1 / 21

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. Retirement pensions Tradition of the American workforce Late start for Sports NFL

wayne-kirk
Download Presentation

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

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. 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

  2. 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

  3. 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”

  4. 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

  5. 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

  6. 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”

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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”

  13. Professional Sports Pension Plans

  14. 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

  15. Bert Bell/Pete Rozelle NFL Player Retirement Plan - Accrual

  16. Example - Former vs. Current But most players retire w/injuries…incurring major recurring medical expenses!!!

  17. 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

  18. 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

  19. 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

  20. 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

  21. Acknowledgements • Jeff Nixon • Buffalo Bills Retiree • 1979-84 • NFL/ NFLPA/ MLB • Dr. Sinow

More Related