The NFL’s Performance-Based Pay Plan

Fourth and Goal would like to go on record in support of the NFL’s Performanced Based Pay system for active players.  As we have mentioned before, this is one of the benefits that comes right off the top of the NFL Salary Cap.  Approximately $109.5 million of performance-based pay was distributed to players during the 2009 season. Last year over $750 Million  in total benefits were funded.  As you know, a majority of that money is going to the post-1993 players for additional benefits such as the Second Career Savings Plan and the Annuity Plan.  Just those two benefit Plans alone have more assets than the NFL Pension Plan.  It should be noted that one third of the money in the Second Career Savings Plan is money that was set aside by current vested players.  ie, for every $11,000 contribution (last years max amount) that a player put into the Plan,   the Owners were required to match it with twice as much money, in this case $22,000 for a total annual amount of $33,000 which can be invested in a variety of stock / mutual funds.

When the Plan was first established, there were a number of players that didn’t even bother to take advantage of it.  Why didn’t they?  Let’s face it, this small benefit is not going to make much of a difference in the bank account  of the average starter who is making close to 3 million annually, but you can bet your bottom dollar that for the average  pre-1993 retired player, something like this could have made a huge difference if the monies had been put into the Pension Plan.

The NFLPA eventually made the player’s contribution to the Second Career Savings Plan a mandatory deduction from their paycheck – unless they specifically opted out.

It would be interesting to see if any players have opted out.  That would not be a wise decision, unless they know some other way to get  a 200% return on their investment - and that’s even before the interest they earn on the account is factored in!

At Fourth and Goal, we believe these other “retirement type” benefit dollars should have gone into the Pension Plan to help strengthen the Plan and assist ALL vested players – including the active vested players.   Right now the Pension Plan is underfunded. You will be receiving additional information on this, if you haven’t already.

As you know, Fourth and Goal drafted a letter that 78 Hall of Fame players signed asking veteran players to institute a Rookie Salary Cap similar to what the NBA has in place.  With the money that is freed up from doing that, it is estimated that $200 million could be available for veteran players and $100 million for improving retired player pensions.  How that money is distributed to veteran players should be modeled after the Performance Based Pay system.

We call on the NFLPA and the NFL Owners to begin serious discussions on instituting the Rookie Salary Cap and determining the specific formula for distributing the funds to veteran players  and former players via the NFL Pension Plan.

I have include a list (below) of the top Top 25 Performance-Based Pay recipients. Players are awarded for playing time based upon their salary level.  The Viking’s John Sullivan, a 2008 sixth-round draft pick from Notre Dame, earned $397,555 in additional pay. Players have been paid nearly $600 million during the eight seasons of the performance-based pay program, which was created as part of the NFL’s 2002 collective bargaining agreement extension.  The program created this fund as a supplemental form of player compensation based on a comparison of playing time to salary. The fund is only paid in league years in which a salary cap exists. Because 2009 was the last year under a salary-cap system, performance-based pay will not continue in the 2010 league year, the final league year of the current CBA. Under the performance-based pay system, players become eligible to receive a bonus distribution in any regular season in which they play at least one official down. Performance-based pay is computed by using a “player index.” To produce the index, a player’s regular-season playing time (total plays on offense, defense and special teams) is divided by his adjusted regular-season compensation (full season salary, prorated portion of signing bonus, earned incentives). Each player’s index is then compared to those of the other players on his team to determine the amount of his pay.