SAG Health Plan Income Dropping – and Pension Plan is One of the Reasons (Graphical Analysis)
The previous installment of this three-part series on the SAG and AFTRA health plans showed that the SAG health plan increased premiums by an aggregate $10 million, and has been reducing benefits, eliminating coverage and tightening eligibility.
SAG Employer Contributions to the Health Plan Have Dropped
Why has the SAG health plan been doing this?
The reason is straightforward: For the same reason that anyone reduces expenses and seeks to supplement income – its main source of income has dropped. That source – employer contributions – represents anywhere from 2/3 to one hundred percent of the health plan’s income, or even more than one hundred percent when investment income is negative because of investment losses. In those cases, employer contributions must make up the difference.
In 2010, the AFTRA health plan – in contrast to SAG’s – actually showed a gain in employer contributions, at the same time that both plans lost investment income:
The AFTRA Plan Has Increased Profits and Assets
In the last two years, the AFTRA health plan has operated at a greater profit than SAG’s:
As a result, the AFTRA health plan’s assets have grown and now actually exceed the SAG health plan’s, even though the AFTRA plan serves fewer people:
In total plan assets (pension plus health), the SAG plan still leads:
The SAG Trustees Support the Pension Plan by Squeezing the Health Plan
Although employer contributions to the SAG health plan decreased, contributions to the pension and health plans combined increased in 2010. They’re also significantly higher than the AFTRA plans’, though the latter is on a somewhat sharper upswing:
The reason the contributions to the health plan nonetheless decreased is that contributions were reallocated from the health plan to the pension plan. This was accomplished by changing the percentage of employer contributions allocated to the respective plans and by increasing the total contribution percentage from employers:
AFTRA allocation data is not available, because the AFTRA plan refused to cooperate with THR’s study (see note at the end of part 3 of this series). However, the AFTRA total percentage is the same as SAG’s.
The reallocation started on Jan. 1, 2009, and was necessitated by the 2008 financial crisis that caused both unions’ plans to lose about 25 percent of their asset value.
The data show that the SAG pension plan is squeezing out the health plan, sucking up contributions in order to offer a higher accrual rate (2 percent) – the rate that benefits grow – than the AFTRA plan (about 0.7 to 0.8 percent) while staying in the government-defined green zone.
The Future of the Pension and Health Plans are Linked
Whether redirecting contributions away from the health plan will remain viable as healthcare costs continue to spiral and television work shifts to AFTRA is a critical question. If not, then sustaining the pension accrual rate may become harder.
Indeed, the accrual rate has already been cut drastically, from 3.5 percent to the current 2 percent, or nearly in half. That happened January 1, 2009, in response to 2008 losses. That rate is still higher than the AFTRA plan’s – but, again, is it sustainable?
In addition, the SAG plan has raised the pension eligibility threshold every year since 2009, amounting to a 33 percent increase, from $15,000 to $20,000. Performers who earn less than this amount in a year don’t receive a pension credit, which means that that year’s earnings don’t count towards their pension amount, and that the year doesn’t count towards vesting (i.e., qualifying to receive a pension at all). The plan trustees have set a target of $1,000 annual increases, but they had to exceed that in 2012.
The AFTRA plan’s threshold was previously $7,500, but it doubled to $15,000 on Jan. 1, 2010 in response to 2008 losses. Like the response of the SAG trustees (cutting the accrual rate), this reduces the plan’s costs. The $15,000 threshold has not been increased since, and is significantly lower than the SAG plan’s. That means it’s easier to qualify for an AFTRA pension, but the benefit ultimately received will be less, all other things being equal. It’s a difference in philosophy that all multiemployer pension and health plans face: how to trade off eligibility, benefits, and fiscal health.
The AFTRA trustees made another decision that favors accessibility: participants are irrevocably vested after receiving five years of pension credits. In contrast, SAG’s vesting only becomes irrevocable after ten years; five year vesting can be lost under some circumstances. There are other differences as well, including some that mostly affect high earning members.
In any case, the SAG plan’s increased eligibility threshold, coupled with the split earnings problem, has the same effect on pensions as it does on health coverage: more SAG members are left out in the cold.
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