Funding of the $3.8 billion pension plan covering members of IATSEs West Coast studio locals has dipped closer to “critical status” for a fourth year in a row, but the plans long-term prognosis is good, according to Mike Kaplan, the plans actuary.
As of January 1, 2017, the Motion Picture Industry Pension Plan was only 67.4% funded; under federal law, a plan is said to have reached “critical status” if its funding of future retirement obligations falls below 65%. In recent years, its funding level has declined precipitously – falling from 80.8% in 2015 to 76.8% in 2016.
That decline continued last year, dipping to 66.3% funded as of January 1, 2018, according to a letter Kaplan sent to the plans board of directors. His letter noted, however, that the plan remains in the healthy “Green Zone,” and projected it will be fully funded by 2032.
That projection, however, is based on a rather rosy assumption that the current market return on investments (after deducting investment expenses) will hit 7.5% in each of the next 15 years. Thats considerably higher than the 7.15% rate of return the DGA has assumed for its pension plans investments, and the DGA plan – which was 92.7% funded as of last year – is the best-funded of all the Hollywood unions multi-employer pension plans.
“Assuming that the market return assumption of 7.5% (net of investment expenses) is achieved in each future year,” Kaplan wrote, the plan is scheduled to reach 80% funding by Jan. 1, 2023, and 100% funding as of Jan. 1. 2032.
Kaplan noted in the letter that “In the unlikely event that the plan were to enter the Yellow Zone (endangered status) under the Pension Protection Act, benefit increases can still be adopted by the board of directors if additional contributions are made to the plan to cover the cost of such increases.”
The health of the pension plan, which also covers members of Teamsters Local 399 and the Basic Crafts unions, was a major bargaining point in IATSEs recently concluded negotiations for a new film and TV contract, which will soon be sent to members for ratification.
IATSE president Matthew Loeb has said that the new film and TV contract, if ratified, will create “a new funding mechanism” for theatrical-length streaming content that he says will result in “additional monies for our pension plan.”