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Money Blog

Sep 27, 2012
03:46 PM

The NFL Referees and Pension Reform

The NFL Referees and Pension Reform

ESPN.com

Last night the NFL, thoroughly embarrassed by the scabs it attempted to trot out for three weeks, caved in on its demands and made a deal with the NFL Referees Association.

There were really only two ways the lockout could end: like this or with the NFL going an entire season with replacement officials and the replacements—who all have other jobs, by the way—finally caving and capitulating on their demands.

The former was always much more likely and only a group of pampered, old, craven and overpaid robber barons like the NFL owners would be pompous enough to think otherwise. There would be no compromise. So how did the deal get done?

It certainly wasn’t about the money. The NFL gave the officials exactly what they wanted. Compensation will increase from an average of $149,000 a year in 2011, to $173,000 in 2013, and capping at an average of $205,000 by 2019. Starting in 2013, the NFL has the option to make some officials full-time employees as well.

The fight was all about pensions. The NFL refs are one of the few groups in this country that still gets a guaranteed pension rather than a 401(K). For those who don’t know the difference, a pension is what’s known as a defined benefit plan, meaning when you retire you get a set amount of money for life. A 401(K), by contrast, is a defined contribution plan, meaning the only thing certain is how much money you put in, not what you get when you’re done.

The 401(K) started gaining traction in the 1980s as an add-on to the package companies could offer to high-level executives. These executives were guaranteed a pension and offered some retirement play money in the form of 401(K)s.

Once the corporate world caught on to the idea they started offering them to employees as an alternative to traditional pensions, telling people they could “take charge” of their retirement money…by taking on investments and risks they were completely unqualified to handle.

The truth about 401(K)s is not that only are they less reliable than pensions, they generate less money and are loaded with fees. The NFL refs, in exchange for getting the money they wanted and job security, accepted a five year guarantee of their pensions and three years of 401(K)s for their eight-year agreement with the league.

I say to the NFL officials what I say to anyone in the US with a pension right now: watch your back.

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