New in the 1998 MBA: Pension and Health on Acquisitions

(April 1999)

Pursuant to the 1998 WGA Theatrical and Television Basic Agreement ("MBA"), contributions to the pension plan and health fund are now payable on purchases of literary material when the Company employs the writer for at least one rewrite or polish. The purchase must be from a professional writer as defined by the MBA (or from a writer the parties agree to treat as a professional). The contributions are to be made on the purchase price plus the rewrite or polish fees, subject to certain dollar caps.

The cap on which the contributions must be made for the sale of a theatrical motion picture script is approximately $162,000, with an overall cap of $200,000 for the writer for the entire project. In television, on a long-form script, the cap is the greater of either (1) 2 1/2 times the other than network prime time minimum, or (2) the initial compensation paid to the writer. In long-form television, the greater of those numbers is still subject to the same cap on the sale (approximately $162,000) and the overall cap on the project ($200,000). [The $162,000 amount is based on an IRS code provision — check with the Pension Plan and Health Fund regarding the exact amount of the IRS §401(a)(17) limits, as the limit will likely increase over time.]

Example 1: Writer’s deal is $100,000 for a sale of theatrical screenplay, and $25,000 for a rewrite. The entire amount is subject to contributions. (The cap on contributions has not been met, either on the purchase or the employment.) The overall cap of $200,000 per project per writer has not been reached, and up to another $75,000 in services is subject to contributions.

Example 2: Writer’s deal is $200,000 for a sale of a theatrical screenplay, and an additional $50,000 rewrite and a $25,000 polish. The sale is subject to contributions up to the $162,000 cap and the rewrite is subject to contributions, up to the $200,000 overall cap, or $38,000 of the $50,000. The polish payments are not subject to contributions, as the overall cap has been reached.

Example 3: Writer’s deal is $100,000 for a sale of a 2-hour television script, with a $50,000 rewrite and a $25,000 polish. 2 1/2 times the current applicable minimum is $80,745. The payments for the sale and all services are subject to contributions as that initial compensation ($175,000) is greater than 2 1/2 times the minimum ($80,745), but does not exceed the relevant caps ($162,000 for the sale and $200,000 overall).

MANDATORY REWRITES

The MBA provides that when a professional writer sells an original screenplay or an original teleplay 90 minutes or longer, the writer must be offered the first rewrite at not less than rewrite minimum (unless the writer is unavailable or waives the right to perform the rewrite). Beware: Many contracts have standard term provisions stating that the writer waives the right of the first rewrite. Writers and agents should ensure that such boilerplate provisions are deleted.

Regardless of whether the script is original, the writer may negotiate a pay or play agreement guaranteeing a rewrite and ensuring that the writer receives contributions on both the sale of the literary material and the guaranteed amount for the rewrite. In deals which guarantee the rewrite or polish, the writer may want to consider adjusting the amount allocated between the purchase price and the rewrite(s) or polish(es) to get the maximum amount of pension and health contributions. The services for the first rewrite may be owed to the Company for a reasonable period of time after the sale.

If you have any questions, please call the Contracts Department at 323/782-4501.