Friday, June 20, 2008

The Motion Picture Industry Pension (Again)

Every so often Kevin and I post about the Motion Picture Industry Health and Pension Plan. Because repetition is a blessing not a curse, here is yet another offering.

There's lots of misconceptions about the Industry Plans, now over half a century old. They provide health and pension benefits for around 42,000 industry participants, which balloons out to 100,000+ when dependents are factored in.

Some participants think pension benefits suck (and there was a time they were pretty sucky), others like them fine. Many people covered by the Plan have only a hazy idea of what its components are, or what they'll get when they hang up their careers and go off to Idaho on a permanent vacation ...

As we've mentioned before:

The Plan (known to aficionados as MPIPHP) offers two different pensions. The so-called "defined-benefit" pension pays retirees monthly checks based on a defined formula of "qualified years and contribution hours. The Individual Account Plan (IAP) pays off a lump sum at the point of retirement"...

Since 1990, the pension, IAP and health insurance have been totally funded by employers. The health insurance and pension contributions are based on an hourly formula. (Work the year, and the monthly payout goes up $74-$83 per annum. These are ballpark figures. Mileage varies with the size of contributions.)

In addition to the hourly contribution, the IAP is funded by a percentage (currently 5.5%) of minimum salary, paid by the studio into the Plan.

So let's look at the Defined Benefit part of the Plan. If you were to work twenty full years, you'd end up with an accumulated monthly benefit of around $1534. That's calculated (first ten years) at $.0295 per hour, multiplied by 2,000 hours per year, then (second ten years) at $.0393 per hour, multiplied by 2,000 hours.

But wait, there's more! As of August, the Individual Account Plan will be calculated at 6% of the minimum wage rate of the classification in which you work, plus 30.5 cents for every hour worked. If you're, say, an animator, your minimum is $1534.64 (a 3% increase) as of August, and your total IAP contribution would be $5,214.

(And yeah, the rate and percentage went up at mid-year, so the total is a little skewed. Because I'm basing it on $1534.64 for the entire year. Sue me.)

Now let's do a little ex-trap-o-lation. You take that $5,214 and multiply it by 20 years (same number as the Defined Benefit Plan), assuming an additional $5214 added to the total every year, and you get $104,280 tucked away in your IAP account at the end of two decades.

But ... we haven't accounted for the magic of compounding. If you assume the 9.2% average earnings that the IAP has achieved over the last twenty years, then you get (drum roll) ... $346,380.

Not too shabby.

And if you assume a 9.5% earning return over thirty years (and there's no reason that you should, except let's be optimistic) then you end up with $980,000. Even more not shabby.

And that, boys and girls, is why union pensions are a good thing.

(Want to plug in your own numbers and multiply? Click over to money chimp and calculate various numbers for yourself. Understand that, though I double-checked my calculations, my math skills are lousy, so some figure up top could be off a bit.)

Addendum: there was a small miscalculation in the yearly IAP number when this was first posted. Hopefully it's all accurate now.


Kevin Koch said...

Just to immediately clarify the one thing many people don't realize: when you write that the MPIPHP "offers" two different pensions to TAG members, what this means is you automatically get BOTH. One doesn't choose between the IAP and the DBP.

And of course we have the 401(k) on top of those two plans, so everyone can take an active hand in building their retirement.

Anonymous said...

I may be mistaken, but doesn't one need 5 straight unbroken years in a covered studio to take advantage of this? So those of us who have been in the industry for 20 years at various union studios , but with broken service amounts (work 6 months, layoff, work 8 months, 2 year layoff etc.), get nothing.

Kevin Koch said...

Fortunately, you are mistaken.

The Individual Account Plan (IAP) vests after a single 'qualified' year. And a qualified year is any calendar year in which one works 400 union hours. So it's extremely difficult to become a TAG member and NOT vest your IAP.

The Defined Benefit Plan vests after 5 qualified years. Those years do not need to be unbroken, but if there are significant gaps before you're vested, then you could lose some or even all of those qualified years.

A good rule of thumb is if you have non-union gaps that equal or exceed your number of qualified years, then you're probably going to start losing credit for some years relative to the DBP. For example, if you work three qualified years, then work non-union for two calendar years, then get another two qualified years, you'll be vested in the DBP. That two years away wouldn't cost you any pension years, and from that point forward, non-union 'breaks in service' couldn't affect your vesting.

On the other hand, say you have three qualified years, then you work non-union for 5 years, then return to a union studio. You'll have lost some of those qualified years. Anyone potentially in such a situation should check with the MPIPHP to get specifics (preferably BEFORE taking the non-union job). I've known of cases where, by being aware of how the system works, people have been able to make relatively small adjustments in the timing of changing jobs, and make the pension plan work for them.

Kevin Koch said...

Just a further clarification about what counts as a 'qualified year.'

Example one: you're hired at a union studio Oct. 1 of 2007 and work full time through April 1 of 2008. Even though you worked a total of only six months, you would have two qualified years (because you'd have a little over 400 hours in each year).

Example two: You're hired Nov. 1 of 2006 and work full time through March 1, 2008, with no overtime. Even though you worked 16 months, you would have only one qualifed year (2007). You'd have just shy of 400 hours in both 2006 and 2008. The hours worked in those years WOULD count towards your pension, but you'd still only have one qualified year.

Now, if you were aware of how things worked, and you were aware that you were going to get very close to having a couple of extra qualified years, you'd have some options. If you could get your employer to let you do some overtime in 2006, to tip you over the 400 hour mark for that year. Then, when you got your layoff date for 2008, you could do the same (put in a chunk of OT) or convince your employer to keep you on for another week or two so you'd qualify. In this example, if you got just a few more hours in 2006 and 2008, you'd have three qualified years.

And of course hours at any TAG 839 studio count, so a couple of months at one place and a couple of months at another place (in the same calendar year) can add up to a qualified year.

Steve Hulett said...

One other point (actually the answer to a question here in 2007):

You canNOT borrow or tap into money in the Individual Account Plan prior to your retirement.

If you have at least twenty qualified pension years and 20,000 hours, you can take retirement as early as age 55. You'll collect 100% of the IAP, but only 49.5% of the monthly benefit.

If you have thirty qualified years and 60,000 hours, you can retire at age 55 with 70% of your monthly benefit and 100% of the IAP.

Anonymous said...

Thanks for all this detailed info. I really like the specific examples. Anybody who thinks these benefits are sucky must have it pretty damn cushy. You should publish a comparison of the great "benefits" most nonunion animation studios offer. That would be an eye opener!

Anonymous said...

I worked for a major studio in LA for 8 years in the 1990s. The ill-informed personnel at the MPIPHP told me in 2000 that I was vested and even went on to tell me what monthly dollar amounts I would collect upon retiring. I then worked in a non-union shop. Only later did I discover that MPIPHP's ineptitude effectively cost me all of the reserves I had accumulated. Had I known that I needed two more qualified years, I would've returned to a signatory environment. Anybody else have this experience? Class action, anyone? E-mIl me: editor 9999 at hotmail dot com.

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