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Cypen & Cypen
FEBRUARY 15, 2007

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001


Pension Benefit Guaranty Corporation published a notice on February 8, 2007 in 72 FR 60112 entitled “Required Interest Rate Assumption for Determining Variable-Rate Premium for Premium Payment Years Beginning in January 2007.” The notice informs the public of the interest rate assumption to be used for determining the variable-rate premium under the Pension Benefit Guaranty Corporation’s regulation on premium rates, for premium payment years beginning in January 2007. This notice revises a previously-published notice to reflect the recent publication by the Internal Revenue Service of updated mortality tables. This interest rate assumption, which is 5.75%, is equal to 100% of the 5.75% composite corporate bond rate for December 2006. The interest rate assumption can be derived from rates published elsewhere, but is published in the notice for the convenience of the public. Interest rates are also published on PBGC’s website,


A while back we did a piece on pension plans offered by major sports leagues (see C&C Newsletter for March 31, 2005, Item 2). Here is an overview of major sports leagues’ pension plans, with a couple of additions:


Major League Baseball. MLB has a defined benefit plan that bases benefits upon when and how long an athlete played. Current players with 10 years or more service are to receive $180,000 a year beginning at age 62. Players who did not play 10 seasons and those who played before 1992 receive less money. The MLB pension plan was in the first collective bargaining agreement in 1968. Originally, a player had to have 5 credited seasons of service time to become vested. That requirement was lowered to 4 years, and today a player need only be on a major league roster for 43 days to accrue pension benefits.

National Basketball Association. The NBA pension plan is a DB program established in 1965. Based on retirement at age 62, current players would receive $12,400 annually for each year of service with a maximum of $124,000. Players must play 3 seasons to become vested. However, those who played before 1965 still receive $200 per month for each season played.

National Football League. The NFL pension system, which began in 1962, pays retired players according to a formula that includes how many seasons played and when they were played. As of last year, players were to receive $200 a month for each season played before 1982, $230 a month for each season played between 1982 and 1992, $240 for 1993 and 1994, $285 for 1995 and 1996, $330 for 1997 and $425 per month for each season played between 1998 and today. So, a player who played 6 seasons between 1998 and 2003 would receive a monthly check for $2,550, payable at age 55. A player who incurs a substantial injury that is a significant factor in causing his retirement from football is entitled to 100% of his monthly pension payment (with a minimum of $1,000) for 7½ years. (When you have time, Google “Mike Webster,” the late, great Steeler, and you will find out just how well the NFL treats former players.)

National Hockey League. Established in 1947, the NHL has a defined contribution plan that establishes an individual account for each player, which specifies a payment each year. Teams contribute to an account after the first season, but a player does not vest until he has been on an NHL roster 160 games (about 2 years). A player on the roster for 160 games or more receives the maximum contribution allowed under U.S. tax law, $45,000 in 2006. Normal retirement age is 45. League officials say it is impossible to determine how much players will receive when they begin collecting, because it depends on variables such as total amount contributed and investment rate of return. In terms of disability provisions, NHL players have guaranteed contracts. Players also have some career-ending insurance as part of their rights under the collective bargaining agreement.

Here are two new entries:


PGA Tour. The PGA Tour first established a retirement plan in 1983. Today, there are two separate programs. The first, called the “cuts” plan, puts money away for a player’s retirement according to the number of cuts he makes during a given season. As long as a player appears in 15 events per year, he gets a certain amount of money for each cut made. Last year, making a cut was worth $3,658. Double that amount for each cut made beyond the fifteenth. Players can begin taking money out of the program at age 50 if they have stopped playing competitively. Otherwise, they can take money at age 60. The second program used to be tied to where a player finishes on the money list. But starting this year, it will be tied in with the tour’s new playoff-style championship. The top 150 players in the FedEx Cup standings will receive contributions toward retirement, and winner of the cup will get $10 million in deferred compensation toward retirement. Out of the second program, players can begin receiving money at age 45 if they stop playing competitively. There are also early disbursement provisions for hardships. (Although tour officials do not discuss how much money a specific player might accumulate under the programs, a 2001 estimate said that Tiger Woods could end up with $300 million!)

ATP Men’s Tennis. The ATP retirement plan started in 1990 and includes about 900 current contributing players and retired players. Players become vested after five years. Based on the number of tournaments played, the ATP determines each year the 125 singles players and 40 doubles players who are eligible to receive a retirement plan credit. Those players receive a contribution to their retirement account for the year -- between $9,000 and $9,500 per year -- and receive one year of credit toward the five credited years needed to become vested. Three percent of the prize money at tournaments goes to fund the retirement plan. At age 49, players can elect to postpone their benefits or begin receiving them at age 50. If benefits start at age 50, they continue for 20 years. Players can postpone benefits for up to 10 years, and then receive them for as many years as they want. The last payment must be during the year when they turn 70. The ATP pension plan no longer has a hardship request for players who become disabled through injury.

Thanks to the Kane County (Illinois) Chronicle for these interesting tidbits.


Saying that it expects Federal programs to perform well and better every year, the Federal Government has created a new website that lists 977 programs, and assesses their performance. The performance rating indicates how well a program is performing, so the public can see how effectively tax dollars are being spent. tells you whether or not a program is performing. There are three ratings: Effective (programs set ambitious goals, achieve results, are well-managed and improve efficiency); Moderately Effective (set ambitious goals and are well-managed); and Adequate (need to set more ambitious goals, achieve better results, improve accountability or strengthen management practices). Check out the site at


The United States Government Accountability Office’s audits and evaluations identify Federal programs and operations that, in some cases, are high risk due to their greater vulnerabilities to fraud, waste, abuse and mismanagement. In recent years, GAO has also identified high-risk areas to focus on the need for broad-based transformations to address major economy, efficiency or effectiveness challenges. Since 1990, GAO has periodically reported on government operations it has designated as high risk. Since July 2003, Pension Benefit Guaranty Corporation has been listed as high risk, facing threat of terminations of large, unfunded pension plans and voluntary termination or freezing of plans. In its January 2007 update, PBGC remains at high risk, despite Pension Protection Act of 2006 provisions designed to shore up pension funding. PPA’s impact on PBGC’s $18.1 Billion deficit is uncertain.


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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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