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Getting to Know the CBA - Episode 14: Article 21 - Pensions

Stevie Roxelle - @stevieroxelle - Biscuit Fox

This week, we take a look inside one of the more hotly-contested issues from the last lockout: player pensions. With a hockey player's career being a relatively short time to earn a relatively large sum, the pension plan is kind of a way to spread some earnings power over a player's lifetime. Owners don't necessarily like it, but they do partially benefit from the tax writeoffs they get for it and also from the unspoken protection against possible future lawsuits of former players claiming their post-NHL earnings potential were severely limited by the cost of playing in a physically demanding sport.

Let's get into some of the specifics.

You can find the entire CBA here (PDF)

Article 21: Pension Plans

Seeing as how the league operates in two countries, the CBA covers for working pensions under two different tax codes (which is why the article has a plural title). There's a ton of legalese here separating out what specifically means what in the U.S. and Canada and if you're interested in that level of nitty-gritty, I'd recommend reading it. The basics are that the league and the players each have equal representation in a committee which runs the plans/benefits, essentially making any decision on those plans a collectively bargained process. Both sides get to pick the specific rules about who gets to serve and for how long, but those rules have to obey the eminent laws in the country where the benefits are being decided.

The fun part is in 21.5, which innocently lays out that the plan was effective as of September 16th, 2012 and then lays into nearly a page worth of explanation that the league is under no obligation to pay for any benefit unless they first have documentation proving that 100% of their contributions to such a plan is tax deductible. These benefits also count against the Players' Share as part of their benefits, so when the salary cap is projected, the amount paid into the Pension Plans is counted against what the players would otherwise earn in any league year. This benefit amount is capped at $38M per year.

As far as specific workings, there is a Benefits Trust set up which is controlled by the Benefits Committee. The Trust is funded by the league & players and that funding is distributed according to the rules of the committee. The Benefits Committee is tasked with a fiduciary responsibility to those served by it, meaning the decisions they make have to take the players' best interests to heart with any decision they make. Failing to do so opens them up to liability. Of course it helps that the committee cannot be compensated for its service here.

Survivability/Expiration of the CBA

There are several pages worth of rules here which describe "True-Up" accounting and an extended timeline to make sure that the accounting of the plan is done right. In the event that additional payments have to be made into the plan and the set rules for those payments extend beyond the expiration of the CBA, both sides will still be bound to make such payments even after the CBA has officially expired.

When the CBA does expire, the plan will automatically be frozen (it can grow by nature of being already invested, but otherwise won't be touched). It can be continued on by a new CBA to follow or it can be terminated and benefits owed to each player will be given to them in a manner of their choosing (lump sum payout or immediate annuitization).


Any player who was already part of the last plan or who played a game after September 16 2013 automatically becomes a participant in the retirement plan (for goalies, they simply have to dress for a game to be eligible). Players get credited service for every game where they're with the club and essentially not suspended or AWOL, and even get credit for games they miss due to being placed on waivers. However, players can't get more than 82 games' worth of credit for any single year. For the lockout-shortened season, game credit was counted at a factor of 1.71, so that any player with 48 games' worth of credit would be credited as though he played 82 for the sake of the Pension Plan.

Technically, a player gets a year by being credited with 80 games, as each year is broken into 20-game quarters. A player who collects 10 total years of credit gets the full benefit amount when he qualifies to receive it (generally age 62).

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The bulk of this article is laid out to set up little specific accounting rules and other standard fare for how tax-qualified retirement plans work. We're not going to get real nitty-gritty, so I'm going to cut it off here. The important thing to remember is that the CBA is very sensitive to the concept of keeping the Pension Plan up-to-date as far as tax rules go, including calls for the plan to change at will to take advantage of (or prevent disadvantage from) changes to the tax code. Other than that, it works like a basic employee retirement plan does.

Next week, we'll look at Article 22, which establishes the Competition Committee.