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10/14/2016

The PGA Tour's Pension Plan

Over the years in my “Bar Chat” column, I’ve talked about the PGA Tour’s pension plan, the best in sports, and in the October 2016 issue of Golf Digest, Ron Sirak describes some of the details.

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Like everything on the PGA Tour, the pension plan is merit-based.  ‘You eat what you kill; you are not guaranteed anything,’ one former player who is vested in the plan told Golf Digest, speaking on the condition of anonymity.  ‘(Former Commissioner) Deane (Beman) set it up right. I think every player going forward should have a debt of gratitude for it.’

“Based on the value of the two main PGA Tour retirement plans, assuming an annual growth rate of a very conservative 5 percent, if Woods were to never hit another shot, his $18 million in deferred FedEx Cup bonus money would grow to $23 million by 2020, when he turns 45 and can begin collecting it.  If he never hits another shot, his $2.2 million in cuts-made bonus money would grow to $3.6 million at 50, giving him a total deferred package of almost $27 million.  He has the option of leaving the cuts-made money alone, gathering interest, until he is 60.

“Under the latest FedEx Cup annuity system and the cuts-made bonus system, a player who joins the tour today at 25 and plays 15 years making the minimum number of cuts required to be bested in the plan – 15 a year – and finishing 40th in the FedEx Cup each of those 15 years would accumulate about $3.3 million in FedEx money and nearly $1.5 million in cuts-made money for a total retirement package of almost $4 million by 40.  And that’s just a conservative estimate in addition to millions a year in prize money and endorsement deals.

“ ‘The two best things about having been on the tour are the pension package and the fact I can play TPC courses for free,’ says another former player, who shared details of his retirement plan on the condition of anonymity. He played more than 15 years in the pre-FedEx Cup bonus era and made more than 250 cuts, amassing about $1 million in deferred income, which pays him $6,000 a month.  ‘That monthly check gives me the freedom to do what I do, which is work on several grow-the-game programs,’ he says....

“Under the PGA Tour’s cuts-made plan, a player must make 75 cuts to be 50-percent vested and is fully vested at 150 cuts, according to multiple players.  According to the PGA Tour, in 2014-15, players received $4,500 for each of the first 15 cuts made - $67,500 – and $9,000 for each cut made above 15, in addition to prize money.  The plan is funded by a variety of revenue streams, including advertising revenue, investments, corporate partners, TPC profits, digital revenue and TV money....

“The FedEx Cup bonus pool is $35 million annually.  The top-10 finishers get anywhere from 90 percent to 40 percent of their money upfront and the rest deferred, the tour says.  Those outside the top 10 have all their money deferred. When Woods won the first FedEx Cup, in 2007, all of his $10 million was deferred. That rule changed the next year, so when he won again in 2009, he got $9 million upfront and $1 million deferred.”

So when you’re watching various tournaments, I know I’ve always understood the importance of making the cut, but now when you see a guy barely do so, think, ‘Ka-ching...that’s $4,500,’ assuming they make 15 the entire year.

*The LPGA Tour, by contrast, has a miserable pension plan.  For example, Beth Daniel, who played 29 years on its, has less than $300,000 in hers.  Matt Kuchar, on the other hand, already has an estimated $2,800,000 in his.

Wall Street History returns in two weeks.

Brian Trumbore



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Wall Street History

10/14/2016

The PGA Tour's Pension Plan

Over the years in my “Bar Chat” column, I’ve talked about the PGA Tour’s pension plan, the best in sports, and in the October 2016 issue of Golf Digest, Ron Sirak describes some of the details.

---

Like everything on the PGA Tour, the pension plan is merit-based.  ‘You eat what you kill; you are not guaranteed anything,’ one former player who is vested in the plan told Golf Digest, speaking on the condition of anonymity.  ‘(Former Commissioner) Deane (Beman) set it up right. I think every player going forward should have a debt of gratitude for it.’

“Based on the value of the two main PGA Tour retirement plans, assuming an annual growth rate of a very conservative 5 percent, if Woods were to never hit another shot, his $18 million in deferred FedEx Cup bonus money would grow to $23 million by 2020, when he turns 45 and can begin collecting it.  If he never hits another shot, his $2.2 million in cuts-made bonus money would grow to $3.6 million at 50, giving him a total deferred package of almost $27 million.  He has the option of leaving the cuts-made money alone, gathering interest, until he is 60.

“Under the latest FedEx Cup annuity system and the cuts-made bonus system, a player who joins the tour today at 25 and plays 15 years making the minimum number of cuts required to be bested in the plan – 15 a year – and finishing 40th in the FedEx Cup each of those 15 years would accumulate about $3.3 million in FedEx money and nearly $1.5 million in cuts-made money for a total retirement package of almost $4 million by 40.  And that’s just a conservative estimate in addition to millions a year in prize money and endorsement deals.

“ ‘The two best things about having been on the tour are the pension package and the fact I can play TPC courses for free,’ says another former player, who shared details of his retirement plan on the condition of anonymity. He played more than 15 years in the pre-FedEx Cup bonus era and made more than 250 cuts, amassing about $1 million in deferred income, which pays him $6,000 a month.  ‘That monthly check gives me the freedom to do what I do, which is work on several grow-the-game programs,’ he says....

“Under the PGA Tour’s cuts-made plan, a player must make 75 cuts to be 50-percent vested and is fully vested at 150 cuts, according to multiple players.  According to the PGA Tour, in 2014-15, players received $4,500 for each of the first 15 cuts made - $67,500 – and $9,000 for each cut made above 15, in addition to prize money.  The plan is funded by a variety of revenue streams, including advertising revenue, investments, corporate partners, TPC profits, digital revenue and TV money....

“The FedEx Cup bonus pool is $35 million annually.  The top-10 finishers get anywhere from 90 percent to 40 percent of their money upfront and the rest deferred, the tour says.  Those outside the top 10 have all their money deferred. When Woods won the first FedEx Cup, in 2007, all of his $10 million was deferred. That rule changed the next year, so when he won again in 2009, he got $9 million upfront and $1 million deferred.”

So when you’re watching various tournaments, I know I’ve always understood the importance of making the cut, but now when you see a guy barely do so, think, ‘Ka-ching...that’s $4,500,’ assuming they make 15 the entire year.

*The LPGA Tour, by contrast, has a miserable pension plan.  For example, Beth Daniel, who played 29 years on its, has less than $300,000 in hers.  Matt Kuchar, on the other hand, already has an estimated $2,800,000 in his.

Wall Street History returns in two weeks.

Brian Trumbore