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2018 Contract Talk



2018 Basic Agreement Ratified

Motion Picture Editors Guild members voted overwhelmingly to reject the 2018 IATSE Basic Agreement in a massive landslide — 89% voting against ratification, representing more than 5,100 members.

In an unprecedented voter turnout for Local 700, 71% of active members voted in the election.

Update – Final votes counts: 5743 total votes.  608 For Ratification and 5,135 against.

The contract has been ratified by the other 12 IATSE locals, according to early reports, and will be retroactive to August 1, 2018, when the previous contract expired, for a three-year term.

Review Election Materials, including: 2018 Basic Agreement MOA, Local 700 MOA and related documents (requires login)

 Contract Talk Podcasts

  In response to the numerous questions posed by members, please listen to our series of podcasts discussing the tentative 
  agreement.  You can also listen on iTunes.

 

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Dear Members,

I would like to provide you with insight regarding a letter received by the MPIPHP Board of Directors dated August 2, 2018 from the MPIPHP actuary firm of Rael & Letson which was circulated on different on-line forums and is now posted on the IA’s ratification website. The letter contained a spreadsheet showing future projections for the MPI Pension Plan. The following is to help you gain a better understanding of the implications of the letter and the chart.

The important thing to note is the spreadsheet projections are based on us achieving all of the assumptions used to create the projections. The letter reflects the Vested Benefit Ratio percentages of the Pension Plan will be back in the 80% funded range in 2023 and at 100% in 2032. However, what gets reported to the participants annually is the “Accumulated Benefit Ratio” and that is what you should be focused on. Using that we will be funded at 81.4% in 2025 and 100% in 2032.

There are three components to the assumptions we use for our future projections:

  1. Hourly contributions - the number of hours (transferred to dollar amounts) we can assume will be contributed. We agreed during these negotiations to increase the assumptions from 87.5 million to 92.5 million. We will likely meet those assumptions. This allows you to assume additional money coming in.

  2. Residuals income - which includes the previously existing new media residuals, Post ‘60s (motion pictures distributed via free television) and supplemental markets (sale of features on DVDs) but not the newly negotiated streaming residuals. We increased the assumptions for these residuals from $275 million to $325 million. Just over $340 million was contributed last year. Post ‘60s are trending downwards and supplemental markets are flattening out. Both of these factors require we obtain enough residuals from streaming products to offset the loss in these other traditional residuals. Nobody knows with any certainty if this newly negotiated residual stream will sufficiently generate enough income to result in completely offsetting the declining Post ‘60s and flattening traditional supplemental markets.

    The other alternative to fund the Pension Plan is to increase the current employer hourly pension contribution rate. For months leading up to negotiations, the IA included a pension rate increase in the Union draft proposal. In the very end, the IA made the decision to remove the proposed increase and put all of the pension funding fight behind achieving the new media residuals formula the other Guilds received (which was not achieved in this deal).

  3. Return on Investments – MPI previously had an assumed rate of return of 8%, lowered last year to 7.5%. We did so because we had not reached our assumptions for many years which resulted in the Plan’s Actuaries refusing to certify 8% going forward. Detail to note: The decrease in our funding percentage from over 80% three years ago to what is now just over 67%, is mostly attributable to not meeting our assumptions on investment returns. The 10% pension increase negotiated last cycle was not the primary driver of this drop in funding percentage.

The most important statement in the cover letter accompanying the spreadsheet emphasizes the projections are assuming we meet the 7.5% return on investments each year. Specifically, it says, “Assuming that the current market return assumption of 7.5% (net of investment expenses) is achieved in each future year, the attached projection shows that the plan is scheduled to reach 80% funding by January 1, 2023 and 100% funding as of January 1, 2032 after including the 13th and 14th checks for 2018 – 2020 and the 10% active increase on January 1, 2021.” 

With this year’s market activity, we are hopeful to break even at the end of the year rather than take a loss. Year to date at the end of June 2018, we are at net pension investments returns of -0.4%.

