Posted December 14, 2011
Equity Pension & Health Trustees Report to Council
Pension Fund Sound; Health Fund Stable
Administrative Processes Streamlined; Efficiency Increased
(Madeleine Fallon, Chair of the Equity portion of the Equity-League Pension & Health Trust Fund, made the following report to Council on November 15, 2011.)
The Equity Trustees are relieved to report that the Pension Plan remains sound despite the buffeting of the markets in recent years. Our actuarial consultants at Segal Co. show that as of the current plan year, which began June 1, 2011, our pensions are 124.6% funded based on an actuarial value of assets of $1,378,000,000. This represents an increase of $67 million since the same period last year. According to the standards of the Pension Protection Plan of 2006 our Pension Plan remains firmly positioned in the "Green Zone." The actuarial calculations are based on recognition of pensions which are currently being paid, the pension amounts earned to date by members who are vested but not yet collecting and by the pension credits earned by members who have not yet become vested. So in lay terms, all foreseeable pensions are funded. The continued vigilance of the Investment Committee and the investment professionals from Segal Advisors is to be commended. And, while the Trustees are pleased to report the positive status of the Pension Fund, we remain mindful of the volatility of the current global economic forces and do not feel it would be prudent to consider improvements at this time.
The Health Fund is currently stable. We began the current plan year of June 1 with assets of slightly more than $65 million and with 12 months of reserves. These reserves meet our target and are needed in case of a significant spike in claims or other unforeseen financial developments which may negatively impact the Fund.
Cost Containment Efforts
As you know, the cost of health care in the U.S. continues to spiral upward. In order for the Plan to remain solvent it is necessary for the Trustees to pursue cost containment efforts. As outlined in the 2009 and 2010 reports to the Council, there has been significant activity in the past several years. In 2006 we hired Art Drechsler as the Executive Director of the Equity-League Funds and charged him with streamlining administrative processes and costs. Under his direction, the satellite Fund Offices in Los Angeles and Chicago were closed and all operations were consolidated in New York. The current fund office staff has received professional development resulting in increased efficiencies. Today's staff of 37 provides enhanced service compared to that provided a few years ago by 57 people. As the Fund Office's lease neared expiration earlier this year, Art successfully negotiated a reduction in rent as well as a reduction in square footage by redesigning the layout of the office space. We anticipate that in early 2012 the transition from an outside vendor to our own state-of-the-art IT system will be completed. We applaud Vince Cinelli, Director of Operations, with shepherding this transition.
Recent Health Plan Changes
In recent years, it has also been the unfortunate necessity to introduce plan changes that require sacrifices by our members. A $100 quarterly premium was introduced. Eligibility was raised to the current standard of a minimum of 12 workweeks to gain six months of coverage and 20 weeks for 12 months. The out-of-pocket maximum and co-pay rates were raised. Free dental coverage was eliminated. The reasonable and customary rate for out-of-network reimbursement was changed from 80/20% to 70/30%. More recently, we have instituted mandatory generics for certain classes of pharmaceuticals and mail order for maintenance drugs. The reimbursement rate for Chiro/PT practitioners was adjusted to favor in-network providers.
While these cost containment efforts have contributed to the stability of the Health Plan, the demands of the marketplace continue to challenge us. Our plan became self-insured in 2006, which means that claims are paid out of our assets. Our relationship with CIGNA is what is known as ASO - Administrative Services Only. In other words, we pay CIGNA a fee for each participant, which allows us to access their network of doctors, and CIGNA administers the paying of the claims. This arrangement saves somewhere between 2% and 4% on the cost of paying CIGNA to be the insurer or approximately $1 million to $2.1 million per year.
The major source of our assets comes from employer contributions. During the course of a year approximately 1,800 employers submit health payments. The cost of those payments is significant to most employers and onerous to some. The Trustees are concerned that we are nearing the point where we will not be able to negotiate sufficient health dollars to meet rising costs. An additional concern is that the workweeks have declined by 9.7% over the past three theatrical seasons.
Challenges for the Future
The challenge we face as Trustees is to make every effort to avoid raising eligibility and/or premiums as well as avoiding cuts in benefits. Our Fund is currently covering 7,752 people at an average annual cost of approximately $8,500 per participant. (By way of comparison, AON Hewitt, an HR consulting firm, shows the average cost per year for employees of large firms is running $9,800. This is not a perfect comparison, as their figures are for single-employer funds and ours is multi-employer. However, the number of participants we cover falls roughly in the large company category.) While the various changes and efficiencies instituted by our Fund has somewhat slowed the rate of increase, the costs are still heading in the wrong direction.
Clearly, these are difficult times. The Trustees remain committed to the core principal of providing quality benefits to as many working members as possible. The 11 Equity appointed Trustees are joined by an equal number of Employer or League Trustees who are appointed by the Broadway League. Together we constitute the Equity-League Board of Trustees. We are grateful that the Employer Trustees are active partners in our quest to keep the Funds viable. (Note: although the Equity-League Fund Office also administers the 410k Plan, that plan is governed by a separate board of Trustees. This report covers Pension & Health only.)
Gratitude for Jeanna Belkin
We would be remiss if we did not acknowledge a seismic shift in the Equity-League Fund's landscape. Jeanna Belkin, who served as the chair of the Equity Caucus for decades, retired in July after 47 years of service as a Trustee. Jeanna's contributions to the Benefit Funds can not be overstated. Her attention to detail and formidable memory set a bar that few of us can reach. She showed her devotion to her fellow members with the feisty, tireless zeal that is so uniquely hers. We owe her endless gratitude. And we know that the way she wants us to show that gratitude is to continue the good fight for the Equity-League Funds.
On behalf of my fellow Equity Trustees - Doug Carfrae, Brian Meyers Cooper, Alan Hall, Thomas Joyce, Francis Jue, Kathryn Lamkey, Mary McColl, Ira Mont, Carol Waaser and Nick Wyman - I submit the 2011 report.