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

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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

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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

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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

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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

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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

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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

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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

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Professional Sports Pension Plans
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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

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Bert Bell/Pete Rozelle NFL Player Retirement Plan
- Accrual
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Example - Former vs. Current
But most players retire w/injuriesincurring
major recurring medical expenses!!!
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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

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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

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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

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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

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Acknowledgements

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