The projection spreadsheet only takes into account the 13th and 14th checks for people who retired prior to August 1, 2009 through 2020 -- see Benefit Payments, b) Extra Checks. Issuing the extra checks are subject to negotiation each negotiation cycle and the cost associated with them can certainly change.

Additionally, the 10% active pension increase is only factored in through the three years, because it is subject to certain reserve levels being maintained. While it is not in the projections, it is a presumed cost going beyond that time frame.  

If we fall short of the funding needed, the producers have a legal obligation to fund the pension and ensure our minimum funding requirements are met. So, if there isn’t enough money in the pension plan to do so, money would have to be diverted from the health plan to the pension plan and the financial hit would directly impact the health plan.

Nobody is claiming the pension plan will be insolvent, nor questioning the work of the plan actuaries nor the Board of Directors. Collective bargaining is the mechanism for securing additional funding into the MPI Plans. Getting successfully through the next three years (the term of this new IA agreement) may be achieved; however, a long-term solution is what was and still is needed.

Cathy Repola
National Executive Director

(Updated: 9/11/2018)


Attachments:

       
         

Motion Picture Actuary Letter to the MPI Board of Directors:

 

MPI Pension Plan Highlights 2018-2032:


Below you will find factual explanations as to why I, as Local 700’s National Executive Director, and our Officers and Board of Directors are unanimously recommending a vote against ratification of the tentative new Basic Agreement. This has been compiled in response to questions we have received from our membership over the course of the last few days. The memorandum of agreement is not yet finalized, so the below points are based on my own negotiation notes.

The Local 700 leadership wants you to fully understand the deal points. There were some improvements made in these negotiations, but we grossly underachieved in the areas of greatest importance.

Cathy Repola
National Executive Director

(Updated: 8/13/2018)

New Media Residuals - Comparison

Comparison of the DGA/WGA New Media Residuals versus the IA's newly proposed formula (an analysis of what SAG-AFTRA achieved was not utilized in preparation for these negotiations).

The other Guilds existing residual formulas are structured very differently than those already paid on behalf of IA members, so the below is not a detailed analysis, but rather broad-strokes.

The DGA and WGA negotiated a new foreign markets residual. Residual compensation reuse is computed by a “Base Amount” (dependent upon budget/type of production, etc.) multiplied by a “Tabled Percentage” (year of reuse; for example, Season 1, Season 2, etc.) multiplied by “Subscriber Factor.” 

Base Amount x Tabled % x Subscriber Factor

The above-referenced new formula is for high-budget SVODs (Streaming Video on Demand):

• An additional 35% of the domestic residual is paid for each of the first and second years. The percent declines gradually for the years afterwards.
• 90-day free streaming window
• The platform must have 45 million or more subscribers

If the foreign license is for 15% or less of the available foreign market — or less than 45 million subscribers — then producer pays 1.2% of the allocated producer’s gross.

The already-existing IA new media residuals are triggered for products streamed on new media as a secondary market, with free streaming windows, budgeting and licensing structures. A new residual patterned after the DGA and WGA for foreign reuse of high-budget SVODs was proposed by the IA when negotiations commenced in May.

The IA did not achieve any reuse residuals for foreign distribution and instead agreed to the below:

Streaming live-action features with budgets of $30 million or more will pay a 5.4% contribution rate of straight time earnings of the IATSE crew provided the following stipulations are met:

• 96 minutes or more in length when distributed theatrically 
• There is an admission fee charged to view it theatrically

Streaming animated features with budgets of $45 million or more will pay a 3.6% contribution rate of straight time earnings of the IATSE crew provided the following stipulations are met:

• 96 minutes or more in length when distributed theatrically 

Both apply to SVOD services with 1 million or more domestic subscribers with license agreements entered into after January 1, 2019.

New Media Residuals - Effects

It is uncertain if this new stream agreed to by the IA will generate sufficient income to result in adequately offsetting the declining Post ‘60s and flattening traditional supplemental markets.

