1.
PBGC VARIABLE-RATE PREMIUM WILL RISE TO 5.75% AS OF JANUARY
2007:
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, http://www.pbgc.gov.
2. MORE ON
MAJOR SPORTS PENSION PLANS:
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.
3. EXPECT MORE:
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. Expectmore.gov
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 http://www.expectmore.gov.
4. PBGC AT “HIGH
RISK”:
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.
5. QUOTE OF THE
WEEK:
“Work only half a day. It makes no
difference which half -- the first 12 hours or the last
12 hours.” Kemmons Wilson (founder of Holiday Inns) |
