Major League Baseball

Benefit Plans

Presented by:

Andrew Hill

Blair Huang

Ted Nocella

Mike Wahls

Introduction

•Comprehensive 3 Part Benefit Plan

▫Part 1: Standard Pension Plan▫Part 2: Investment Plan▫Part 3: Health & Welfare Benefits

Introduction

As a whole,•Major League Baseball’s Plan is:

▫Covers more members▫Covers them quicker▫Gives them more benefits throughout life

Than the other Major Sports Leagues

•MLBPA deserves much of the credit for this

MLB Pension Plan

•Implemented since 1947•Expansion in 1966 by Marvin Miller•Gain more concession on 1972 strike•The compensation is considered generous!•Eligibility and requirements tends to be

beneficiary to the players! (ex: 1 day vesting, early access allowed…etc)

•Average 10-year retiree earns: $180,000

Eligibility and Compensation

•Apply on all the players, coaches, trainers•Compensation based on “active service”

period and contract salary levels. •No specific formula. Benefits are

determined by group table( year, classes..)

•Accrual rules apply: Fixed retirement benefit (pre-setup) Assumed variable benefit

(performance)

Question!A 10+ years serving MLB veteran can actual receive an estimate annual payment close to the maximum amount allowed by law!

Q: What is the maximum allowed benefit in Defined Benefit Plan (Pension) that is restricted by law?

(A)$50,000

(B)$185,000

(C)$1,000,000

(D) MLB pension is out of this cap concern

(E) Why do I bother?

Question !

Compensation Cont.•Before 1970: Normal retirement age: 65•After 1970: decrease to 62•Monthly minimum:$1,000

Max out to $185,000 yearly (10+ years )•Payout method: whole life annuity with

option of endowment annuity for 120 payment guaranteed (subject to reduced half benefit)

Pension: Mortality Issue•According to the researches: Career length is inversely associated with

the risk of death, likely because those who play longer gain additional incomes, physical fitness, and training.

In addition: the life expectancy of MLB player is higher than other major leagues sports even than normal people.

Pension is real $!!

Compare to other Sports

Vesting schedule

Major plan type

Compensation Recent improved benefit

MLB 1 day Pension,401k

Dave Garcia(86)$92,000

Received $175,000(10+ years) Max. allowed by law!

NBA 3 years Pension, 401k

John Ezersky(84)$10,800

Post 65ers landed a 37 % increase in benefits

NFL 3 yeas Pension, 401k, annuity

Bob Clair(76)$36,000

25% negotiated increasing+ annuity plan

NHL 2 years DC plan, 401k

Christian Brown(77)$12,000

Teams Contributes $45,000(2+ years)

Investment Plan

•2nd major portion of Benefits plan•More of a hybrid plan•Pension committee decides amount of

contribution•Contribution is allocated to individual

accounts

Limitations

•Individual must accrue:▫At 60 days of service▫One or more quarters in a year of service▫Must have accrued in the year in which

contributions are made▫Allocation limit, Lesser of:

7% of salary, or $7500

Contributions

•Made to the suspense account on Nov. 15•Usually allocated the following March 31st

to members individual accounts•Amount based on total quarters of active

years of service•Members get amount per qtr. of service•Suspense acct. amount gets divided by #

of qtrs. of active service for all eligible members

Plan Administration• Administrator establishes and maintains

individual accts.• Pension Committee provides info. to admin.• Committee determines # of investment

funds Funds that could be available: money market

funds, equity, mutual, fixed income, guaranteed inv. Contracts, pooled inv. Funds established by insurance co., and insurance co. special accts. Fund.

• Members determine which funds to invest in• Members can periodically change portfolio

allocation

Member distribution of account

•Member can remove money from investment account if:▫Inactive for more than one year▫Becomes disabled▫Retires

•If member dies, distr. goes to beneficiary•If married, spouse is beneficiary•If single, anyone can be appointed

beneficiary

Health Plan

•General Health Plan•Optional Medicare Supplement•Visions and Dental

General Health Plan- Coverage

•Eligible Member▫Active List for 1+ Days▫60 Days of service for MLB ▫2 years of contract

•Wives, Dependents

General Health Plan- Coverage

•Examples▫Death, Divorce, Eligible Member enters

Medicare•Effect

▫Under 4 years of service 24 months continued coverage

▫Over 4 years of service Indefinite continuation

General Health Plan- Hospital Stays

•Costs▫100% Coverage▫Examples

Drugs, nursing costs, machine usage•Limitations

▫120 days ▫Semi private room

If a private room, plan will cover cost of semi private room + $20

General Health Plan- Outpatient•Examples

▫Prescription Drugs, Physician Services, Initial Prosthetics

•Staged Payment coverage▫$500 Deductible▫80% coverage for costs above $500▫Above threshold, plan pays 100%

$5,000 for individual $15,000 for family of four

Medicare Supplement

•Procedure▫Recalculate costs based on Supplemental

Plan▫Supplement pays difference between

medical coverage and calculated benefit•Staged Coverage

▫Similar to General Plan▫Thresholds raised

$10,000 for an Individual $30,000 for a family of four

Dental and Vision Benefits• Dental– 100% of all Routine Maintenance– 80% of Approved Charges procedures• Examples– Root canals, Orthodontics

• Limited to $5,000 • Vision– $75 per individual for Optometrist– $50 per individual for Glass Lenses– $75 per individual for Frames– $100 per individual for Contact Lenses

Health Plan is

ExtremelyImportantespecially for

the baseman!!!

Conclusion

•Considered “Standard” for any Sports League▫Not to say there aren’t improvements that

can’t be made but..

•At this point it’s the best, relatively

Conclusion

•Pension Plan▫Tied to salary, performance & years of

service Allows for players to maintain somewhat

relative lifestyle

•Encourages personal savings (IRA?) for Minor League, Low-level Major League and Mid-Level Major League Players

Conclusion

•Investment Plan•Allows for Major League Baseball to give

back some of the massive amount of Money it earns▫No Player Contribution▫Like a hybrid plan (individual

accounts/profit sharing)▫Pension Committee decides on $ amount

Conclusion

•Health & Welfare Plan▫Comprehensive for coverage ▫Generous coverage amounts▫Supplemental Medicare help

▫Extended Benefit Amounts 24 months for players with less than 4 years

service Life for players with more than 4 year service

Suggestions

•Two suggestions:

1. Automatic 401(k) plan▫ To help ensure responsible savings for

athletes▫ To help ensure Lower level players are

taken care of2. Life coverage for players whose careers

are cut short by injury

Thank you!

Questions?