NHL Players Score New Pension Plan
The defined contribution plans, created during the last league lockout in 2005, will be restructured into voluntary contribution plans and neither plan will be terminated.
Players taking to the ice in a shortened National Hockey League season will have their own defined benefit plan.
The new plan was included in the 10-year collective bargaining agreement reached Jan. 6 between the NHL and the National Hockey League Players' Association. The league's Board of Governors approved the agreement on Jan. 9 and the players voted overwhelmingly to ratify the deal Jan. 12, ending a four-month lockout. The season, which was originally slated to start in early October, was scheduled to begin Jan. 19.
The league and NHLPA now turn to dealing with the nuts and bolts of the new Taft-Hartley plan, to be administered by a benefits committee comprising three or four representatives of the NHL and the players' association, said Alex Dagg, the union's director of operations based in Toronto.
Through an e-mail from John Dellapina, NHL spokesman, league CFO Craig Harnett in New York confirmed the plan will be jointly administered with the players' association through the committee. Neither Hartnett nor the NHL would provide further details or comment.
League players previously had two defined contribution plans—the National Hockey League Retirement Plan (United States), New York, and the NHL Club Pension Plan and Trust, Toronto. The U.S. plan, a 401(k), had $22.6 million in assets as of June 30, 2011, according to the league's latest Form 5500 filing. The size of the Canadian plan could not be learned.
The DC plans, created during the last league lockout in 2005, will be restructured into voluntary contribution plans and neither plan will be terminated, Dagg said.
Players were locked out by the league in late September when negotiations for a new collective bargaining agreement broke down. Although negotiations before and during the lockout centered on sharing of hockey-related revenue, the pension plan was "the centerpiece of the deal for the players," according to Winnipeg Jets defenseman Ron Hainsey, who took part in negotiations. Hainsey was quoted in an interview on the NHLPA's website when the tentative agreement was reached.
The league's 30 teams will contribute to the plan, although total contributions will be based on the players' share of overall league revenue, so the amount won't always be the same depending on overall player salaries. The new agreement calls for players to get half of all league revenue; that's down from the 54 percent to 57 percent range players received under the 2005 agreement. The league's salary cap also was reduced, to $63.4 million per team in 2013-14 from this season's $70.2 million.
John McGowan Jr., Cleveland-based partner at the law firm of Baker & Hostetler L.L.P. who has advised the National Football League Management Council on pension issues, said that although the assets for contributions are budgeted as part of the 50 percent players' share of revenue, the assets themselves are from the clubs and players would not contribute to the plan.
Still to be resolved are governance issues for the new plan, Dagg said, including the amount of contributions, asset management and tax issues.
What makes the issues that remain so complex is that seven of those NHL clubs are in Canada, which has different tax and pension rules than the U.S., Dagg said. "It's very complicated because it (the new defined benefit plan) covers both players in Canada and the United States, and we have to adhere to tax rules in both countries as well as U.S. and provincial (Canada) pension rules," she said. "In Canada, pension rules for these kinds of plans are provincial."
She said the benefits committee ultimately would determine whether RFPs would be issued for investment consultants, money managers or other service providers, although neither the league nor the union is close to making that decision. "We'll need to work with the league on all these issues," she said. "The trust agreement to create the plan is still in discussion," because the agreement approved by both sides only established the framework for the plan.
Dagg said the plan would more closely resemble a Taft-Hartley plan run by Major League Baseball because one of its clubs, the Toronto Blue Jays, is based in Canada. The $2.04 billion Major League Baseball Players Pension Plan is based in New York.
Although much of the NHL pension plan details still have to be ironed out, McGowan said the tax issues to be dealt with between U.S.- and Canadian-based clubs probably already have been studied. "Both parties have looked at the U.S.-Canada Income Tax (Convention)," he said. "They know what the tax issues are. Tax results are predictable."
Specific tax issues to be studied are the deductibility of contributions by clubs, their applicability to employment taxes and the ability to defer taxes on player benefits until they are paid out.
Although clubs would be responsible for contributions to the plan, McGowan said, those assets might not come directly from club coffers. In the NFL, for example, contributions to the Bert Bell/Pete Rozelle NFL Player Retirement Plan, New York, are funded through television revenue allocated to each of the league's 32 teams. The plan had about $1.4 billion in assets as of March 2012, the latest data available, according to the website of the NFL Players Association. And in baseball, contributions use allocations from the proceeds of each year's All-Star Game, he said.
McGowan thought the NHL clubs would use TV revenue received from the league's contracts to fund their contributions. According to league and network sources, the NHL has a contract with NBC Sports Group to get $2 billion over 10 years for U.S. television and media rights through the 2020-21 season.
In Canada, the Canadian Broadcasting Corp. paid $600 million over six years for the rights to "Hockey Night in Canada." That contract with the NHL expires in 2014.
"Those TV contracts are a reliable funding source," McGowan said. "The NFL uses it, and probably the NHL will, too."