Feeling The Financial Pinch

By Daniel Kaplan and Liz Mullen
Updated: April 14, 2009

NFL NEW YORK

— NFL owners voted late last month to allow teams to opt out of the league-run pension, retirement and 401(k) plans for club employees and coaches, according to four senior team sources and one person who deals with team employees.

Now teams can opt out of the plans or continue to participate to varying degrees. Prior to the vote, all clubs were required to participate fully in the plans. The league has made no announcement of the decision.

Team sources for this story wouldn’t allow their names to be used because they were not authorized to speak publicly about the decision.

The person close to team employees asked for anonymity for fear of reprisals from the clubs. Over the last few weeks, some clubs began to tell employees that they are opting out of the pension plan, sources said.

It is not clear how many teams may choose to opt out or change their plans. There are three benefit plans affected by the change: The 401(k) match, pensions, and the Supplemental Employee Retirement Plan.

“One or two teams notified their guys this change has been made,” said the person who deals with employees. “I think the alarming thing is no one had any forewarning that this was going to happen.”

“Head coaches didn’t know. General managers didn’t know and now, all of a sudden, here are some really good benefits that possibly could no longer be there.”

Clubs need to decide whether to make changes by about April 30 for the upcoming season, sources said. It is not clear how much money clubs contribute to employee benefits.

For league office employees, in the year ended March 31, 2008, teams contributed $18 million into 401(k) plan and the NFL pension plan programs for more than a thousand employees, according to Department of Labor filings.

The pension affected by the owners’ vote is called the NFL Club Employee Pension Plan. However, unlike the league office pension plan, the federal Form 5500 that details the club plan was not listed on www.freeerisa.com, a Web site that makes the pension forms available.

A league spokesman who provided the name of the employee pension plan wouldn’t provide the Form 5500 and would neither confirm nor deny that any decision on retirement plans had been made by owners.

In the NFL’s case, it may also be another signal to the NFL Players Association that times are tough and the union should consider compromising as the two entities enter difficult labor talks.

The pension change has been discussed for years, one team source said, but only came up for a vote at the annual meeting in Dana Point, Calif., in March. Another source said the change was brought up by the league office on behalf of the finance committee.

A source close to the league said the change was about club costs and was not posturing for the upcoming CBA negotiations.

The benefits change does not affect the players’ pensions, which are managed by the union, or the pensions of league office executives.

Any change to player benefits must be negotiated between the NFL Players Association and the NFL, since NFL players are unionized.

“We don’t want to be like GM,” said one of the team sources, referring to the troubled automaker whose pension liabilities have threatened to swallow the company.

While this source admitted using a bit of hyperbole, the point is to contain runaway liabilities, and not necessarily to limit year-over-year expenses. Indeed, another team source said there were some clubs underfunded on their pensions.

The NFL is an anachronism in offering the pensions, with most companies offering only to match 401(k) employee contributions.

Generally today only union and government employees enjoy pensions, with a few bloated exceptions like GM, said Gary Young, a pension lawyer with Herrick Feinstein.

“None of us live in a vacuum and it doesn’t sounds like this is a mean-hearted decision, but one about economic viability and vitality,” he said.

In sports, the NFL is not alone in collectively managing team pension systems. MLB also has a similar plan, though three to five teams have opted out and offer comparable benefits, said MLB Chief Financial Officer Jonathan Mariner.

NBA teams are required to make pension contributions only for coaches. The NHL requires pension coverage for certain team-level employees, a spokeswoman said.