NFL retirement system not as bad, or good, as argued

Union chief Gene Upshaw, commissioner Roger Goodell and Mike Ditka made it clear before Congress that the NFL's pension system is far from a happy compromise. AP

The treatment of retired NFL players took center stage in Congress Tuesday as NFL commissioner Roger Goodell, NFLPA executive director Gene Upshaw and others testified before the Senate Committee on Commerce, Science, and Transportation. The interests of former players were championed by two Hall of Fame players, Mike Ditka and Gale Sayers and others.

Are former NFL players treated poorly by their retirement system, or have only a handful of exceptional, well-publicized cases muddied public attitudes towards an otherwise functional system?

For starters, consider why NFL players have a retirement system, which effectively includes a pension plan and a disability plan.

Like any pension plan, the NFL's is designed to promote lifetime financial security for employees. It does so by deferring a portion of a player's income to his retirement years and by obligating the NFL to contribute additional funds for those same years. By implication, a pension system recognizes that employees often fail to save enough of their earnings to account for future expenses.

For a number of reasons, many NFL players will eventually, and sometimes unexpectedly, rely on their pensions for sustenance. The most salient reason may be the often difficult transition from well-paid NFL player to less-profitable and less-glamorous "ex" or "retired" NFL player. Indeed, the average NFL career lasts only three and a half seasons, usually occurring between ages 21 to 25, and most players earn less than the average NFL salary, about $1.1 million. Players need to play at least three seasons in the NFL to satisfy the pension's vesting requirement, and age 55 serves as the NFL's designated retirement age (although players can tap in earlier at reduced payments).

While ex-NFL players can always seek employment in other professional football leagues, such as the Canadian Football League or the Arena Football League, salaries for players in those leagues usually pale in comparison to NFL salaries. Thus, for most NFL players, when their NFL career ends, so too does their professional football career.

So instead of continuing a professional football career, many ex-NFL players gravitate toward positions in coaching, scouting, finance, sales or real estate, all of which can offer a good wage by most standards, but typically not by NFL standards. Other ex-NFL players lack the education, skills, or life experience to obtain continuous employment outside of football. In short, life in the NFL may be good, but it's usually very short, and the vast majority of ex-NFL players are headed for lives more akin to those of their fans than of their star teammates.

Of course, if you polled the average NFL player before his NFL career began and asked him how long his career would last, you would likely obtain a much higher number than three and a half seasons. And therein rests the ubiquitous threat of "optimism bias" to NFL players and their spending habits. Psychologists describe optimism bias as the tendency of individuals to assume that general risks do not apply with equal force to themselves and that, on average, good things are more likely, and bad things are less likely, to happen to them. Optimism bias has been evidenced in a wide-variety of decision-making contexts, most famously with smokers, who tend to regard smoking as significantly less risky for themselves than for other smokers.

Assuming NFL rookies share in the optimism, they likely feel good -- and, on average, too good -- about the probable length and success of their NFL careers. Perhaps that begins to explain the extravagant lifestyles that many players enjoy. Their minds are primed to view their careers' hour glass as half-full, or even three-quarters full. While we know they might regret buying that Lamborghini or second home, we also enjoy the benefit of a distanced perspective.

Nevertheless, a player's agent can play an influential role in curbing his client's spending, particularly in introducing the player to a financial adviser, negotiating endorsement opportunities, and encouraging him to seriously contemplate his post-playing career. The player, however, ultimately remains in charge of his account. The likely presence of optimism bias among NFL players thus supplies another compelling rationale for deferring some of a player's income to a future time.

Legal protections for that deferred payment illuminate another benefit to pensions. Under certain conditions, creditors cannot touch a player's pension. As a notorious illustration, consider the recently arrested O.J. Simpson, whose NFL pension is fully immune under Florida law from creditors. Simpson receives a yearly pension of $28,000, which is protected from the $30 million judgment against him for the wrongful deaths of Nicole Brown Simpson and Ronald Goldman. While most ex-NFL players avoid serious legal problems, some do encounter them. Although those problems can threaten their savings, they usually cannot endanger their pensions.

