Last night the Denver Broncos won Super Bowl 50. For Denver’s starting quarterback Peyton Manning, this was almost certainly his last game before retirement. Once Manning enters retirement, there is one thing he can count on: his defined benefit pension.
NFL players participate in the Bert Bell/Pete Rozelle NFL Player Retirement Plan. NFL players are fully vested in the plan after three years on active roster or injured reserve status. The benefit amount is then based on the number of credited seasons played. In 2014 the average annual NFL player’s pension benefit was $43,000.
The NFL pension plan was funded at 55.9 percent in April 2014. This is a low funding ratio, but there’s a good reason for it. Following the lock-out in 2011 and the negotiation of a new collective bargaining agreement (CBA), the NFL Players’ Association fought for an increase in pension benefits for retired players. This took the plan down to a funded status of 48 percent in 2013, but the NFL has agreed to commit $620 million over ten years to reach full funding by 2021. The plan should hit 80 percent funded by April 2017.
The NFL is not the only professional sports league with a defined benefit pension plan for its retired players. MLB, the NBA, and the NHL all offer pension plans to players. Baseball’s is the oldest with its plan existing since 1947; it is also consistently well-funded at 80 percent. The NHL’s is the newest, started in 2012, and also extremely well-funded at 144 percent. Finally, the NBA’s pension plan is funded at 53 percent and NBA teams are contributing more to bring the funded status up to 80 percent.
One final thing worth noting: during the 2011 lock-out and the contentious negotiations over the new CBA, the NFL team owners hoped to close the pension plan for players. Instead, the players fought not just to keep the plan open, but to increase the benefit for already retired players. Dale Hall, managing director of research for the Society of Actuaries in Chicago, said it best: “It helps to emphasize that football players and others all retire at some point, and it’s important that they at least have some retirement (savings). There is the comfort of knowing that at least there’s this minimum.”
The players’ support for each other speaks both to the benefit of being in a union and also to the recognition among the players that a defined benefit pension is the best way to prepare for retirement.