SportsProf

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Wednesday, May 13, 2009

The NFL and the Pension Plan Decision: A Study in Bad, Unintended Consequences

USA Today has a good article about the NFL's decision to alter the pension landscape for employees of teams (assistant coaches, front office personnel). While intended to save money and avoid untenable pension liabilities (something which state and local governments should spend some time on now), this particular plan could have unintended consequences -- compelling long-time assistant coaches to quit and take their retirements now or else risk losing what they've accumulated and accepting far less should they wish to continue on their jobs. You'll have to read the whole thing to get the flavor, but suffice it to say that some key long-time assistants might have to leave their teams if they want the retirement that they have worked hard for. If they stay, they could be putting their hard-earned retirements at risk.

It's hard to believe that the NFL wants this to happen, unless the powers that be believe the following: 1) there are some long-in-the-tooth assistants who need to retire to make room for up-and-comers; 2) the league needs to put a terminal cap on these assistants' pensions to prevent them from accruing even more benefits; or 3) look, other companies have had early retirement packages, and while the NFL's message isn't as eloquent or thoughtful, what the league has done in practice is the same thing and people will just have to lump it, because in the new economics these things will happen.

My guess is that when the owners were presented with this plan, they jumped at it with alacrity because they saw the savings. Look, many teams have cut front-office staff, and the league has done so too. I confess I don't know when season-ticket renewals went out but assume that they did so after last season, so most teams have solid season-ticket levels, although a) there probably are teams that continue to need to sell tickets and b) advertising revenue has to be down. Therefore, the league, like every other business, explored ways to save money, so they jumped at this opportunity.

But did they consider the effect that this plan would have on this type of employee. They might have considered the front-office employees (and many in the working world would jump at the chance to accept an opening in a sports' teams front office, and there is plenty in the talent pool right now to replace retirees, especially as jobs that require much less of a unique skill than, say, coaching an offensive line). But with assistant coaches, let's face it, while there are many at other pro teams and in the college ranks who would jump at the chance to be an NFL assistant, there are some assistants with unique skills (like the guys coaching the Colts' offense) that will be very hard to replace. Yet, under the new structure, those guys might have no choice but to retire.

The lesson to be learned here if you're making decisions for a business is to encourage those whom you charge to create solutions like these to speak truth to power and pound the problem hard for unintended consequences. Because I doubt that the Colts would want to save a million bucks on pension contributions if that meant turning a Super Bowl contender into an 8-8 also ran.

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