is to provide quality health coverage to as many working members as possible. The difficulty is in balancing both sides of the equation. Given our current financial parameters, if we significantly improve benefits we would have to redesign eligibility to cover fewer members. Conversely, we could change eligibility to cover a higher number of members but we would have to offer less coverage.
The variables are also impacted by the cost of the health coverage and the contribution rate. The approximate current cost of a year's health insurance attained through covered employment is $6,700. Let's take the example of an Actor who works for 20 weeks on a contract that pays a health rate of $170. That Actor will receive a year's coverage although the amount paid into the fund was $3,400, a little more than half the amount of the actual cost. This example is to illustrate the importance of the pooled contributions. Those who worked 11 weeks or less have generated contributions into the pool but do not receive coverage. Likewise, someone who worked 52 weeks, using the $170 figure again, would have generated enough contribution to cover the actual cost of the insurance in 40 weeks. The remaining contributions help subsidize those who achieve the needed number of eligibility weeks but whose work does not generate sufficient contributions to cover the cost of the year's coverage.
In the months to come we will be assessing the impact of the health contributions generated by the Production Contract and the new LORT Contract. The Trustees have a fiduciary responsibility to maintain a prudent level of reserves. But we also have a fiduciary responsibility to see to it that contributions are used for benefits. If the reserves continue to increase we will begin the process of examining our options for health fund improvements.
In the interim, the Trustees have taken steps to keep down the administrative costs of running the funds. In 2004 we commissioned the Segal Company to conduct an operational review of the funds. The findings of that report triggered some significant changes. The satellite offices in Chicago and Los Angeles were closed and operations were consolidated in New York. The departments of the fund were re-organized and employees were, in many cases, re-retrained. One of the most significant changes was in hiring a new Executive Director, Art Drechsler. Art came to us with unique qualifications. He began his career as an insurance underwriter and eventually became a vice president of an insurance company. From there he went to the Segal Company as a senior vice president of health benefits. He was an executive director for an HMO and the president of a subsidiary of the Visiting Nurse Association of NY. Due to his work history, he is fluent in the language of health care. He has been vigilant in his scrutiny of CIGNA, our provider, and has shown an uncanny ability to wring every last dime out of our various vendors. Under his leadership we are currently undertaking the final major initiative stemming from the Segal Operational Review-acquiring the technology for a state-of-the-art benefits administration system. Art and our Director of Operations, Vince Cinelli, are doing a masterful job in running the fund office.
The H&R Trustees
The Equity Trustees are as follows: Madeleine Fallon, Chair; Mark Zimmerman, 1st Vice Chair; Doug Carfrae, 2nd Vice Chair, Nick Wyman, 3rd Vice Chair; Jeanna Belkin, John Connolly, Alan Hall, Thomas Joyce, Kathryn Lamkey, Ira Mont, Carol Waaser.
We serve with a like number of Employer Trustees who are subject to the same responsibility and scrutiny. The Equity and Employer Trustees each represent a caucus. When the two caucuses come together it constitutes a Full Board of Trustees.
Jeanna Belkin, the previous longtime chair of the Equity Caucus, instituted a policy of naming Observers to the Equity Caucus. From this pool of Observers come future Trustees. One of the new challenges I have had is in developing a curriculum to educate our observers so that those who are appointed trustees will be prepared to lead the Funds forward. With the assistance of our professional advisors, that educational process has begun.
The Observers to the Equity Caucus are: Ivar Brogger, Barbara Callendar, Brian Cooper, Ira Denmark, Wally Dunne, David Girolmo, Francis Jue, Dev Kennedy, James Ludwig, Kevin McMahon, Maureen Moore, Paige Price, Irma Rogers and Vernon Willet.
This report is meant to be an overview of the state of the Pension & Health Funds. Due to time constraints and the complexity of the funds, this report is far from comprehensive. If the Council wishes to schedule a session at a later date to receive greater detail we would be happy to comply.