Major League Baseball Benefit Plans Andrew Hill Blair Huang 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 ! 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? $50,000 $185,000 $1,000,000 MLB pension is out of this cap concern Why do I bother?

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 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 Staged Coverage 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 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 Extremely Important especially 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: Automatic 401(k) plan To help ensure responsible savings for athletes To help ensure Lower level players are taken care of Life coverage for players whose careers are cut short by injury

Thank you! Questions?