The NBA pension plan is the crucial issue in a new Employee Retirement Income Security Act (ERISA) lawsuit. A player who spent ten seasons in the National Basketball Association received eight years of credited service towards his retirement and participated in the NBA pension plan from July 1991 through August 2001. According to an analysis, NBA players get some of the most generous benefits in their pension plans, but one player argues that the choices selected within the plan could deprive former players of a fair retirement. According to his allegations, the options presented to players could lead to them being blocked out of a reasonable cost of living adjustment that could add up significantly over time. That player also alleges that this choice in and of itself violates ERISA due to the structure of the NBA pension plan.
History of the NBA Pension Plan
The 1970 NBA pension plan agreed upon between the members and the NBA guaranteed retired NBA players a normal retirement pension in the form of a defined monthly benefit that begins on the first day of the first month following their normal retirement date. This was to be paid on the first day of each month up to and including the month in which the player passed away.
In addition to the normal retirement pension, the 1970 NBA pension plan offered an actuarial equivalent which leads to three different options that terminate prior to the player’s death; a single lump sum payment, instalments for a fixed period, or installments of fixed amount.
According to the new NBA pension plan lawsuit, this plan violates the ERISA because the actuarial equivalence that are offered to retired NBA players do not give those individuals a benefit of equivalent value when compared with a normal retirement pension. The failure to pay cost of living adjustments was noted as the primary reason why there is a financial inequity between an actuarial equivalent and a normal retirement pension.
The NBA pension plan lawsuit also argues that the plan as provided to NBA pensioners violates both IRS regulations and ERISA because those protections mandate that a pensioner has to receive an actuarial equivalent when compared with a pensioner who elects to receive a life annuity that is payable until death. In 1991, the plaintiff in this NBA pension plan case elected to receive early retirement benefits and signed his application for retirement benefits in June of 1991.
The retirement application offered to players in the NBA pension plan did not provide sufficient information about how future costs of living increases would be incorporated into the actuarial equivalent when compared with a normal retirement pension, says the lawsuit. According to the NBA pension plan lawsuit, the 2005, 2011, and 2017 collective bargaining agreements and revised versions of the retirement plan have not provided the plaintiff with an actuarial equivalent of the normal retirement pension including costs of living increases.
Do you believe that your pension plan violates ERISA regulations? If so, you may have grounds to pursue legal action- talk to our lawyers at Bradley/Grombacher today to learn more.
Note: Bradley/Grombacher is not representing the plaintiff in this lawsuit.