It will be some sort of increase in residuals, but attempting to estimate its value is guesswork. On the other hand, increasing the hourly pension contribution rate is something you can calculate and rely on because it is quantifiable.

The future funding of the Plans is based on actuarial assumptions. There are three components to the assumptions we use for our future projections:

  1. Hourly contributions - This is the number of hours (transferred to dollar amounts) we can assume will be contributed. We agreed during these negotiations to increase the assumptions from 87.5 million to 92.5 million. This allows you to assume additional money coming in. There were over 96 million hours last year, but better to be conservative.

  2. Supplemental markets income – This includes the already existing new media residuals and the traditional secondary markets (sale of features on DVDs) but not the newly negotiated residuals. The assumptions were increased from $275 million to $325 million. Just over $340 million was contributed last year.

  3. Return on investments – The Plans have assumed a rate of return of 8%, amortized over a 20-year period. This has not been reached for many years. It was lowered last year to 7.5%, and the amortization period was changed to 15 years. It is unlikely 7.5% will be achieved adding further burden on the funding of the Plans.

There is an obligation to fund the pension first by meeting our minimum funding requirement; any shortfall beyond that would be to the health plan. That should be avoided at all costs. Even though the hourly health contributions are being increased under this new deal (in disproportionate amounts, see below "Health Plan Hourly Contribution Increases"), that was done to prop up the monthly reserves in the active and retiree health plans to allow for the continuation of the 13th and 14th checks for those who retired prior to August 1, 2009 and to avoid other funding triggers related to reserve levels that have negative implications on the health plan. 

Getting successfully through the next three years (the term of this new IA agreement) may be achieved. The IA members deserve more security than that. Addressing the long-term stability should be our Number One priority, leaving us positioned to make improvements in future negotiations.

Health Plan Hourly Contribution Increases

The studios and their affiliated companies will pay an extra $.20 cents per hour in year one, and an additional $.10 in each of the second and third years resulting in a total of $.40 increase beginning the third year of the agreement. All others will pay an additional $.75 per hour each year of the agreement, resulting in a $2.25 increase beginning the third year of the agreement. This applies to both service providers and producing entities. For service providers, this will put them at a competitive disadvantage with their primary competitors – the studios. 

This new financial burden will likely result in loss of available jobs for IA members as most of these signatory companies already have extremely tight profit margins. In addition, it will likely have a negative impact on our organizing drives and the ability to secure both the MPI Plans and much needed wage increases in non-union facilities.

Rest Period/Turnaround

The tentative agreement makes some improvements to turn around, but there are exclusions and limitations put upon it that will not address the core areas where it is most needed. Our goals were to provide sufficient time for sleeping, getting home safely and spending personal/family time between shifts, but this new provision is inadequate on several levels, regardless of the negotiations resulting in 9 hours for Local 700 and 10 for all other locals.

Here is why:

• The exclusion of pilots and first seasons of episodic series.
• The exclusion of features and long-form television, except in instances in which employees have worked two consecutive 14-hour days.
• The exclusion of all IA On Call classifications.
• A penalty that is the equivalent to one straight time hour of pay for an invaded 9th hour (10 for production) will not act as a deterrent, which is what these types
of penalties are intended to do. (This leaves in place the current 8-hour structure for Local 700 in LA and the 10 hours in NY).

Ratification Vote - Clarification

As soon as the Memorandum of Agreements (Local and Basic) are completed, the ballots will be sent out with an explanation and recommendation from the IA President. It will also include a letter from Local 700's leadership urging a vote against ratification. The IA President will indicate that a vote against ratification is a vote to strike. If a majority of the electoral votes are cast against ratification, that does not necessarily mean we go back to the table. The IA President will decide upon the strategy if that were to occur. If the majority vote in favor of ratification, the new agreement will be implemented and it will apply across the board.

Additional Information

Why Local 700 Says No to the Tentative Agreement (Click here)

The Local 700 Officers and Board of Directors on Saturday, July 28, 2018
unanimously voted to recommend a vote against ratification of the
2018 tentative IATSE Basic Agreement.