NEWS
East Meets West June 30
MPIPHP Rules Go National
by Louis Bertini
As most Motion Picture Editors Guild members know, on July 1, 2002 the Guild’s Eastern Region Pension and Health Plans were merged into the west coast’s Motion Picture Industry Pension and Health Plans (MPIPHP). The merger was not without controversy, but it was in fact a lifesaving move for the Eastern Region. The east coast plans were relatively small and were funded through employer contributions and investment income. The MPIPHP, on the other hand, is one of the largest and strongest multi-employer plans currently in existence. It derives its strength from the fact that it is funded primarily through residuals. It is one of the few plans left in this country that does not charge its active participants a medical insurance premium.
During the plan merger talks, it was discovered that a number of benefit features of the east coast plans did not exist in the west. These would need to be phased out so that the overall plan structure would remain consistent. Likewise, a number of benefit features that were part of the MPIPHP did not exist in the east, and were to be added for Eastern Region members, representing significant improvements in many areas. As a result, it was agreed during negotiations that benefits to be phased out would remain unchanged for a three-year period of transition, after which they would be modified, and the rules of the MPIPHP would be applied nationally. That date of final transition will arrive soon. It is June 30, 2005. Changes for Eastern Region members include the following:
•Subsidized, and non-subsidized self-pay for continuing health care
coverage by participants who do not have the required number of hourly contributions
will no longer exist in its previous form. Self-pay for continuing health
care coverage, for those who require it, can be made under the rules of the
federally mandated COBRA program. This allows for 18 months of self-pay at
the full cost of the plan, plus an additional two percent administrative fee.
•Long-term disability coverage will be discontinued. Short-term disability
coverage will be modified to follow the rules of the MPIPHP.
•Life insurance for active participants will be reduced from $25,000
to $10,000.
During the period preceding the merger, the old Eastern Region Health Plan was fortunate to be able to offer participants who lacked the required amount of employer contributions a 50 percent subsidy towards the cost of self-payment. Though a popular benefit at the time, economic circumstances would have forced its elimination several years ago if the plans had not merged. The reasons for this are complicated, and require a bit of history to explain.
In the early 1970s, there was a relative balance of cash distribution between the Health Fund and Pension Fund of what was then the east coast Local 771 Editors Union. Health insurance costs were low (a strange notion from today’s perspective) and the Pension Fund, created in 1961, was growing steadily. Then, in 1971, the stock market had a severe “downward correction,” and our Pension Fund lost a considerable amount of money. The plan’s Trustees at that time responded to the perceived crisis by adopting a very conservative investment policy. They decided to no longer invest the Pension Fund in equities (stocks), and instead invested all the money in stable fixed income instruments (government-issued bonds).
While this may have offered stability, it did not offer a very high rate of return. The Trustees felt that they were plotting a safe course, which would pay off over time. But we now know that was a big mistake. Historically speaking, the stock market has always vastly outperformed the bond market in rates of return. This includes the “downward correction” periods of 1929, 1971, 1987 and 2001. The stock market has always recovered, and moved on to grow again and surpass its losses. The key for an investor is that funds must remain invested for a very long period of time so that they will have a chance to recover after periods of downward trends. They must also be “diversified,” so that potential losses in one weak sector of the market can be buoyed up by gains from another stronger sector.
Additionally, a Pension Fund must have cash on hand to meet its payment liabilities to retirees. That is why a portion of the money should be placed in equities (very long term investments), and a portion placed in fixed income instruments (shorter term investments––more cash on hand). Exactly what percentage of the Fund to invest in each area is a source of constant debate between Trustees and plan consultants.
I became a Health and Pension Trustee for Local 771 in 1991. I soon learned the state of things and set about to try to make some changes. Along with my fellow Trustees, we began to slowly move portions of the Pension Fund back into the equities markets. Before long, financial returns began to improve. This was encouraging, but for the most part the game had already been played.
I once read a study by one of our plan consultants which claimed that if 20 percent of our Pension Fund had been placed in properly diversified equities in 1971, and been allowed to remain there, by 1997 the Fund would have been three times its current size at that time. Needless to say, our retirees would have been receiving much stronger pensions if that had happened. The investments we were making in the 1990’s would only begin to pay off well for a future generation of retirees.
But in 1991 we were facing even greater challenges. Health care costs were inflating rapidly. Insurance companies were struggling to redesign their services and find ways to save money. “Managed Care,” “HMO,” “PPO” and “POS,” all previously unfamiliar terms, soon became household words. At that time the Health Fund was also providing a 50 percent subsidy of self-pay costs. It had two months worth of reserves left, and was nearing bankruptcy. Some drastic moves were needed in order to begin building up the Fund again. The self-pay subsidy, which caused a significant drain on the reserves, had to be ended.
William Hanauer, the Local 771 Business Agent at the time and a fellow Trustee, was fortunate to be able to negotiate a large increase in employer contributions to our major and independent contracts. We reapportioned these contributions, so that instead of being evenly distributed between health and pension, roughly 75 percent was sent to the Health Fund, and 25 percent was sent to the Pension Fund. Before long the Health Fund began to grow again.
Our membership demanded that we keep the Health Fund strong, and use it to aid people who were having a hard time maintaining their health care eligibility due to irregular work patterns and unemployment. The upturn in investment markets during the 1990s gave the Fund a burst of growth. Federal law mandates that this money cannot be held endlessly in reserve, but must be used for the benefit of the membership. So in 1995 we reinstated the 50 percent self-pay subsidy. This benefit may have been popular, but it had a real downside. It created the false impression that we could easily provide cheap health insurance. Many of our members lost sight of what the actual costs really were.
During 2001, investment markets experienced another “downward correction,” and the subsidy once again began to drain the Health Fund. But even worse, health care inflation had grown to historically high levels, and was not showing any signs of slowing down. Employer contributions were not high enough to keep up with this rate of inflation. Trying to manage the Fund against these forces was like using a fire extinguisher against a raging forest fire. The signs were clear that it was only a matter of time before it would go under entirely.
This is why the merger of the east coast plans into the MPIPHP was a life preserver. The MPIPHP has structured its plans to be able to meet and deal with the destabilizing forces besetting the health care and financial markets in a way that the old Eastern Region plans could never do. The transition to the new benefit modifications is a necessary part of this structure. Subsidized self-pay for health insurance has unfortunately had to go the way of history. But we have been able to retain some of the old plan features that were popular––most importantly the Oxford Point of Service Health Plan.
By joining the MPIPHP, we have acquired a much stronger pension and retirement package and a retiree health care plan. We are now part of a stable national plan that is well positioned to move us into the future.
Louis Bertini, a Sound Editor member of the Editors Guild, is an Eastern Region representative on the Guild’s Board of Directors.
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