Professional athlete

[LIBERTYKID]

Anyone have experience setting up a retirement plan for a professional athlete? Income will consist of endorsement $$$$. His salary is paid by the "league" and is subject to the league pension plan. Any insight, issues or links to articles on the subject is appreciated.

[Andy the Actuary]

Presumably, you are speaking of a DB plan with maximum benefits sponsored by a corporation whose purpose is to collect endorsement fees.

Apart from the obvious (415), your biggest challenge will be to get the parties to invest conservatively so as not to overfund. If possible, set the DB plan up to fund less than the maximum though the sizzle is the big deduction. Also, you will want to ensure that if 401(k)/PS contributions satisfy 404(a)(7) -- the 6% rule.

You would likely set up DB with age 62 but allow for immediate unreduced early retirement and an in-service normal retirement. The difficult part will be to justify any retirement age other than 62 unless you can demonstrate that their is a life expectancy to the endorsement period that say ends within x years of the athlete's retirement from professional sports. To help increase the value, you may be able to include the spouse (if there is a spouse) as an employee of the corporation.

Most important, seize control and do not make it incumbent upon the attorney or cpa to oversee and document. You will likely be the only one who truly understands the dynamics. The league pension should not affect what you're doing other than for long-term financial planning.

[mwyatt]

Assuming that endorsement dollars put you into 415 $ limitations rather than 100% of Comp limitations then the retirement age issue is somewhat moot. The NRA of 62 and an accrual pattern that gets the accrual to the 415 limit each year will generate same results as the subsidized early retirement (in this case, the PPA changes requiring funding of accrued benefit rather than spreading over working lifetime works in your favor).

To be honest, biggest issue with celebrity clients is investments (and the shaky characters involved in peddling investments that are attracted like moths to these types of clients). Buyer beware.