Ex-players (and their families) aren't the only beneficiaries of NFL pensions. The league also possesses a vital stake in seeing ex-players live without financial hardship. That stake is motivated by various desires: encourage players to work hard and play at least three seasons in the NFL; reward players' loyalty to teams and the league; dissuade players from striking; ease the transition of players into ex-players; and satisfy what may be a moral obligation to retired players, many of whom played through injury and pain, with a nary a complaint.

That final reason seems particularly compelling when a retired player falls on hard times. Whenever that happens -- and it seems to be happening with increasing regularity in recent years -- we usually examine whether others could have mitigated his suffering. Along those lines, while ex-players are no longer employees of NFL teams, they remain ambassadors of the game and the NFL. Their struggles thus reflect poorly on a very prosperous and successful NFL, a league which generated upwards of $6 billion in revenue during the 2006 fiscal year.

In addition to a pension, retired NFL players may obtain disability benefits under the NFL's retirement system. Playing an unquestionably brutal sport, NFL players can suffer devastating injuries, followed by years of expensive treatments, surgeries, and counseling. Kevin Everett's recent spinal-cord injury sadly illustrates this concern. The non-guaranteed nature of most NFL contracts only heightens the need for disability benefits. Although injured players may receive injury settlements upon being waived by teams, those settlements provide less compensation than those players would have earned had they remained healthy and fulfilled their contractual obligations.

Let's now consider the quality of benefits afforded by the NFL's retirement system. As a starting point, note that eligibility terms and benefit levels derive from collective bargaining between the NFLPA, the exclusive collective bargaining representative for NFL players, and the NFL's Management Council, the exclusive collective bargaining representative for NFL clubs. Consequently, ex-players who are dissatisfied with their pension and disability payments can blame their own brethren as much as those who employed them.

Present-day concerns over the NFL retirement system partly reflect the system's historical progression. Back in 1959, the NFL, for the first time, agreed to a relatively modest retirement system for ex-players. Three years later, the NFL and NFLPA collectively-bargained into existence the "Bert Bell NFL Player Retirement Plan" (sometimes known as the "Old Plan"). It provided enhanced retirement, disability and related benefits to eligible ex-players. An alternative version of that plan-the "Pete Rozelle NFL Player Retirement Plan" -- was established through collective bargaining in 1989. Five years later, it was merged with the Old Plan to form the verbose-sounding "Bert Bell/Pete Rozelle NFL Player Retirement Plan" (more easily called the "New Plan").

In addition, collective bargaining created the NFL Player Supplemental Disability Plan ("Supplemental Plan") in 1993. It provides disability benefits in addition to those provided under the New Plan. The New Plan and Supplemental Plan are collectively called "the Plans." Although the Plans represent progress for ex-NFL players, their offerings pale in comparison to retirement benefits obtained by retired MLB players under the MLBPA leadership of Marvin Miller and Donald Fehr. Then again, the NFLPA did negotiate a series of enhancements with the NFL during the 1990s. In 1993, for instance, it convinced the NFL to agree to 401(k) plan, which requires teams to contribute $2 for every $1 a player contributes. Five years later, the NFLPA motivated the NFL to add a $100,000 annuity to benefit 10-year veterans.

The Plans are covered by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1002, a federal law that regulates pension and benefit plans. Administrating the Plans are two separate groups of six voting members: the Retirement Board and the Disability Board. The NFLPA and Management Council each select three persons for each board. The Boards have full power, authority and discretion to interpret the Plans and to decide claims for benefits.

