MLB teams can elect to cut pensions
PORT ST. LUCIE, Fla. -- Major League Baseball owners, despite earning more than $8 billion in revenue in 2013, voted in January to allow individual teams to slash or eliminate pension-plan offerings to their non-uniformed personnel.
The vote, tabled a year earlier when the intention became public, quietly took place Jan. 16 at the quarterly owners meetings in Paradise Valley, Ariz., the same gathering at which instant-replay expansion unanimously was approved.
The retirement plans of any baseball employee not wearing a big league uniform may be affected by the decision, including secretaries, scouts, front-office executives, and minor league staff.
Some of those personnel, particularly at the minor league level and in amateur scouting, make less than $40,000 a year and rely on pensions in retirement.
Rob Manfred, MLB's chief operating officer, noted no team has yet acted to reduce employee pension benefits.
"The change in the rule does not require a club to change anything," Manfred said. "All 30 clubs are free to leave their plans exactly where they are and, in fact, no club has made a change. This change gives the clubs the ability to put together what they feel is a competitive pension program in their particular market."
Manfred also vehemently objected to any characterization that the owners are going after baseball's employees while owners and players continue to reap huge sums.
"Large corporations all over America make adjustments in their pension plans," Manfred said. "That's like saying because the top line is billions of dollars, they shouldn't be making changes to their pension plans.
"The fact of the matter is that the structure of one's pension, and the appeal of that pension to employees, varies greatly depending upon the makeup of your workforce. We have traditionally had defined-benefit pension plans in baseball, but a lot of young people would rather have a defined-contribution plan [401(k)].
"So I just don't think it's so simple as to boil it down to there's a bunch of money and they're taking away people's benefits. First of all, I'm going to say again: Nobody has changed any benefits. And it remains to be seen whether or not that's going to happen. And, point two, I think that the motivation to make a change in the pension area in general is driven by the desire to be competitive in their markets and provide the kind of benefits that people want in today's economy."
The owners technically voted to repeal the "compatibility rule." That rule mandated that each team provide a pension to employees through the Non-Uniformed Personnel Pension Plan, or provide something of equivalent quality.
Now, any individual team will be free to reduce the quality -- or eliminate the pension offering entirely.
Some benevolent owners are expected to keep the quality of the current pension offering intact, potentially including the Colorado Rockies. Others, like the Kansas City Royals, who are owned by former Wal-Mart CEO David Glass, would appear likely to greatly reduce or eliminate their employees' pension benefits, according to sources.
Manfred, however, disputed the suggestion that the vote means some clubs assuredly will reduce or eliminate their pension plans over time.
"Honestly, I'm not quite sure that is correct. I just don't know what's going to happen," Manfred said. "I really don't. This is a complicated area. Changing pensions isn't easy in general. And I think the clubs are going to be really careful about making any change, and particularly making a change that would affect their competitiveness."
A source told ESPNNewYork.com that Chicago White Sox owner Jerry Reinsdorf chastised owners for being petty with the lives of ordinary people during an earlier attempt to pass this plan.
Existing pension commitments should not be affected, so previously promised money will not disappear.
MLB players' pension benefits, and those of other uniformed big league personnel, are unaffected.
"Businesses all over the country are cutting pension programs," said Mark Conrad, director of the sports business specialization program at the Gabelli School of Business at Fordham University. "I think it's going to be a rarer sight to find even a major corporation having a classic pension. They seem to be replacing them more with 401(k)-type programs.
"In part what they will say -- and I'm not saying they're right -- is administrative costs tend to be higher [with pension plans]. It could be a situation where payments down the line could amount to lots of money, depending on how long retirees live."
Said Joel Maxcy, a labor economics expert at Temple University: "In general, corporations will look for any way to reduce labor costs if they can. And company-funded pension plans, which are an expensive obligation, are a target. Since the '90s, old-style defined-benefit pensions -- paid by the employer -- have been more and more replaced with defined-contribution plans, including 401(k)s, paid by both employee and employer, and even by just the employee.
"Companies facing bankruptcy reorganization often take that opportunity to 'adjust' pension obligations. This includes some of the big and famous like GM and American Airlines recently. Of course, bankruptcy in no way applies to MLB, who have seen significant prosperity this decade.
"So, to sum up, pension reductions are sought particularly when firms face financial distress. However, the MLB owners' action, given their current financial situation, the quiet vote, and that the lowest-paid group is the one that loses out, seems especially malevolent."
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