Data & Research February 5, 2016

A Look at Retirement Benefits for NFL Players

Word is this Super Bowl will be Broncos quarterback Peyton Manning’s last game before retiring.
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With the Super Bowl this weekend, no doubt most players aren’t thinking about their retirement benefits.

However, as the word is that this Super Bowl will be Broncos quarterback Peyton Manning’s last outing before retiring, at least he’ll be thinking about it after the big game.

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The Society of Actuaries (SOA) has done a study about the National Football League’s (NFL’s) multiemployer defined benefit (DB) plan. According to the report, the plan considers age 55 to be the standard retirement age. If a player waits until later to start his payments, his benefit is actuarially increased accordingly.

The NFL also offers a defined contribution (DC) retirement plan, but there are penalties for early withdrawals before age 59 1/2.

Given the young ages at which NFL players retire—Peyton Manning is 39—this means there are many years before they will receive benefits. Let’s hope that players have invested a large portion of their enormous salaries to use during this interim period. However, a study last year found initial bankruptcy filings among NFL players begin very soon after retirement from the game and continue at a substantial rate through at least the first 12 years of retirement.

As of April 1, 2014, the most recent publicly available data, the NFL multiemployer plan had $1.6 billion in assets to cover $2.9 billion of benefit liabilities—making it 55% funded. Per Pension Protection Act (PPA) zone status, this puts the plan in the yellow, or endangered, status.

However, Dale Hall, managing director of research with the SOA in Shaumburg, Illinois, tells PLANSPONSOR, the funded status improved from 48% in 2013, because the NFL is taking some big steps and making very large contributions—well in excess of benefits being earned—to get the plan fully funded. “There is information that indicates the funded status will be near 70% [for] 2015,” he says.

Hall says there are 21 benefits offered to NFL players per the collective bargaining agreement (CBA). A look at the CBA shows players are offered extended post-career medical and dental benefits, a disability plan, long-term care insurance and neuro-cognitive disability benefits.

Data & Research February 4, 2016

Americans Value Design, Utility of 401(k) Plans

Households oppose changing tax incentives for retirement saving, says an ICI survey.
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Nearly three-quarters of American households expressed confidence in the ability of 401(k) and other defined contribution (DC) plan accounts to help individuals meet their retirement goals, a new Investment Company Institute (ICI) survey finds.

Confidence was higher among households with retirement accounts, and most households with DC plan accounts appreciate the savings and investing features of their plans. Consistent with past ICI research, ICI found that Americans overwhelmingly oppose changing the current tax incentives for retirement saving.

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In the eighth annual update of “American Views on Defined Contribution Plan Saving” ICI reported that two-thirds of survey respondents with DC plan accounts—young and old—agreed that saving from every paycheck made them less worried about stock market performance. Nine out of 10 DC plan-owning households agreed these plans helped them think about the long term and made it easier to save. With periodic saving from each paycheck into their retirement plans as investment prices fluctuate, plan participants are “dollar-cost averaging,” and the value of investments they purchase in a down market rises when stock and bond markets recover.

The study suggests that DC plan design encourages workers to save and invest for retirement on a regular basis, according to Sarah Holden, ICI’s senior director for retirement and investor research. “Most DC plan-owning households indicated payroll deduction made it easier to save,” Holden says. “They also valued choice in, and control of, their DC plan investments.”

NEXT: Americans favor tax advantages of DC plans

Eighty-eight percent of households disagreed with the idea that the government should remove the tax advantages of DC accounts, and 90% disagreed with reducing the amount that individuals can contribute to DC accounts. These percentages are unchanged from a year ago.

Even among households that do not own DC accounts or individual retirement accounts (IRAs), more than eight in 10 rejected the idea of taking away or reducing the current tax treatment of DC accounts. About eight in 10 households with DC accounts cited the tax treatment of their retirement plans as a big incentive to contribute.

Among households expressing an opinion in the survey, 90% had favorable impressions of 401(k) and other DC plans. Nearly all DC account-owning households valued design features such as choice and control over investments.

U.S. households, whether they owned retirement accounts or not, continued to express confidence in DC plans’ ability to help individuals meet their retirement goals. Eight in 10 households owning DC accounts or IRAs indicated such confidence. Even among households without a DC account or IRA, three in five reported having this measure of confidence.

“Our survey consistently finds that Americans strongly support keeping current tax incentives for retirement saving because all workers, regardless of their income, benefit from this current tax treatment,” says Paul Schott Stevens, president and chief executive of ICI.

ICI’s study surveyed more than 3,000 Americans for their views on DC retirement account saving, reactions to proposed policy changes, and confidence in 401(k) and other DC plan accounts. The survey was conducted from mid-November through mid-December; results were weighted to be representative of U.S. households by age, income, region, and education level.

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