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Pension, Health & Welfare in the Industry

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By Bruce Shutan
They used to be called fringe benefits or perks. They were mostly incidental advantages to gainful employment, overshadowed by wages. But pension, health and welfare coverage is anything but an afterthought in today’s workplace, where employee benefits—including legally mandated programs—can account for up to 30 percent of total compensation.
To organizations across every sector and industry, it’s a strategic tool that draws top talent in an increasingly competitive global economy. To the average worker or rank-and-file union member struggling to make ends meet, it’s a “hidden” paycheck with priceless value.
Nowhere does this new employment contract resonate more loudly than in Hollywood, where the initials PH&W have taken on near mythical importance in the hearts and minds of some 40,000 behind-the-scene talent in 31 union locals, 11,000 retirees, widows and widowers, and another roughly 75,000 dependents that are covered under the Motion Picture Industry Pension & Health Plans (MPIPHP).
These seemingly intangible benefits can mean the difference between life and death, with health insurance financing treatment for serious ailments. They also dictate quality of life, enabling people to afford home ownership or retirement – the latter option unthinkable for earlier generations of workers who worked on farms or in factories, or sold goods and services as street merchants.

Bargaining Issue
At the turn of the 21st century, all eyes are on health insurance.
“We’ve been hearing from unions across the country that health benefits are the top issue in bargaining now, right behind wages,” according to AFL-CIO spokesperson Kathy Roeder. But concessions don’t come easy. Ed Kaplan, a health care consultant with The Segal Co. who specializes in Taft-Hartley funds, recently remarked that this is the most difficult climate for health care benefits bargaining in all 17 of his years in the field.
The angst has trickled down from labor negotiators, consultants and corporate executives to average working Americans. An American Express Financial Advisors survey found that 73 percent of employees are concerned about rising health-care costs undermining their ability to fund retirement and other financial goals.
In the face of all this alarming news, Tom Zimmerman has cause to celebrate. The executive administrative director of MPIPHP is clearly pleased with gains made on the health-care side during recent labor negotiations. For example, plan participants will continue to pay no monthly premiums and modest co-pays. “It was an amazing accomplishment,” he observes. “When you benchmark our terms against others in this country, we have an incredibly strong health plan that’s among the best of the best.”
One comparable benchmark is that the Teamsters union earlier in the year guaranteed that the group’s 65,000 covered members would not have to pay health premiums or deductibles as part of a five-year contract with the nation’s biggest trucking companies.
MPIPHP also brought home the bacon in the retirement-benefits area. “To have a pension plan increase of 7.5 to 15 percent in this economic climate,” Zimmerman explains, “is very impressive considering that most corporate and Taft-Hartley plans are required to earmark more money for pensions because the stock market dipped for three years – placing a big strain on meeting funding requirements.”
Moreover, MPIPHP pension assets exceed vested benefits because trustees accelerated by 10 years the federally mandated 30-year funding requirement, which is used along with complex actuarial tables to project retirement benefit payouts for each retiree.
Still, enjoying the view from the upper echelon can serve as a double-edged sword. Critics and industry observers have blamed the runaway production phenomenon in part on the crew’s rich benefits package, wages and post studio-era work rules.
“These are extraordinarily generous provisions that absolutely assure moviegoers will be paying higher ticket prices in the future,” Dallas Salisbury, president and CEO of the Employee Benefit Research Institute in Washington, D.C., says of the MPIPHP benefits package relative to others. EBRI bills itself as the only nonprofit, nonpartisan organization committed exclusively to data dissemination, policy research, and education on economic security and employee benefits.
Salisbury calls highlights from the new labor agreement impressive, placing the crew among “the crème de la crème of the American labor force in terms of health and retirement benefits.” The absence of employee co-pays in a climate of double-digit health care cost increases and high medical inflation is “out of this world,” he adds. Salisbury wouldn’t be surprised if amortizing retirement benefits over a 20-year period contributes to driving more motion picture and television production overseas in the future.
“It could be that the very group that is hurting the most from runaway production is the group that is inciting it: below-the-line laborers,” Audrey Droesch of Stanford University writes in a 2002 paper on the topic. She also cited “stringent demarcation rules” originating from the vertically integrated studio system that has long been friendly to both below-the-line and above-the-line unions – mentioning that scrapping rules favoring the hiring of 10 to 15 more Americans than Canadians “could shave $137,000 to $207,000 per film from the below-the-line bill, including health benefits savings.”

