Presented by:Jimmy LyznickiHelen ChungLauren HoyeTraci Kingdon

Employee Benefits for Pro Sports

Agenda Introduction to pro sports’ employee

benefits: NFL MLB WNBA NBA

Recap & comparison of benefits Suggestions to improve benefits Class activity

NFL

NFL: Issues with Benefits Serious disconnect between Player's Union

(NFLPA) & retired players Retired players receive $8 billion in

revenue Higher than all other sports, but worst

retirement benefits Former NFLPA Director Gene Upshaw says,

“The bottom line is, I don't work for them. They don't hire me and they can't fire me. They can complain about me and have their opinion. But the active players have the vote. That’s who pays my salary.”

NFL: Issues with Benefits (cont.) The NFL pays the Groom Law Group well to

handle disability benefits It is difficult to get needed disability benefits

Andre Waters’ brain at age 45 looked like an 85 year olds

Pensions are the only means to live for many retired players Taking pensions early drives down

monthly payments

NFL: History of Benefits 1959: First retirement plan Early 1960‘s: Bert Bell Retirement Plan introduced

Enhanced retirement, disability, and related benefits to ex-players

1993: NFL Player Supplemental Disability Plan established

1998: Introduction of $100,000 annuity benefit for 10-year veterans

2006-2007: Current Collective Bargaining Agreement (CBA) finalized Introduced significant changes and reform to benefits

2010: Next CBA negotiation date

NFL: Financial Benefits NFL contracts

Overall league minimum contracts based on years of service for 2009:

0 Seasons $310,0001 Season $386,000

3 Seasons $535,0007-9 Seasons $745,000 NFL contracts are not guaranteed

NFL: Defined Contribution Benefits 401(k) program

$2 for $1 match Maximum contribution is $22,000 in 2009 Vested after 1 season

Retirement Annuity Players eligible after playing at least 10

years Receive a lifetime annuity and other

benefits

NFL: Pension Benefits Pete Roselle Retirement Plan

Defined benefit plan Retirement age is 55 3-year vesting period Annual pension payments are between $3,000

and $5,640 for players retiring after 1981 Plan underfunded by $1.034 billion

NFL: Medical Benefits Life Insurance - Maximum coverage is

$800,000 Medical - Annual deductible of $400 per

individual or $800 per family Maximum out-of-pocket expenses - $1600 Variety of co-pays and co-insurance Maximum lifetime benefits - $2,500,000 Covered only 5 years after retirement at no

cost

NFL: Disability Benefits Main source of public outrage NFL injury rate is 8 times higher than

other sports Pre-2006, if disabled under Social

Security, not automatically disabled under NFL disability

Previously, there was a very expensive and long legal process to get approved disability through NFLPA Most retirees cannot afford this process

NFL: Miscellaneous Benefits Gridiron Greats

Co-developed by Mike Ditka Non-stock, non-profit corporation “Established to provide financial assistance

and coordination of social services to retired players who are in dire need due to a variety of reasons, including disability and/or pensions”

Make a donation and receive choice of cigars, Ditka wine, autographed jerseys, hats, and more

NFL: Miscellaneous Benefits (cont.) “88 Plan”

Program to help players with dementia Provides up to $88,000 annually for

institutional care or $50,000 for in-home care

NFL: Benefit Reform Doubling of minimum post-career non-football total

and permanent disability from $20,000-40,000 per year for retired players who become disabled unrelated to football

Players who take their NFL pension early, and therefore are ineligible to apply for and receive disability benefits, will be offered a new one-time opportunity to apply for total and permanent disability

NFL disability awards not offset by any amount paid by SS

Now if disabled under SS, eligible for full disability under NFLPA

NFL: Proposed Changes to Benefits Current players pay into separate fund

for retired players (unlikely) NFL sets aside 1% of league revenue and

devote it to injured and disabled former players

$5 surcharge on game tickets for separate fund for injured and disabled former players

MLB: Issues with Benefits

Some players from 1947 to 1979 didn't play long enough to be vested. Old rule required 4 years to be fully vested

in both pension and medical benefits Non-vested players before 1980 were

excluded from the new vesting rules (Pension: 43 days, Medical: 1 day)

MLB: History of Benefits 1947: Pension plan began

First pro sports league to set-up a pension plan 1966 and 1981: Reforms to pension

program Became most generous pension program in

pro sports Average annual pension benefits:

$36,700 Fully vested 10-year player

Qualifies for $175,000 pension

MLB: Summary of Benefits Three parts:

Pension Plan Investment Plan Health and Welfare Plan

MLB: Eligibility for Benefits Benefits apply to:

Players, coaches, trainers, managers Normal retirement age:

65 (Service before 1970) 62 (Service 1970 – 1991) 67 (Service after 1992)

