History of NBA Pensions

March 2, 2017

Today, the NBA has what is widely considered the best pension plan for retired players amongst professional sports organizations in North America. In fact, as recently as June of this year, the National Basketball Players Association announced that its player representatives’ unanimously voted to fund health insurance for all retirees who have played at least three years in the Association, the first benefit plan of its kind in all of sport.

NBPA President Chris Paul, the point guard for the Los Angeles Clippers, said, "The game has never before been more popular, and all the players in our league today recognize that we're only in this position because of the hard work and dedication of the men who came before us. It's important that we take care of our entire extended NBA family, and I'm proud of my fellow players for taking this unprecedented step to ensure the health and well-being of our predecessors."

One of the predecessors who exemplifies Chris Paul’s statement wholeheartedly is 6-time NBA Champion, 13-time NBA All-Star, NBA Hall of Famer, and NBPA Founder Bob Cousy. Without Bob Cousy, the NBA and its players may not now be in the position that Chris Paul describes.

Cousy, who was drafted in 1950 by the Tri-City Blackhawks and later chosen by the Boston Celtics in a dispersal draft, began forming what would be the NBPA in 1954. He began the process by simply writing a letter to the most established players on each team, expressing his vision for the union and gauging the interest amongst his fellow players. Cousy found that there was strong support and shortly thereafter in January, 1955, the NBPA was formed. Cousy would become its first president.

Despite the success in forming a players’ association, the NBA still had to recognize it as a union. This would only occur after Cousy met with AFL-CIO officials over possible affiliation and after a threatened strike during the 1957 NBA season. Fortunately, their demands were met. This was a tremendous milestone for the NBPA, but more important than the new benefits, they now had a strong voice and the power to negotiate even further.

After being recognized by the NBA, the NBPA’s next mission was to introduce a pension plan for players. This was an uphill battle as only 9.8 million private-sector workers (25 percent of all such workers) were covered by pension plans in the United States. Pensions were expensive and not popular at the time amongst businesses, including the NBA. Compared to the NFL and MLB, the NBA was in its infancy, and its team owners did not want to provide this benefit to its players. This was, after all, an era in which a total team salary pool was about $150,000. A well-paid player might make $15,000.

Nonetheless, in 1962 current NBPA President Tom Heinsohn was near finalizing a pension deal with NBA team owners that would give retired players at the age of 65 with 5 years of service $100 a month for life, while players with at least 10 years would receive $200 per month. Unfortunately, the negotiations broke down in the final stages. It would be another two years, with players threatening to sit out once again, before a pension plan would be agreed upon.

The setting was the Boston Garden, 1964, with the first nationally televised All-Star Game about to tip-off. Despite all efforts to reach an agreement, the Heinsohn plan had not been adopted. The players recognized this was a moment of opportunity and of danger for themselves. If they did not play, they would be risking their careers, but it would also be a debacle for the NBA. It would mean loss of prestige and credibility the NBA could not afford at a time when they were striving to compete with the NFL and MLB. The players held together, and, fortunately for all concerned, the NBA and NBA President Walter Kennedy relented. Just moments before tip-off, they agreed to institute a pension plan at the end of the year. The players took the floor, albeit twenty minutes later than scheduled.

A few years later in 1967, the pension plan would be improved under the watch of the new NBPA president, Oscar Robertson. Robertson wanted two big changes: first he wanted the the $200/month pension for players over 65 with at least 10 years of playing time to be raised to $600/month and second, he wanted the pension plan to also include new medical and insurance benefits. He recognized the physical toll NBA players incurred throughout their career that could lead to increased health concerns later in their lives. It has taken until now, a full fifty years later, for his dream to be realized.

