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The Business of Hockey Discuss the financial and business aspects of the NHL. Topics may include the CBA, work stoppages, broadcast contracts, franchise sales, and NHL revenues.

Let's Talk Pensions! (NHL/NHLPA kind, that is)

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01-11-2013, 12:03 AM
  #1
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Let's Talk Pensions! (NHL/NHLPA kind, that is)

MOD: Previous discussion on pensions: http://hfboards.hockeysfuture.com/sh....php?t=1314839

the 'business trust' side of me is fascinated by the pension aspects of the CBA...i'm only kinda 'on the up' when it comes to NHL pension issues ... but am very interested in what they're doing w/ the pension under the new CBA.

G&M just published the following:

Still the ‘poor cousin,’ new CBA improves pension plan for average NHLers

http://www.theglobeandmail.com/sport...medium=twitter

Quote:
While the league has revealed few details about how the new pension plan will work, it has said it plans to create a new defined benefit (DB) pension plan, which is a traditional pension plan that pays a guaranteed level of income in retirement. The NHL currently has a defined contribution (DC) plan that operates similarly to an RRSP, with payouts varying depending on the performance of investments selected by the plan members.

...

The NHL previously had a DB pension plan for its members, but switched to a DC plan in 1986. Now it is planning to switch back at a time when it is rare for employers to create new DB pension plans and many are closing their plans and transferring employees to lower-risk DC arrangements that don’t lead to expensive shortfalls that must be funded by the employer. But players pushed for the plan as part of a trade-off for reducing salary caps and lowering their share of league revenue, calling the pension deal a centrepiece of their new contract.

The NHL has been the “poor cousin” of pension plans in pro sports, says pension lawyer Mitch Frazer. NHL players were eligible to earn a maximum of $50,000 (all currency U.S.) a year in 2012 after playing at least 160 games, while players in Major League Baseball need 43 days of service to begin to qualify for a pension benefit of $34,000 a year, and analysts say baseball can earn pensions of $200,000 annually with 10 years of service.
read the article - it's a very interesting one on a bunch of levels

...but do those who have more knowledge of these types of pension issues have anything they want to add - re amendments to the pension in general and how it is vs. the other major pro-sports?


Last edited by LadyStanley: 01-11-2013 at 11:31 AM. Reason: ...
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01-11-2013, 01:06 AM
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Originally Posted by UsernameWasTaken View Post
the 'business trust' side of me is fascinated by the pension aspects of the CBA...i'm only kinda 'on the up' when it comes to NHL pension issues ... but am very interested in what they're doing w/ the pension under the new CBA.

G&M just published the following:

Still the ‘poor cousin,’ new CBA improves pension plan for average NHLers

http://www.theglobeandmail.com/sport...medium=twitter



MOD read the article - it's a very interesting one on a bunch of levels

...but do those who have more knowledge of these types of pension issues have anything they want to add - re amendments to the pension in general and how it is vs. the other major pro-sports?
There's not a lot of detail right now, but going from "Defined Contribution" to "Defined Benefit" is a big deal. They're saying this is for the non-superstar players so it leads me to think they've lowered the number of NHL games required to get some kind of pension benefit - and since that benefit will be defined, the players can rest assured they will receive $X from their pension from the day they qualify to receive it, until they die.

So, hypothetically, a player might qualify for a $20,000 annual pension if they play in at least 50 NHL games. The pension would start a lot earlier than 65 as well - probably something like 5 years after their last NHL game or age 40 or something like that.

MLB has that short 43 day qualifying period. You play for 43 days and you're guaranteed a $35,000 pension for life. Also, you play 1 game in MLB and you get free health care for life. I think that's the gold standard for sports pensions. And Don Fehr was probably instrumental in forging those generous terms, so it will be interesting to see what he got from the NHL.

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01-11-2013, 07:07 AM
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Going from defined contribution to defined benefit is a big deal. When can they start collecting the money. How much is it that they can collect. Most of us have to wait until our late fifties at least.

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01-11-2013, 07:57 AM
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The one thing I saw was 10 yrs in the league gets them $200k for life starting at age 62.

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01-11-2013, 08:19 AM
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A new “defined benefit” pension plan will be established, at maximum benefits permissible under US law (currently $200,000 /year for life at age 62, with a minimum of 10 years of service). Benefits are reduced for service less than 10 years or taking benefits before age 62. In addition, players will still be able to make contributions to the defined contribution plan, by voluntary payroll deduction.
That is directly taken from Donald Fehr's letter to the NHLPA members (the players).

