Thursday, March 30, 2006

Inside the Motion Picture Industry Health and Pension Plan

And now we do some narrow-casting -- a post of interest to participants in the entertainment industry's largest pension and health plan - The Motion Picture Industry Pension and Health Plan...and less interest to others... Top Plan Administrator Tom Zimmerman rolled out facts and figures about the Pension Plan at Tuesday night's panel discussion. The nuts and bolts: * The Plan has $4.6 billion in total assets, with 29 investment managers to oversee them. * There are 36 Trustees on the Plan, half from the major studios and half from the unions covered by the Plan. * $2.3 billion is in the Defined Benefit Plan part of the Pension (this is the "old style" pension plan that pays participants a monthly retirement check when they retire.) There was a 15% increase in the payouts to participants who retired after August 1, 2003. An additional 10% increase is penciled in to take effect in 2009, and it will be retroactive to 2006. (Total pension plan increases since '96: a whopping 84%.) * The Individual Account Plan (IAP) -- which is the newer part of the pension plan, holds $1.7 billion in assets. The Plan investments in the IAP are more heavily weighted toward bonds than the Defined Benefit Plan, since there's a need to have enough cash on hand to pay participants rolling into retirement, and many of the accounts are large. Despite the need for conservative investing, the IAP has averaged 9% per annum returns (compounded, of course) over the last 20 years, and 5.5% over the last five years. As noted in previous posts, our IAP will get healthy bump ups in contributions from the studios in our new contract. * Residuals: The Plan received $350 million in residual payments last year. This is the secret to why our health plan is so good, without payroll deductions, and without bankrupting signator studios. These residuals go into the health plan and, when that plan is adequately funded, into the IAP. In the past five years, residuals have provided around 50% of the cash flow coming into the plan and are -- obviously -- important. One example: 50% of the work done on The Titanic was "union work," that is, work performed under a union contract. Residuals that have flowed in from The Titanic have totaled $9 million to date. If all of the work had been done under contract, the residuals would have totalled $18 million. * Last year the Plan's cash inflow totaled $700 million (half from residuals, half from hourly and IAP contributions.) Cash outflow was just under $600 million. * The are 42,000 eligible participants in the plan. 72 million contribution hours came into the plan in the last reported year, which is an increase from hours in the previous year. The message here: it's crucial that participants work under a union contract, otherwise the plan, and your pension, doesn't keep growing. The Health Plan There have been plan changes to contain costs -- 1) Doctor visit co-pays will rise from the current $10 per visit to $25 (remember, no copays for visits to the Motion Picture Television Fund clinics). 2) Participants who go to a hospitals outside the Blue Cross PPO network will have to pay 30% of hospital and doctor costs (up from 15% currently. This is designed to "encourage" participants to stay inside the network.) 3) Drug costs will go up somewhat. Generic brands will not rise, but brand costs will jump from $15 to $20 per prescription. 4) There will now be a $50 co-pay for emergency room visits. Currently this is $0, but the $50 fee will be waived if the participant is admitted to the hospital. This, in a nutshell, were the highlights of Mr. Zimmerman's presentation. He related that the pension benefits are absolutely rock solid (funded at 102% currently) but that health care costs continue to rise. Rising health care costs are the number one issue nationwide, and it's the same for our health plan. Nationwide, health care premiums last year rose 15%. Because of our relationship with the MPTF Clinics, our health care costs rose 8% last year. As an example of how severe uncontrolled health care costs can be, SAG's plan recently "hit the wall" and eligibility requirements had to be significantly increased, so that about one third of SAG members no longer qualify for health coverage. Because of the way we make use of residuals, we are aren't in danger of such an event, but we do need to be vigilant about controlling health care costs.


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