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    Posted December 17, 2012

Pension & Health

Equity Pension & Health Trustees Make Annual Report to Council

Pension Plan Weathers Economic Storm; Health Fund Currently Stable; Cost Containment Remains a Priority

(Madeleine Fallon, Chair of the Equity portion of the Equity-League Pension & Health Trust Funds, made the following report to Council on November 20, 2012.)

Pension Fund

To set the stage for the annual report on the status of the Equity-League Pension Fund we take note of significant market events over the past five years which include: the housing bubble collapse, the Lehman Brothers bankruptcy, the widespread banking system bail out, the Euro crisis and, of course, the market meltdown of 2008. While all pension plans have taken heavy hits, ours has weathered the storm better than most. Our most recent pension valuation report shows that as of our current plan year, which began June 1, 2012, our pensions are funded at 122.3% based on an actuarial value of assets of $1,407,000,000. This represents an increase of approximately $29 million dollars since June 1, 2011. Our Pension Fund, therefore remains well within the "Green Zone" according to the requirements of the Pension Protection Act of 2006.

The Trustees are keenly aware that we are entering a period when new pensions will be awarded in unprecedented numbers as the fabled "baby boomers" reach pensionable age. We recently commissioned an Asset/Liability Modeling (ALM) study to assess our ability to continue to remain fully funded. This ALM study showed there is a possibility that our Fund could be in the "Red Zone" within 20 years. A Red Zone plan is considered in critical condition. Therefore, the Investment Committee, in conjunction with Fund's professional advisors, has begun the work of devising a new asset allocation policy with the goal of remaining well-funded far into the foreseeable future.

Health Fund

The Health Fund is currently stable with assets of $102,000,000 and approximately 13 months of reserves. We remind the Council that reserves are necessary to protect the Health Fund from a sudden spike in health claims or other negative financial developments. The Health Fund currently covers 7,235 participants with an average annual cost of $8,500 per person.

In the upcoming calendar year, the Trustees will be wrestling with compliance issues that are mandated by the Patient Protection and Affordable Care Act, known in the industry as PPACA or ACA. (Known by the general public as Obamacare.) At present there is massive uncertainty as to how compliance will impact the Health Fund. A number of key terms in the law are yet to be defined and we await guidance from the regulatory agencies (the IRS, DOL, HHS) which will oversee implementation of the act. As the requirements of the ACA become more defined, we will be working with the Fund's professional advisors to implement the changes. It is possible that the structure of the Equity-League Health Fund will have to be substantially altered in the next few years.

Continuing to Lobby for Recognition of Multi-Employer Plans

There are currently more than 25 million people covered by Taft-Hartley Multi-Employer Health Funds. These are Funds, such as ours, where multiple employers pay a negotiated amount into a Trust. The Trustees, half of whom are appointed by their union and half by an employer association, are charged with providing benefits to union members based on their work. The "plan design", as it is known, is set by these Trustees who determine the level of benefits and the eligibility standards. Unfortunately, the ACA was written as though everyone works for a single employer such as a business, or in the public sector. In other words, the law assumes we are all employed by entities such as IBM, Target, the city of St. Louis or the state of Florida. There is no recognition in the law for those of us in the entertainment industry, the construction trades and other occupations where intermittent employment and multiple employers is the norm.

The Equity-League Fund, along with other multi-employer funds, has participated in active lobbying efforts to try to raise awareness among legislators and the regulatory agencies that a strict interpretation of the ACA could have the unforeseen consequence of causing as many as 25 million workers who currently have quality benefits to lose coverage. We are placing a high priority on continued lobbying in order to protect the integrity of our health plan.

Cost Containment Initiatives

Despite our worries about negative ACA-mandated changes, we need to assume that our plan will remain essentially intact and continue our efforts to control the costs of the plan. Previous reports to the Council have detailed vigorous efforts to curb administrative costs. Most recently we have added a new initiative -- encouraging members to elect to receive the Fund's newsletter and other communications electronically. Each newsletter mailing costs the Fund $40,000. We have legal requirements to send certain information to all participants and potential participants. We can not switch to all electronic messaging on our own volition, as some members are not connected to the Internet. However, a member may choose to receive the information electronically. We ask all members of the Council to invoke that option and to encourage others to do the same.

In order to preserve the financial well-being of the Health Fund we need to control what costs we can on the health care side itself. It should come as no surprise that health claims are by far our biggest expense. As a self-insured plan we bear those costs directly. The Trustees have spent a significant amount of time analyzing claims data with an eye towards mitigating expense without compromising the quality of care. The cost of a colonoscopy, for example, ranges from approximately $500 to $5,000. And there is no evidence that a $5,000 procedure, performed in a hospital setting, is any better than the same procedure performed at a clinic or doctor's office. The Trustees have determined that for certain non-emergency procedures, such as colonoscopies, hip and knee replacements, incentives will be offered to participants who elect quality care without the excessive price tag. To that end, CIGNA is working with the Fund Office to identify what are known as Centers Of Excellence. These are hospitals who have demonstrated excellent outcomes and whose costs are within a reasonable standard. We are launching a pilot project in 2013 to attempt to educate our members on options that produce savings both to the Fund and to the members themselves. In the case of a hip replacement, for example, a participant who elects to have the procedure done at a Center Of Excellence will receive a $200 credit. In addition, if the surgeon is part of the CIGNA Cares Network (CCN) which is comprised of doctors who are highly rated, there will be an additional $200 credit. These credits will be held in a Health Reimbursement Account (HRA). They can be used to cover such things as premiums, co-pays, deductibles or for any other health-related expense on a pre-approved list issued by the IRS. The details of this pilot program have been sent to members who are enrolled for coverage and will be sent to new enrollees each quarter. We wish to emphasize that participation will be voluntary and that the thrust is quality care. Quality care reduces the additional costs of complications and re-admissions. If the pilot is successful we will begin expanding the types of eligible procedures.

Equity-League Fund, Actors' Equity: Two Separate Organizations

Finally, the Trustees will continue to try to communicate to our members that the Equity-League Fund and Actors' Equity Association are separate organizations with separate purposes. We have a lot of work to do.

The core mission of the Trustees has remained the same - to provide quality benefits to the maximum number of working AEA members. We are grateful that the League Trustees (Employer Trustees, appointed by the Broadway League) share that commitment.

On behalf of my fellow Equity Trustees -- Doug Carfrae, Brian Myers Cooper, Alan Hall, Thomas Joyce, Francis Jue, Mary McColl, Ira Mont, Steve DiPaola, Carol Waaser and Nick Wyman -- I submit the 2012 report.

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