Early retirement age: 45 years old

MLB: Vesting of Benefits 1968 Agreement

4-year vesting for both pension and medical

1981 Strike 43 days for full pension benefit

Only applies to players who played after 1980

MLB: Pension Benefits Defined Benefit Plan

Calculation using predefined numbers based on years of service and age at retirement

Fixed Retirement Benefits Variable Retirement Benefits Min. = $1,000/mo Max = $180,000 annual

MLB: Pension Benefits (cont.) Example of fixed monthly payment:

A player had 4 years of service and retired at age 45

$117 - fixed monthly payment

MLB: Investment Plan For 1990 and after:

Pension committee determines the amount to contribute

Contribution is allocated to individual accounts

Allocation limitation is the lesser of: 7% of compensation, or $7,500

MLB: Investment Plan (cont.) Investment:

Members can choose their investments in various funds

Distribution: Eligible to receive distributions when:

Inactive for at least a year Disabled Retired

Lump-sum payment

MLB: Medical Benefits A player must qualify through one of the

following: on the active list for at least 1 day, 60+ days service, or in second year of contract, with more than

1 day during the season Spouse and children are also eligible

MLB: Medical Benefits (cont.) General Health Plan

Hospital Stays Plan pays 100% of costs Limit to 120 Days

Outpatient $500 deductible Plan pays 80% up to threshold

(individual $5,000, Family $15,000) 100% afterwards

Optional Comprehensive Health Care Visions and Dental

MLB: Disability Benefits Eligibility:

Active member, 60+ accrued services Inactive member, 4 years of service Totally and permanently disabled

Benefits: Monthly payment = Earned income in prior year Max. $5,000, Min. $2,500, $300 for each dependent

If eligible and disabled: while an active member, within 5 years of becoming inactive, or from active service

Benefit: $5,000 monthly income, $600 for each dependent

WNBA: History of Benefits 1998: The Women’s National Basketball

Players Association ("WNBPA") was founded First labor union for professional female

athletes 1999: First collective bargaining

agreement in women’s professional sports

WNBA: Summary of Benefits 1st CBA (1999-2002) made many advances toward

equality for women and professional athletes: 75% minimum salary increase for rookies 100% minimum salary increase for veterans over the prior

year’s minimums Year-round health coverage Retirement plan Guaranteed contracts Collective share of licensing income

2nd CBA ratified on April 25, 2003 Free agency for WNBA players Re-instated player group licensing rights to WNBA players

WNBA: Financial Benefits Revenue Sharing - 10% of Overage Rule

Average Team Ticket Revenue exceeds the target in the regular season

Average Team Ticket Revenue =

Team Ticket Revenues for all Teams in the regular season

# of Teams that generate that revenue

Target Revenue for 2008 regular season: $2.5 million

WNBA: 401(k) Program Elective deferrals by each player of a portion of

her base salary 25% employer matching employer contributions determined as follows:

2 years of playing service as of the end of that Season = 2% of base salary for that season;

3 years = 3% 4+ years = 4%

Eligible after 1 playing season

WNBA: Medical BenefitsBeginning with the 2008 Season, players receive either: In-network services:

No annual deductible No co-insurance No annual lifetime maximum benefit Co-payment for certain services

Out-of-network services:

$300 annual deductible per covered individual ($600 per family) Coverage for 80% of first $5,000 of eligible charges per person in a calendar year, and 100% thereafter Unlimited lifetime maximum benefit

Players pay 33% of coverage cost for dependents Worker’s Compensation

WNBA: Dental Benefits In-network services:

No annual deductible Coverage for 100% of preventive and basic services Coverage for 50% of major services No annual or lifetime maximum benefit

Out-of-network services: $50 annual deductible per covered individual ($150 per

family) Coverage for 80% of preventive and basic services Coverage for 50% of major services Annual maximum benefit of $1,000.

If player elected coverage for dependents, player pays for 33% of coverage cost

WNBA: Medical/Dental Limitations

Premiums cannot exceed last year’s premiums by more than 5%

When premium increases in any season are by less than 5%, the difference is carried forward

WNBA cannot pay premiums that exceed last season’s by more than 10%

WNBA not obligated to pay players, in benefits or other form, any carry forward not used to fund benefit premiums

WNBA: Pregnancy/Disability Benefits

50% of the base salary for the shorter of: the duration of her inability to perform

services due to pregnancy, or the remaining term of her Standard Player

Contract Not eligible for team merit bonuses unless on

active list for at least one regular season game

WNBA: Pregnancy/Disability Benefits Termination While Pregnant:

Player can, if the applicable insurance policies allow, continue to receive the medical benefits

If applicable insurance policies do not allow for continued benefits, but player elects continued coverage pursuant to COBRA, WNBA pays premiums for the player’s coverage

Player continues to receive coverage until the later of: the end of the season in which such contract is

terminated, or 3 months after giving birth

WNBA: Life Insurance Benefits Group life insurance policy providing a

face policy amount of $100,000 per player

WNBA: Miscellaneous Benefits

WNBA administers off season player programs that may include: Graduate school tuition

reimbursement Career apprenticeship programs Substance abuse education

programs Educational programs for individual

financial management WNBA contributes at least $75,000

per year toward such programs in the aggregate

WNBA: Miscellaneous Benefits (cont.)

