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Major League Baseball Benefit Plans Andrew Hill Blair Huang

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Presentation on theme: "Major League Baseball Benefit Plans Andrew Hill Blair Huang"— Presentation transcript:

1 Major League Baseball Benefit Plans Andrew Hill Blair Huang
Presented by: Andrew Hill Blair Huang Ted Nocella Mike Wahls

2 Introduction Comprehensive 3 Part Benefit Plan
Part 1: Standard Pension Plan Part 2: Investment Plan Part 3: Health & Welfare Benefits

3 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

4 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

5 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)

6 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?

7 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)

8 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 $!!

9 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)

10 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

11 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

12 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

13 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

14 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

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

16 General Health Plan- Coverage
Eligible Member Active List for 1+ Days 60 Days of service for MLB 2 years of contract Wives, Dependents

17 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

18 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

19 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

20 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

21 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

22 Health Plan is Extremely Important especially for the baseman!!!

23 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

24 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

25 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

26 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

27 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

28 Thank you! Questions?

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