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

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,

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

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  1. Major League Baseball Benefit Plans 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

  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 • 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 • 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

  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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