How Bill H. R. 4 Is Going To Help The Orchestra Business

According to CNN, President Bush is expected to sign bill H.R. 4 into law today designed to buttress America’s pension system. For the orchestra business, this new legislation promises to eliminate one of the more contentious issues surrounding collective bargaining agreement negotiations at many large budget organizations…

According to an AP report from August 4, 2006 H.R. 4 “compels employers with defined-benefit pension plans to meet their funding obligations and seeks to prevent companies from terminating plans and shifting the financial burden to the taxpayer.”

If you aren’t up to speed on the differences between defined benefit and defined contribution retirement plans, I published two articles in August, 2004 featuring interviews with Richard Wagner, CAP and Senior Manager for Clifton Gunderson LLP, which describes the plans and how they impact the economics of orchestras (part 1 and part 2).

In essence, some managers and boards feel that their defined benefit programs are so expensive they can’t raise enough money to properly fund them while simultaneously funding artistic growth at traditional levels. For some players associations, they perceive underfunded pension accounts as a deliberate act that managers and boards conveniently time to coincide with negotiations so they have a bargaining tool they can use to lower wages and design work rule issues to their favor.

The reality is likely a little of Column A and a little of Column B and of course, H.R. 4 won’t solve the disagreements between managers/boards and musicians right away. Nevertheless, after the bill’s seven year implementation phase comes to an end, all orchestras will need to have their defined benefit programs fully funded one way or another.

All in all, it will be interesting to watch which organizations go about the process amicably and which ones will wring every last bit of use out of an old bargaining tactic. Regardless of the potential casualties along the way, the business will be better off for being required to find a stronger financial foothold.