Over the past several months prolonged discussion has taken place among the trustees of the Local 802 Health Benefits Plan concerning the plan’s present financial dilemma.

Beginning in 1999 a combination of factors has resulted in a precipitous decline in reserves which has, in turn, caused at least one influential trustee of the plan to seek benefit modifications in order to address certain cost issues.

Among the factors responsible for this quandary are the following:

• Increased participant usage of the plan. The benefits – a category which includes both payments for insurance premiums and direct payments to participants – paid in 1999 increased by almost one million dollars over those paid in 1998 – from $3.9 million to $4.83 million. Of that increase, more than $600,000 was a result of major medical insurance premium increases and almost $200,000 was caused by greater payments for prescription drugs. Premium costs are driven by the actual cost of benefits. The premiums are examined by our advisor, The Segal Company, and discussed with the insurance providers on a regular basis.
• These increases continued during the first half of 2000, with insurance premiums rising by another $180,000 and prescription drug costs by $115,000.
• Like everything affected by the fortunes of the U.S. stock market, our investments did poorly in 1999. While our investments grew by $830,000 in 1998, they earned only $134,000 in 1999. And although the first six months of 2000 saw a rebound, the market remains in a worrisome state of flux.

In the aggregate, this has led to losses of nearly $800,000 in 1999 and another $555,000 in the first six months of 2000, for a total of about $1.3 million.

In this generally troublesome scenario, we do have one factor working in our favor. Over several years prior to 1999 we had increased our assets to almost $9 million, even after accounting for future benefit obligations. Even with our recent losses, we retain reserves in excess of $7 million, so we have a little breathing space.

Unfortunately, at this time, the Segal Company is projecting that the pattern of the last two years will continue. It would be irresponsible to continue to spend down our reserves in the vague hope that things will get better. We must look carefully at our situation – our more than two years of reserves gives us that luxury – and decide which measures, if any, need to be taken.

The first steps are already in place.

• We are continuing to monitor our investment policies and the performance of our money managers to assure they are working to our best advantage.
• The union trustees of the fund will be asking that our insurance be put out for bid in order to find whether any coverage exists that would suit our needs for a better price.
• We will also ask that audits be conducted of both our major medical carriers, the Union Labor Life Insurance Company (ULLICO) and our prescription drug provider, National Medical Health Care Systems, Inc.

We will be looking to the complete financial statements for 2000, which are due in the late spring or early summer, for more information on these troubling trends, and are determined to do what is best for the membership’s health insurance needs.

EMPLOYEE STATUS IS KEY

I’d like to share with readers some e-mail inquiries that I’ve recently received concerning Local 802’s policies and positions.

The first, from a long-time member, asks, “What’s the benefit of W-2 tax status?” He goes on to relate his experience as an independent contractor writing off instrument repair and upgrade purchases as well as equipment for his home-based project studio.

It would take a tax expert to argue in detail the relative merits of 1099 vs. W-2 tax classification. However, I am convinced that for the vast majority of our members – guitarists, violinists, drummers, bassists, even trumpet players – the benefits gained from employee status far outweigh the relatively minimal write-offs to be obtained as an independent contractor.

The one advantage of employee classification that clearly decides this issue is the possibility of union representation. Unions represent employees. Employers can, and more often than not do, prevent workers identified as independent contractors from forming a union or being represented by one.

Independent contractors are – in the strictest legal sense – just that: independent. They stand alone. Unions were created to overcome the weakness inherent in that situation. Solidarity is not merely an empty slogan. It’s a necessity if we are to have an effective voice in our workplaces. Under U.S. labor law the basis for collective activities is your employee status.

In a somewhat related matter, a posting on the AFM Bulletin Board from an AFM member from Canada asks for more discussion regarding the issues raised by an article in the November 2000 issue of the International Musician about the recently submitted Live PALRA legislation. A letter from me challenging one of the assumptions in that article and a response from the editor appeared in the IM‘s January 2001 issue.

It probably needs to be clarified that I support Live PALRA and hope that it can be passed. However, if that does not happen and we are left with the status quo, we are still not prohibited from organizing freelance nightclub and hotel musicians. They are employees.

The case most often referred to on this subject is the Caribe-Hilton decision, which the IM editor mentions in his response to my letter. In that case the hotel argued that it was not the employer and the court agreed, overturning an NLRB decision. Nowhere did the court find that the side musicians were independent contractors, nor was it asked to. It did declare the bandleader to be an independent contractor and, by implication, the employer of the musicians.

The AFM has shown a continued reluctance to accept that reality and to organize musicians based on it. Most leaders are our fellow members, and awkward situations arise from that fact. We must, nevertheless, accept the reality for what it is and do what needs to be done to protect and represent musicians. If that means identifying some of our members as employers, then so be it.