January 10, 2013
The new pension plan for NHL players should improve the league’s status as the "poor cousin" of professional sports leagues in terms of pension offerings, and will provide a better cushion for ordinary players, experts say.
While the league has revealed few details about how the new pension plan will work, it has said it plans to create a new defined benefit (DB) pension plan, which is a traditional pension plan that pays a guaranteed level of income in retirement. The NHL currently has a defined contribution (DC) plan that operates similarly to an RRSP, with payouts varying depending on the performance of investments selected by the plan members.
The NHL has been the "poor cousin" of pension plans in pro sports, says pension lawyer Mitch Frazer. NHL players were eligible to earn a maximum of $50,000 (all currency U.S.) a year in 2012 after playing at least 160 games, while players in Major League Baseball need 43 days of service to begin to qualify for a pension benefit of $34,000 a year, and analysts say baseball can earn pensions of $200,000 annually with 10 years of service.
Frazer said the NHL’s new pension arrangement may be a rounding error for superstars like Sidney Crosby, but it will provide security for other players, many of whom have little financial education and find their careers cut short after just a few years.
"In the long run, it’s not good for the NHL to have news stories about homeless athletes," Frazer said.
When the deal was settled after the long final talks last weekend, Ron Hainsey, the Winnipeg Jets' defenceman who was a central player in the talks, called the DB plan "the centrepiece of this deal."
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