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Issue With NFL & Refs is Portfolio Management


Since the 1974 the NFL refferies’ have been getting retirement benefits via a pension plan. Business owners (in this case NFL team owners) hate pension plans. The NFL wants to convert the referee defined benefit plan to a 401k. The refs don’t want this. Who would? I’d much rather have a guaranteed pension than risk running out of money in a 401k plan.

First, the Numbers

NFL refs make around $4000 to $8000 per game. That’s $64,000 to $128,000 a year. They also get other perks. I think they deserve more, but that’s not the big issue here. The big issue with the referee lockout is the retirement benefits refs get.

The NFL puts $40,000 in 401k/pension benefits per year towards each referee. That’s a big nut. The NFL is trying to change that and put $12,750 towards each ref’s retirement. The refs want the number at $38,500.

So the refs want a premium retirement plan — like finance guys get. Forty grand a year. I can see why they want this, they’ve had it for a while and don’t want it to change. Unfortunately for the NFL owners, that’s a lot of money each guy is getting. Plus the owners have the risk of the plan to deal with — which I feel is the big issue here.

I’ll Take the Pension

With a 401k plan, the risk is on you. You better pick good mutual funds so your money grows. If you watch the market too much and get shook out (sell your funds) you will probably sell when the market’s really low and buy back in after its gone up. Do this twice and you could lose half your money. Lose half your money and you’ll probably be risk-averse and get out of the market entirely (so your money stays down). Or you could play it ultra-safe from the beginning and just make the 1-2% money market funds/conservative investments make. And let inflation eat away.

Pensions are great for employees. Just retire, plan your vacations, and spend time with your family. No money worries. You know each month that check’s going to be in the mail — like clockwork. The longer you live the more you get paid.

For a company, the pension stinks. It takes a lot of work to grow the money conservatively, all the time making sure there’s enough there to last everyone’s lifetimes. Once the employee retires you aren’t off the hook, you have to keep the pension going indefinitely. As long as the former employee and/or spouse lives.

Sharek’s Take

I’ve known business owners with pension plans, its a big worry in their business. A big one. If I were an NFL owner, I too would insist on a 401k plan. No doubt.

If I were the mediator I would tell the refs they need to accept the 401k plan and just understand that pension plans aren’t around like they used to be. Once the refs understand and agree to this then they can negotiate a better dollar amount that will be contributed for each ref every year.

David Sharek David Sharek is stock portfolio manager and CEO of DavidSharek.com. David believes a company's profits ultimately drive the price of its stock. His book The School of Hard Stocks can be found on Amazon.com.