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NFL Retirement Plans

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Title: NFL Retirement Plans


1
NFL Retirement PlansWhats 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-59ers 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/injuriesincurring
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 players 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
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