Even the NFL Knows Pensions are Dead

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Written By:
LegitSlater

Sep 28, 2012
2:05pm

The long national crisis is over. No, you didn’t fall asleep and wake up on November 7th to news that President Obama lost his re-election bid either.

The real National Football league (NFL) referees are back on the field as of last night’s Thursday Night Football game between the Baltimore Ravens and Cleveland Browns. A settlement agreement was reached in the three week lockout, which allowed for a return of the pros for Week 4 of the NFL season. The new deal still needs to be ratified by the rank and file of the 121-person NFL Referees Association (NFLRA), but barring some unforeseen displeasure with the new agreement, we won’t have to face this “crisis” again until the 2019 season.

The fact that us football fans (and more importantly, the players and coaches whose livelihood is tied to the calls made by officials) had to put up with the replacement crews of Keystone cops drug up from as far down as Division III football for three weeks is not that big a deal in light of other things going on in the world. Even the Packers will find a way to move on after last Monday night’s game where a critical call was so obviously blown at the very end. My old coach would have said “Quit complaining (or stronger words) about the Zebras. You had plenty of opportunities to score; more than enough to have won the game had you executed better. You just didn’t get it done!” It was one of my first real-life lessons in the importance of personal responsibility, and it stuck. But I digress….

The terms of the settlement between the NFL and NFLRA are:

• * The average NFL referee, who made $149,000 last year, will now average $173,000 in 2013 and $205,000 by 2019.
• * The NFL was allowed to make some officials full-time employees beginning in 2013.
• * The NFL can hire additional officials for training and development.
• * Pensions will be phased out in favor of a 401K plan.

 
This last part of the agreement was the one which was most contentious, but what I found most interesting.

The two sides had been particularly at odds over pensions, which seemed to emerge as the major sticking point late in the negotiations. Referees wanted to retain their pension plan, which the league apparently considered too generous, particularly for part-time employees. The NFL wanted to switch the officials to 401(k) retirement plans.

The compromise that was struck, according to an announcement by the league about the terms of the deal, would keep the pension plan in place for current officials for five years through the 2016 season, at which point it will be frozen. Newly hired officials will be given 401(k) retirement plans, as will all officials beginning in 2017.

The NFL is a multi-billion dollar professional sports juggernaut. Regardless of which sport is your favorite, professional football is certainly the most successful of all of them in terms of revenues generated, thanks to multiple successful streams such as ticket sales, concessions, TV rights (and their own network), and merchandising. A big part of their success as a whole has been recognizing the trends and positioning themselves to adapt to the realities these trends bring about. They also never took for granted that what got them where they are today won’t keep them moving forward tomorrow.

That was reflected in this agreement with the NFLRA. Full time officials needed to happen and so did a development program. You simply can’t keep up with the evolving speed and complexity of pro football with part-time refs, and a more focused system which will ready the next generation of referees for the NFL gridiron. Part time refs worked well for decades, but the league can’t depend on this practice any longer in the long run.

The other was the gradual elimination of Defined Benefit, or pension, retirement programs. “Defined benefit programs are out date,” said Roger Goodell, NFL Commissioner during a Thursday news conference announcing the end of the lockout. “They don’t exist in industry going forward. It was important to end that and to move into the defined contribution program.”

So, one of the nation’s most successful sectors, who certainly “has the money” to offer pensions (because they earned it through offering a product the market wants to consume) understands it can no longer offer them to it’s smallest union for economic reasons. While resistant, that union saw the long term futility of pensions as well. Why doesn’t government (by far our nation’s least successful sector, which only redistributes success) and public-sector unions (whose memberships are too often compulsory) have the foresight to see that? The only answer is government has never been good at foresight, and public-sector unions are only out for themselves instead of their memberships. Why do you think the memberships are compulsory? If they actually delivered anything of value to their members, they would want to join of their own free will; as if a real market existed for their services.

We are not exempt here in North Dakota. Rob wrote a post yesterday entitled “North Dakota’s Public Worker Pensions Represent 57% Of Unfunded Liabilities” which addressed how the foresight of some in the legislature to gradually shift public workers and teachers was shot down in large part because of the efforts of the state teachers and public workers unions. Yet, it was change seen as necessary by those charged with state spending (as well as some in the “rank and file” of the public-sector, especially those starting their careers). Quite simply, while a pension looks great on paper for those current employees they are meant to benefit, they are useless once they get to retirement and there no longer is a benefit to them because of the unfunded liabilities we talk about today. The Ponzi Scheme that is Defined Benefits pensions will leave nothing for them when it was their turn to draw; everyone who went before them used it all up.

Government has much to learn from how the private sector operates. We have a pension crisis upon us now that simply must be addressed through significant changes to how public sector retirees are covered. The proposal offered last legislative session in ND was a reasonable solution that, like the NFL-NFLRA agreement, phased in the new program over time to help ensure in the long run all teachers and state employees will have a retirement plan when the time comes where they need it. It is time for the state to lead the nation in pension reform just as it is in economic growth and opportunity.

We can no longer pretend we are in a bye week on this problem.