And Above the Line…
Even actor Bruce Willis weighed in on the issue, opining on a talk show that crew labor costs drive up filmmaking expenses, according to a report last year in The Christian Science Monitor. Gaffer Jim Gilson told the newspaper that to this day he can’t bring himself to see any of the action-hero’s pictures.
There’s a juicy irony to Willis’s observation. Above-the-line talent, of course, doesn’t come cheap – especially if a major movie star is attached to a project.
Zimmerman identifies growing above-the-line costs (which are similar no matter where a film is shot), along with currency exchange rates that reduce expenses in foreign locations, plus subsidies to filmmakers granted by many foreign governments, as the chief culprits for driving productions to far-flung locales. “To me, those are bigger issues than the cost of benefits,” he says. Indeed, Droesch’s research acknowledges this argument.
When comparing the MPIPHP to above-the-line benefits coverage, there are fundamental differences in funding. For example, Zimmerman notes that actors are paid residuals whereas below-the-line residual funds are pumped into PH&W. The upshot: benefits coverage appears richer for the crew.
Another is that benefit eligibility rules have tightened for above-the-line talent. SAG’s Screen Actors Guild-Producers Pension and Health Plans significantly reduced the number of enrollees by raising the minimum $7,500 annual earnings requirement to $9,000 in 2003 (the amount will rise to $11,000 by 2007).
Zimmerman says tighter eligibility requirements were not part of MPIPHP’s contract renewal (it stayed put at 600 hours of work in one or two consecutive six-month qualifying periods to initially qualify, with renewals falling to 300 hours every six months thereafter).
In addition, SAG members who’ve long been accustomed to receiving first-dollar health coverage saw their deductibles for major medical procedures double beginning January 1, 2003, while co-pays also rose. “Earnings were not keeping up with costs even in robust times,” according to Bruce Dow, the plan’s director.
MPIPHP benefit comparisons also hold up well beyond Hollywood. “Knowing the benefit levels we have, they’re extremely hard to match,” Zimmerman says, “though there are other generous plans out there. Auto workers, for example, have had wonderful coverage for years, but I don’t know what they’ve done recently.”
One example is that the United Auto Workers made sure brand-new contracts with General Motors and Delphi did not include cost shifting of health insurance premiums onto workers, while retirement benefits were enhanced for those with 30 years of service (i.e., an $800 annual lump-sum payment was secured for current retirees in each year of the four-year agreement as well as a $1,000 voucher in the first and third years toward the purchase of a new GM vehicle).

Organizing labor
In years to come, PH&W could hold the key to reviving the American labor movement, whose membership peaked at 34.7 percent of the workforce in 1954 and has been declining rapidly ever since, falling to 13.2 percent last year, according to the U.S. Bureau of Labor Statistics. The number of working Americans represented by collective bargaining now stands at 16.1 million out of 122 million total U.S. workers.
As with any organization, MPIPHP tries to raise the bar on plan participant understanding of their benefits package. Strategies include a quarterly newsletter that publicizes topics relating to PH&W, as well as membership meet-and-greet events led by union leaders and retirement seminars that are held three or four times a year.
“The more communication we have, the better,” says Zimmerman, who practices what he preaches with MPIPHP staff. In fact, these employees are so well informed that they’re able to enjoy one of the most cutting-edge forms of communication: a statement that personalizes benefits and compensation for each individual. If MPIPHP had access to compensation data on all 40,000 of its active participants, he says personalized total compensation statements would be available to them as well.
Sometimes the greatest challenge is just getting people interested in knowing more about their benefits. Indeed, scores of benefits-industry professionals have long lamented the fact that most employees appear apathetic unless they’ve been touched by the implications of a life-altering event such as serious illness, divorce or death of a loved one. “When you’re young and healthy, you’re more interested in a paycheck than benefits,” says Zimmerman.

Below the Line writer Bruce Shutan has been covering the employee benefits industry for 15 years. Mark London Williams, who writes the page 2 Union Roundup column for Below the Line, contributed to this report.

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