Lodging Benefits - During regular season and playoffs, players can either:

stay in housing provided by the team, or receive a monthly housing stipend equal to the average monthly cost of a furnished one bedroom apartment in the market where the team plays its home games

During training camp, the team can decide between a monthly housing stipend or hotel accommodations When “on the road,” players receive first class hotel accommodations:

Players with 5+ years of service have individual hotel rooms Players with 4 or less years share a hotel room

NBA: Issues with Benefits NBA offers guaranteed salary contracts

Currently, the economy is affecting ticket sales Commissioner David Stern says “the league will

cut staff in anticipation of the downturn…the figure will be about 9 percent of the American work force.”

Creates funding and expense issues for the NBA

Differences in eligibility & benefit payouts between pre and post-1965 players

NBA: History of Benefits 1954: NBPA (National Basketball Player’s

Association) is formed 1965: First employee benefits plan and

collective bargaining agreement established

2005: Current collective bargaining agreement ratified

2007: Lower eligibility requirements and a 50% increase in benefits for pre-1965 players introduced

NBA: Financial Benefits The NBA uses a salary cap to maintain competitive

and fair trading: Salary caps limit the amount teams can spend

on player contracts Salary caps allow the NBA to have a lower

correlation between salaries and wins as opposed to other leagues, like the MLB

Season Defined percentage of BRI Actual salary cap 2005-06 49.5%* $49.5 million 2006-07 51% $53.135 million 2007-08 51% $55.63 million 2008-09 51% $58.68 million

NBA: Defined Contribution Benefits 401(k):

Teams match 140% of contributions 3-year vesting Eligible if play after 1999-2000 season Negative election: players must opt out

NBA: Pension Benefits Monthly benefit per year of service

In the past: Pre-1965 players received $200 per month and post-1965 players received $285 per month

2004: for post-1965 players, monthly benefits increased to ~$357

2007: for pre-1965 players, monthly benefits increased to $300

3-year vesting Since 2007, covers both pre and post-1965 players

Retirement age is 45-65 Disbursement methods: lump-sum, annuity for

lifetime or set period, and pre-retirement survivor annuity

NBA: Medical & Disability Benefits Medical & Dental

Insured by Prudential Insurance Covers 80% of first $5,000 and 100% thereafter

per family per year; co-insurance set at maximum of $3,000/yr. per family

Annual deductible of $300 per player and family member; limit of a $1,200 deductible per year for 4-person household

Life & Vision Insurance available Disability & Worker’s Comp also available

NBA: Miscellaneous Benefits The Education Trust

HIV/AIDS education program Education & career counselling programs

Player’s Association High School Basketball Camp

Anti-Drug Program Playoff Pool – increases with the number

of teams participating in the playoffs 2004-2005: $8.5 million

NBA: Benefit Reform Current collective bargaining agreement valid

through the 2010-2011 season The league can extend the agreement through

the 2011-2012 season or negotiate a new agreement

Pension BenefitsWNBA NBA NFL MLB

Normal Retirement Age

N/A 45 55 65 - 67

Vesting N/A 3 playing seasons

3 playing seasons

43 days

401(k)WNBA NBA NFL MLB

Vesting 1 playing season

3 playing seasons

1 playing season

N/A

Matching 25% 140% 200% N/A

Medical BenefitsWNBA NBA NFL MLB

Medical X X X XOptical X XDental X X X XDeductible X X X XCo-insurance X X X X

Life Ins., Disability, & Worker’s Comp

WNBA NBA NFL MLBLife Insurance

X X X X

Disability X X X XWorker’s Comp

X X X X

Other BenefitsWNBA NBA NFL MLB

Graduate SchoolTuition

Reimbursement

HIV/AIDS Education Program

88-Plan College Scholarship Plan

Career Apprenticeship

Programs

Player’s Association High

School Basketball Camp

Retirement Annuity

Draft eligibility at 18

Substance Abuse Programs

Tuition Assistance

Spanish Translation and

ESL CoursesFinancial

Management Education

Financial Management Assistance

Suggestions to Improve Benefits

WNBA NBA NFL MLB

Defined benefit plan; increase

401(k) matching

Congruency between pre and

post-1965 players’ benefits

Access to disability benefits

More congruency between pre and

post-1980 players’ benefits

Decrease coverage costs for dependents

Financial management

education

Financial management

education incentives

401(k) Plan

Survivor annuity Guaranteed contracts

Improve retirement benefits to

former Negro league players

Post-retirement medical benefits

Post-retirement medical benefits