The next significant change occurred twenty years later. In 1987, the players sought among other things changes to the salary cap, restricted free agency and the collegiate draft system. After nine unsuccessful negotiating sessions attempting to reach a new collective bargaining agreement, nine players, led by President Junior Bridgeman and its general counsel Larry Fleisher, filed a class action anti-trust suit against the league and its 23 teams. The NBA responded by avoiding litigation and coming to a settlement with the players, that among other things provided that those who had careers of at least 5 years, but ended before 1965, should also be included in the pension. Former NBA player and lawyer Jack Marin, who spent the last twenty years leading a fight pension for plan improvements in each new collective bargaining agreement said:

In regard to the issue of so-called “Pre-65ers,” those players whose service predated the NBA Players Pension Plan, think it is fair to conclude that the extension of benefits to previously un-covered workers such as these who last served their companies more than 20 years before may be a unique act of collective generosity from current owners and workers in any business anytime and anywhere. Slow but steady progress over the years has finally produced a result that may have come as close as reasonably possible to unifying our entire family. This is truly remarkable.

Marin became involved after receiving a phone call from NBRPA founder Dave Bing, who asked Jack if he had any interest in getting involved in fighting for a better pension plan for NBA players.  A veteran of 11 seasons, who was drafted in 1966 three picks behind Bing, at the time was a practicing lawyer and agent and had both personal and professional interests in improving the plan. He agreed to help Bing and the retired players association.

Because of his work as a certified player-agent and his status as a pension plan participant, Marin had at hand the research materials he needed. A thorough reading of the then current CBA coupled with an understanding of the condition of the pension plan led him to the conclusion that the pension plan should have been increasing as the NBA salary cap increased, and it was not. Jack called Ron Klempner, then a young lawyer working at the NBPA to be sure of his conclusion. Klempner’s one-word response was “Wow!” The two lawyers were in agreement that this provision of the agreement were not being implemented that the pension plan was not being funded commensurate with the increase in salary cap.

Shortly thereafter a meeting, that turned out to be quite cordial and constructive, was set up with league officials including David Stern, its pension administrators along with all founding members of the NBRPA, its general counsel and, of course, Marin.

In addition to correcting what was clearly an oversight, Jack advocated maximizing the pension plan going forward up to the limits of federal law. He argued that doing so was as much for the benefit of current players as it was for retirees.  His argument carried the day and this was made part of the next collective bargaining agreement. The Pension plan increased by 42% the following year and since then has approximately tripled. Players at the age of 62 or over now receive $210,000 per year, while players at the age of 50 receive about one-third of that in an actuarially equivalent benefit.

Success in maintaining the pension plan’s maximized benefit has not always come easily. There are always competing uses for dollars in every enterprise. Allocations among salaries and various benefits must be arrived at with each having its own advocates. One particular sticky issue arose in 1999 when the players association implemented a 401k plan in addition to the pension. At that time federal law limited the total amount of money that could be put in so-called qualified plans like these two. This became a huge point of contention, as some supported the 401k plan, whereas Marin and the NBRPA, for whom he and his firm Williams Mullen had become chief counsel strongly supported the pension plan. This was in large part because the latter had much lower risks for the players, and left most of the risk to the team owners. Strong arguments were made for each plan, coming to a head on All-Star Weekend in Los Angeles in 2004 where happily for all players, the pension plan retained its place as the preferred retirement vehicle.  In 2006, federal law was changed such that a 401k plan and pension plan could be independently and fully funded. Marin credits Ron Klempner, his old friend and now senior counsel for collective bargaining at the NBPA, for much of the success. “Without Ron’s steadfast belief in the value of the pension for all players and his capable advocacy for it within that organization, the plan would probably have been watered down.”

The pension plan today is among the best in professional sports. It has benefited former NBA players tremendously, and despite the richness of player salaries today, will stand as a valuable safety net for current ones.

Summing it all up, Marin said, “I may have found an opening and spearheaded the effort, but without the advocacy of Ron Klempner at the NBPA, the compassion of NBA Commissioner David Stern, the cooperation of active players along the way, the power, prestige and commitment of greats like Oscar Robertson, Dave Bing, Dave DeBusschere, Archie Clark and Dave Cowens, the foresight of a player rep like Pat Garrity, and professional leadership at the NBRPA in Mel Davis, this mountain would have been far more difficult to climb. Every good coach preaches teamwork, and there is a good reason for it, no matter what the challenge. It’s a lot more fun this way, too.”