So how much do players actually receive from the NFL retirement system? For each year of service, players who retired after 1981 receive annual pension payments of between $3,000 and $5,640. More recently-retired players receive annual payments closer to $5,640 for each year of service, while those who retired in the early '80s receive closer to $3,000 per year in the league. Players who played at least 10 seasons also receive a retirement bonus in the form of annuity income. Also, players who retired in 1981 or earlier, and who played at least 10 seasons in the NFL, receive an annual payment of $30,000.

Disability benefits present greater controversy, as they are often difficult to obtain, both in terms of meeting the requisite legal standard and in enduring a lengthy, sometimes disheartening claim process. Disability benefits are available to those players who become "totally and permanently disabled," a standard that seems clear, but imposes a lofty threshold. Under the New Plan, a player is totally and permanently disabled only if the Retirement Board finds that he has "become totally disabled to the extent that he is substantially prevented from or substantially unable to engage in any activity for remuneration or profit." Several seriously injured ex-players, including Walt Sweeney, Dan Johnson and the late Mike Webster, litigated against the Retirement Board, which claimed that they had failed to evince "totally and permanently disabled" status.

Even when an ex-player qualifies as "totally and permanently disabled," resulting benefits vary considerably, depending on whether the player was active when injured and how he became injured. The New Plan employs a 4-point classification scheme to assess benefit amounts. It essentially calls for monthly disability benefits to be at least $4,000 if an active player suffers total and permanent disability "shortly after" the disability first arises, or if the disability stems from a "football degenerative" condition that occurs before the later of (1) age 45, or (2) 12 years after the end the player's career. Those who suffer the total and permanent disability from non-football-related activities or after age 45 or 12 years out of the game, receive at least $1,500 a month. The "start date" and origin of a players' injury thus prove crucial.

To illustrate the application of the 4-point classification, consider ex-NFL player Brent Boyd. In 2005, he unsuccessfully challenged the Retirement Board's rejection of his claim. He asserted that he had suffered a brain injury from head trauma sustained in NFL-related activities, yet both the Retirement Board and the U.S. Court of Appeals for the Ninth Circuit held that his health problems were related to depression, rather than playing in the NFL.

On Tuesday, Boyd shared his concerns with what he hopes is a more sympathetic audience. As Senator Byron Dorgan (D-N.D.), who lead the hearings, recently said, "Many players say the NFL's retirement system seeks to delay, or avoid altogether, paying disability payments to players with long term injuries. The NFL says those complaints are overstated. The committee wants the facts."

At first glance, the facts appear to underscore players' concerns. In 2006, for instance, only 284 out of an estimated 9,500 retired players, or about 3 percent, received disability benefits. It is unclear how many claims were rejected, but many observers intuit a staggeringly high number. Moreover, while 284 players received a combined $19 million in disability benefits, they each received, on average, about $67,000 to pay for their medical expenses, a figure that may not have satisfied some treatments.

In addition, a number of ex-players have expressed frustration over the Board's alleged implausible explanations in rejecting claims, as well as over extended waiting periods before the Board issues a decision. Former New Orleans Saints offensive lineman Conrad Dobler, for instance, has been rejected by the Board at least 12 times, without (in his view) adequate reasoning for why his ability to hold down a desk job -- which technically prevents him from satisfying the definition of "totally and permanently disabled" -- should preclude recovery for an inability to walk.

Perhaps further lending credence to the players' argument is the improbability of obtaining a judicial reversal of a Retirement Board decision. This obstacle relates to the applicable standard of review: under ERISA, an appellate court can only overturn the Board's decision if its decision is "clearly erroneous," which requires the ex-player to prove that the Board abused its discretion in one of three ways: 1) rendering a decision without explanation, 2) construing provisions of the plan in a way that conflicts with the plain language of the plan, or 3) relying on clearly erroneous findings of fact. In most cases, those ways are nearly impossible to establish.