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01-11-2013, 11:21 AM
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Just to note that defined benefits isn't necessarily better than defined contribution. It simply changes where the risk lies. Defined beenfits the market risk lies with the employer while contributions the risk lies with the employee. Since most people are risk averse that would be beneficial, but depending on how the investments are handled and market conditons, a defined contribution may net you more money for retirement.

But it certainly is getting rare for a company to offer defined benefits anymore. Especially after the latest fiscal disaster and the effects defined benefits had on some sectors ie the auto industry.


Another caveat to this story is the differences in pension law between Canada and the US. The US allows a higher pension so players from Canada would receive the difference as a check that is taxable. OR something along those lines. Anyone know the details?

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01-11-2013, 11:32 AM
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Another caveat to this story is the differences in pension law between Canada and the US. The US allows a higher pension so players from Canada would receive the difference as a check that is taxable. OR something along those lines. Anyone know the details?
From previous discussion: http://hfboards.hockeysfuture.com/sh....php?t=1314839

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01-11-2013, 11:40 AM
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Originally Posted by cheswick View Post
Just to note that defined benefits isn't necessarily better than defined contribution. It simply changes where the risk lies. Defined beenfits the market risk lies with the employer while contributions the risk lies with the employee. Since most people are risk averse that would be beneficial, but depending on how the investments are handled and market conditons, a defined contribution may net you more money for retirement.

But it certainly is getting rare for a company to offer defined benefits anymore. Especially after the latest fiscal disaster and the effects defined benefits had on some sectors ie the auto industry.


Another caveat to this story is the differences in pension law between Canada and the US. The US allows a higher pension so players from Canada would receive the difference as a check that is taxable. OR something along those lines. Anyone know the details?
I was at a company that went thru this switch and have talked to numerous financial advisers ( off the record as it is their job to sell people on these things ) about the differences. Basically in their opinions there isn't a defined contribution pension plan anywhere that even comes close to making you the amount of money you need in a pension to give you ( the person relying on this pension ) the financial security you get from a defined benefit plan.

The DB plan I used to have paid me a pension based on the last 5 years of my salary multiplied by the number of years of service, but more importantly ( and this is the real important part ) it paid me until the day I died AND after that it paid my spouse ( if still around ) until the day she dies. The problem with DC plans is you are responsible for managing the money and yes, if by some chance you make your plan worth a lot of money, the unknown is the number of years you might live. With most DC plans there is a very good chance you are going to run out of money if you get lucky and live into your 90s. Not a worry with DB plans. It's not about the cash value of the plan, it's the security it gives you.

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01-11-2013, 06:47 PM
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Originally Posted by LadyStanley View Post
RenLavoieRDS 11:02am via Twitter for BlackBerry® Details of pension fund. Player with minimum of 10 years service will get $200 000 annually starting at 62.
Haha, you're kidding me right?

And this had to be part of the negotiations?

First off, most players don't last 10 years. So the majority of players will never qualify for pension. (Around 20% of players make it to 10 seasons).

Then.. the pension starts roughly 20 years after they retire and is peanuts compared to what they earned. Especially considering the only ones eligible are mostly elite players. Low level grinders don't last 10 years. Not to mention, the life expectancy of NHLers is lower then the general population due to the abuse they take.

I don't know why the pension plan even exists

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01-11-2013, 07:33 PM
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AIUI, there are lesser amounts of pension now available for players who reach 300 games (down from 400 in 2005 CBA).

(Guessing here....

800 games = ~10 years = $200k
600 games = $100k
400 games = $75k)

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01-11-2013, 07:56 PM
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Originally Posted by LadyStanley View Post
AIUI, there are lesser amounts of pension now available for players who reach 300 games (down from 400 in 2005 CBA).

(Guessing here....

800 games = ~10 years = $200k
600 games = $100k
400 games = $75k)
Well, regardless, the problem I see here is the pension plan doesn't serve a purpose. Generally a pension plan is designed to give a retirement benefit to the employee.

Here, the pension doesn't kick in until 20 years after retirement. At that point, a player is either going to have tons of money from good investments / planning, or they're going to be completely broke (and probably dead).

