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NFL Retirement Plans “What’s all the fuss about?”. Charles Clark and Regine Rucker Thursday, November 29, 2007 Finance 434 - Employee Benefits Dr. David Sinow. Introduction. Retirement pensions Tradition of the American workforce Late start for Sports NFL

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NFL Retirement Plans “What’s all the fuss about?”

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Nfl retirement plans what s all the fuss about

NFL Retirement Plans“What’s all the fuss about?”

Charles Clark and Regine Rucker

Thursday, November 29, 2007

Finance 434 - Employee Benefits

Dr. David Sinow


Introduction

Introduction

  • Retirement pensions

    • Tradition of the American workforce

  • Late start for Sports

  • NFL

    • Nearly $7 billion in revenue annually

    • $193K: Minimum Salary for Rookies

    • $1.1 Million: Avg. NFL Salary

    • Pensions Plans

    • Avg. career 3.5 yrs.

  • Recent Debate


Objectives

Objectives

  • History of NFL Retirement Plans

  • Current state of NFL Retirement Plans

    • Comparison to other major professional sport leagues

  • Suggestions to improve benefits of “old-timers”


History of nfl retirement plans

History of NFL Retirement Plans

  • NFLPA

    • Union providing retirement, medical, and disability benefits to players through a collective bargaining agreement (CBA) along w/ NFL

    • 3 of 6 appointed voting trustees on the Retirement Board

    • Organized in 1956

    • “Bert Bell NFL Retirement Plan” of 1962


History of nfl retirement plans1

History of NFL Retirement Plans

  • 1970 – 1st Revision

    • Basis for current plan

    • Formula to calculate monthly pension developed

      • Normal Retirement Age (NRA) = 55

      • Single Life Annuity

      • Vesting Schedule – 5 “Credited Seasons”

      • # of “Credited Seasons” X “Benefit Credit”

        • “Credited Seasons” earned if paid for 3 or more games in a football season

        • “Benefit Credit” = $60 for retirement 1959-66

      • Reductions – Joint/Survivor, Early Pension Benefits, and Social Security Adjustments


History of nfl retirement plans2

History of NFL Retirement Plans

  • 1977 Revision

    • Vesting Schedule - Reduced to 4 yrs.

    • Added lump sum “Early Payment Benefit” (EPB)

  • 1987 Revision

    • Expiration of 1982 CBA

    • $150 Benefit Credit for 1987 and 1988

    • 1989: “Pete Rozelle NFL Player Retirement Plan”


History of nfl retirement plans3

History of NFL Retirement Plans

  • 1993 CBA

    • “Benefit Credit” increase from $60 to $80 for 1959-66 retirees and $150 to $210

      • “Pre-59er’s” included, receiving same rate as 1959-99 retirees

    • Vesting Schedule – Reduced to 3 yrs.

    • Co-counsel, co-actuary system replaced


History of nfl retirement plans4

History of NFL Retirement Plans

  • 1993 CBA

    • Future contributions based on actuarial factors

    • Increases in plan funding

    • Early Retirement Options eliminated for those retired after 1993

    • 401 (k) Plan established w/ 2 for 1 match

    • All benefits tied to salary cap


History of nfl retirement plans5

History of NFL Retirement Plans

  • The “GREAT DEBATE”

    • Benefits of all (current and retired) paid by active players

    • Former Players vs. Current Players

    • Benefit upgrades not received by “old-timers”

    • Union leaders have no obligation to represent former players, nor does management to re-negotiate benefits for “PAST” employees


Current retirement plan

Current Retirement Plan

  • CBA allocated 60% of league revenue to player benefits and salaries.

    • Because of this allocation, each NFL player (approximately 1800) paid $82,000 in benefits to former players

  • Although NFL revenues are estimated to be nearly $7 billion, only 2% went to retired players.

    • $96.5 million went to player retirements

    • $31 million went to health benefits

    • $20 million went to disability benefits


Current retirement plan1

Current Retirement Plan

  • A player retiring today receives under the collective bargaining agreement

    • Pension funding

    • Group insurance

    • Injury protection

    • Workers’ compensation

    • Pre-season per diem

    • Expenses for travel, board and lodging for off-season workout programs

    • Payments or reimbursements for participating in Rookie Orientation Program

    • Moving and Travel Expenses

    • Postseason Pay


Current retirement plan2

Current Retirement Plan

  • A player retiring today receives under the collective bargaining agreement

    • Player medical costs

    • Severance pay

    • Minimum Salary Benefit

    • The Performance Based Pool

    • The Tuition Assistance Plan

    • The NFL Players Health Reimbursement Plan

    • The “88 Benefit” Plan

    • The “Second Career Savings” Plan

    • The “Player Annuity Plan”


Professional sports pension plans

Professional Sports Pension Plans


Bert bell pete rozelle nfl player retirement plan

Bert Bell/Pete Rozelle NFL Player Retirement Plan

  • In April 2006, was estimated to be 93% funded

    • $1.034 billion actuarial liability

  • Assumed investment rate of return is 7.25%

  • Players receive retirement credits based upon years of service in the NFL, not total salary


Bert bell pete rozelle nfl player retirement plan accrual

Bert Bell/Pete Rozelle NFL Player Retirement Plan - Accrual


Example former vs current

Example - Former vs. Current

But most players retire w/injuries…incurring major recurring medical expenses!!!


Second career savings plan

Second Career Savings Plan

  • Established in 1993

  • Was the first 401(k) plan in professional sports

  • Beginning in the 2007 Plan Year, eligible players are automatically enrolled

  • After a player’s second year, pre-tax contributions up to $20,000 receive a two-to-one match

    • Remember, the IRS limit for contributions for 2007 was only $15,500


Nfl player annuity program

NFL Player Annuity Program

  • Established in 1998

  • This DC plan allows former players to receive annuity payments as early as age 35

  • After 4 credited seasons, $65,000 is placed in an annuity account for each subsequent season

  • The NFL Player Annuity Program has approximately $340 million in assets


Health and disability benefits

Health and Disability Benefits

  • Free medical coverage for vested retired players and their families for five years after retirement

  • Players can contribute $25,000 per year (for a total of $300,000) to fund medical coverage after their free coverage ends

  • 88 Plan provides reimbursement for certain costs related to dementia up to $88,000

  • Disability benefits can be between $18,000 to $224,000 per year


Ways to improve the plan

Ways to Improve the Plan

  • Many of the problems of the NFL pension plan are similar to those of Social Security

    • “Pay as you go” DB plans

    • Increasing health care costs

    • Benefits for many retirees outweighs the amount they put into the system

  • Similar to fixing Social Security, there are two ways to fix NFL pensions

    • Increase pension funding

    • Decrease the benefits of current players


Acknowledgements

Acknowledgements

  • Jeff Nixon

    • Buffalo Bills Retiree

    • 1979-84

  • NFL/ NFLPA/ MLB

  • Dr. Sinow


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