Beyond the technical merits of the players' claims are the human dynamics emerging. Perhaps most notable is Ditka, who, along with several other Hall of Fame players, recently started "The Gridiron Greats," a fundraising effort on behalf of disabled ex-players who are unable to obtain relief from the Retirement Board. In a June 2007 hearing before a subcommittee of the House Judiciary Committee, Ditka lambasted the NFL's pension system as a disgrace to the game. Considering the NFL's status as the most lucrative professional sports league, it seems unseemly that some ex-NFL players must rely on donations to pay for medical expenses.

On the other hand, the NFL and NFLPA have recently enhanced the retirement system. For instance, they have created a $7 million fund that will offer free surgery for joint replacement to uninsured retired players. They also have begun the "88 Plan," named in honor of John Mackey. It will provide up to $88,000 a year for institutional care or up to $50,000 a year for in-home nursing care for former players with dementia. Along those lines, both Goodell and Upshaw argue that the retirement system, while flawed, has improved considerably in recent months.

Whether the senators demand specific changes at some point remains to be seen. In recent months, some have proposed, for instance, that the NFL set aside at least 1 percent of league revenue and devote it to injured and disabled former players. Another proposal calls for a $5 surcharge on game ticket. While both of those steps would generate significant revenue for injured and disabled former players, neither appears to enjoy much traction in either the NFL or NFLPA.

Of course, the overriding question is "why": Why have so many of the men who are largely responsible for the league's success, and who now suffer so badly, been forgotten by both the league they help built and the players who should now owe them?

There is no certain answer, but one reason may relate to the NFLPA's comparatively weak leadership on issues relating to pensions and disability. As a point of comparison, consider how MLB players can largely thank former MLBPA executive director Miller and current executive director Fehr for vigorously protecting retired players. Miller, in particular, negotiated a lucrative pension and disability plan-one that amazingly guarantees a lifetime of healthcare to any player who spends just one day in the big leagues (I call it the "Moonlight Graham provision"). The NFLPA's bargaining priorities, in contrast, appear focused on other matters.

In defense of the NFLPA, however, Upshaw expressed a desire Tuesday for Congress to provide the union with greater authority to approve claims, which suggests that the NFLPA understands the dire need for improvements. But then again, the NFLPA could collectively-bargain for such authority with the NFL, such as by negotiating down the lofty threshold standards for disability eligibility, most notably the "totally and permanently and disabled" provision. More obtainable phraseology would result in a higher percentage of successful claims and would not compel Congressional involvement.

Another explanation may relate to Upshaw serving his constituency. He is only elected by current players, not former players. If Upshaw ignores the wishes of those who cannot vote for him, then former players, much like prospective players, would have no one at the bargaining table when their interests conflict with those of current players, such as in how to divide a pool of retirement funds. As an analog, consider how the NFLPA agreed to an age eligibility requirement which prevents younger, more talented amateur players from taking jobs from older, less talented veterans: the younger players had no one representing their interests at the bargaining table, and yet, because of labor and antitrust laws, the NFLPA could negotiate "on their behalf."

Perhaps the most plausible reason for the seemingly shoddy treatment of so many ex-NFL players rises from the old adage, "out of sight, out of mind." With typically brief careers, often obscured behind a helmet and pads, representing just one of many on a large roster, and sometimes fielding a position that receives only modest individual attention, let alone acclaim (such as an offensive lineman), many NFL players retire without much fanfare or even recognition.

Instead, they go back home and live relatively ordinary lives, unrecognized by strangers, much like the rest of us. Consequently, their life struggles aren't well positioned to capture the public's attention, save for when made known to a sympathetic journalist or a compassionate politician.

And therein lies perhaps the most disheartening implication of indifference towards the plight of ex-NFL players: how many plights of other ordinary Americans are we ignoring?

Correction: O.J. Simpson's pension is $28,000 per year, not $25,000 per month as we previously reported. We regret the error.

Michael McCann is a law professor at Mississippi College School of Law. He specializes in sports law. McCann can be reached at mmccann@mc.edu.