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01-11-2013, 08:34 PM
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Haha, you're kidding me right?

And this had to be part of the negotiations?

First off, most players don't last 10 years. So the majority of players will never qualify for pension. (Around 20% of players make it to 10 seasons).

Then.. the pension starts roughly 20 years after they retire and is peanuts compared to what they earned. Especially considering the only ones eligible are mostly elite players. Low level grinders don't last 10 years. Not to mention, the life expectancy of NHLers is lower then the general population due to the abuse they take.

I don't know why the pension plan even exists
Gill. Cleary. Hamrlik. Sutton. Hordichuk. Spacek. Belanger. Hannan. Kostopoulo. Torres. Pyatt. There's some. Now am just going by what TSN calls a season so that could be off slightly. But that should show that it's not just elite players who'll get this. While Hannan and Hamr got some decent contracts, most of those guys never really made tons.

Sure they don't get it till 62, but at least as they get older, they know they'll get something decent.

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01-11-2013, 10:23 PM
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Originally Posted by Riptide View Post
Gill. Cleary. Hamrlik. Sutton. Hordichuk. Spacek. Belanger. Hannan. Kostopoulo. Torres. Pyatt. There's some. Now am just going by what TSN calls a season so that could be off slightly. But that should show that it's not just elite players who'll get this. While Hannan and Hamr got some decent contracts, most of those guys never really made tons.

Sure they don't get it till 62, but at least as they get older, they know they'll get something decent.
There's a lot more than that. I think this pension plan is pretty good for the players.

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01-12-2013, 12:29 AM
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Originally Posted by Riptide View Post
Gill. Cleary. Hamrlik. Sutton. Hordichuk. Spacek. Belanger. Hannan. Kostopoulo. Torres. Pyatt. There's some. Now am just going by what TSN calls a season so that could be off slightly. But that should show that it's not just elite players who'll get this. While Hannan and Hamr got some decent contracts, most of those guys never really made tons.

Sure they don't get it till 62, but at least as they get older, they know they'll get something decent.
Still, I would say that those players would either have a nice nest egg built up by the time they're 62, or they'll be completely broke and would've been screwed a long time before 62. When you make millions of dollars there's very little in between there. There's players who invest their money wisely and players who blow it really fast.

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01-12-2013, 01:10 AM
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There's a lot more than that. I think this pension plan is pretty good for the players.
Absolutely there is. That was just a quick look at a couple of players who were not star players earning huge salaries.

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Originally Posted by Hockey Team View Post
Still, I would say that those players would either have a nice nest egg built up by the time they're 62, or they'll be completely broke and would've been screwed a long time before 62. When you make millions of dollars there's very little in between there. There's players who invest their money wisely and players who blow it really fast.
Hordichuk's best salary was 825k. Kostopoulo was 1.1m (his only year over 1m). Their total gross earnings are around 5.5m. Say at least half in taxes, agent fee's, PA dues, etc. How much do you think they've been able to put away? I'm sure every NHL player has some money put away. But the majority of players will have to work a job after the NHL (not because they want to... but because they need to). How much of a nest egg they build up will depend on their life style, and what they do once their retire from the game.

I just don't see how someone thinks that players should get their full pensions right after they retire. I don't get mine until ~54/55 (or rather I have to work till then to be eligible for a full pension). I think I have to be close to 60 to actually get it. Why should it be much different for these guys?

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01-12-2013, 04:32 PM
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Originally Posted by Riptide View Post
Absolutely there is. That was just a quick look at a couple of players who were not star players earning huge salaries.



Hordichuk's best salary was 825k. Kostopoulo was 1.1m (his only year over 1m). Their total gross earnings are around 5.5m. Say at least half in taxes, agent fee's, PA dues, etc. How much do you think they've been able to put away? I'm sure every NHL player has some money put away. But the majority of players will have to work a job after the NHL (not because they want to... but because they need to). How much of a nest egg they build up will depend on their life style, and what they do once their retire from the game.

I just don't see how someone thinks that players should get their full pensions right after they retire. I don't get mine until ~54/55 (or rather I have to work till then to be eligible for a full pension). I think I have to be close to 60 to actually get it. Why should it be much different for these guys?
I didn't see anyone say players should get their pensions when they retire.. I was simply stating that because of the huge time gap between retirement and receiving pensions it greatly diminishes the purpose of them.

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