MLB Pension Plan

Major League Baseball Benefit PlansPresented by: Andrew HillBlair HuangTed NocellaMike Wahls1IntroductionComprehensive 3 Part Benefit Plan

Part 1: Standard Pension PlanPart 2: Investment PlanPart 3: Health & Welfare Benefits2IntroductionAs a whole,Major League Baseballs Plan is:Covers more membersCovers them quickerGives them more benefits throughout lifeThan the other Major Sports Leagues

MLBPA deserves much of the credit for this

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MLB Pension PlanImplemented since 1947Expansion in 1966 by Marvin MillerGain more concession on 1972 strikeThe compensation is considered generous!Eligibility and requirements tends to be beneficiary to the players! (ex: 1 day vesting, early access allowedetc) Average 10-year retiree earns: $180,000

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Eligibility and CompensationApply on all the players, coaches, trainersCompensation 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)

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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? Question !6

Compensation Cont.Before 1970: Normal retirement age: 65After 1970: decrease to 62Monthly 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)

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Pension: Mortality IssueAccording to the researches: Career length is inversely associated with the risk of death,likely because those who play longer gainadditional incomes, physical fitness, andtraining.In addition: the life expectancy of MLB player is higher than other major leagues sports even than normal people. Pension is real $!!

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Compare to other SportsVesting scheduleMajor plan typeCompensation Recent improved benefitMLB1 dayPension,401kDave Garcia(86)$92,000Received $175,000(10+ years) Max. allowed by law!NBA3 yearsPension, 401kJohn Ezersky(84)$10,800Post 65ers landed a 37 % increase in benefits NFL3 yeasPension, 401k, annuityBob Clair(76)$36,00025% negotiated increasing+ annuity plan NHL2 yearsDC plan, 401kChristian Brown(77)$12,000Teams Contributes $45,000(2+ years)

9Investment Plan2nd major portion of Benefits planMore of a hybrid planPension committee decides amount of contributionContribution is allocated to individual accounts

10LimitationsIndividual must accrue:At 60 days of serviceOne or more quarters in a year of serviceMust have accrued in the year in which contributions are madeAllocation limit, Lesser of:7% of salary, or$750011ContributionsMade to the suspense account on Nov. 15Usually allocated the following March 31st to members individual accountsAmount based on total quarters of active years of serviceMembers get amount per qtr. of serviceSuspense acct. amount gets divided by # of qtrs. of active service for all eligible members12Plan AdministrationAdministrator establishes and maintains individual accts.Pension Committee provides info. to admin.Committee determines # of investment fundsFunds 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 inMembers can periodically change portfolio allocation

13Member distribution of accountMember can remove money from investment account if:Inactive for more than one yearBecomes disabledRetiresIf member dies, distr. goes to beneficiaryIf married, spouse is beneficiaryIf single, anyone can be appointed beneficiary14Health PlanGeneral Health PlanOptional Medicare SupplementVisions and Dental15General Health Plan- CoverageEligible MemberActive List for 1+ Days60 Days of service for MLB 2 years of contractWives, Dependents16General Health Plan- CoverageExamplesDeath, Divorce, Eligible Member enters MedicareEffectUnder 4 years of service24 months continued coverageOver 4 years of serviceIndefinite continuation17General Health Plan- Hospital StaysCosts100% CoverageExamplesDrugs, nursing costs, machine usageLimitations120 days Semi private roomIf a private room, plan will cover cost of semi private room + $2018General Health Plan- OutpatientExamplesPrescription Drugs, Physician Services, Initial ProstheticsStaged Payment coverage$500 Deductible80% coverage for costs above $500Above threshold, plan pays 100%$5,000 for individual$15,000 for family of four19Medicare SupplementProcedureRecalculate costs based on Supplemental PlanSupplement pays difference between medical coverage and calculated benefitStaged CoverageSimilar to General PlanThresholds raised$10,000 for an Individual$30,000 for a family of four20Dental and Vision BenefitsDental100% of all Routine Maintenance80% of Approved Charges proceduresExamplesRoot canals, OrthodonticsLimited 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 Lenses21Health Plan isExtremelyImportantespecially forthe baseman!!!

22ConclusionConsidered Standard for any Sports LeagueNot to say there arent improvements that cant be made but..

At this point its the best, relatively

23ConclusionPension PlanTied to salary, performance & years of serviceAllows for players to maintain somewhat relative lifestyle

Encourages personal savings (IRA?) for Minor League, Low-level Major League and Mid-Level Major League Players24ConclusionInvestment PlanAllows for Major League Baseball to give back some of the massive amount of Money it earnsNo Player ContributionLike a hybrid plan (individual accounts/profit sharing)Pension Committee decides on $ amount25ConclusionHealth & Welfare PlanComprehensive for coverage Generous coverage amountsSupplemental Medicare help

Extended Benefit Amounts24 months for players with less than 4 years serviceLife for players with more than 4 year service26SuggestionsTwo suggestions:

Automatic 401(k) planTo help ensure responsible savings for athletesTo help ensure Lower level players are taken care ofLife coverage for players whose careers are cut short by injury27Thank you!Questions?28