Red Sox cutting employee pension plans. Why?

In February, Major League Baseball gave teams the option to reduce benefits for non-uniformed personnel. At the time, Rob Manfred, Bud Selig’s successor to the job of commissioner of baseball, downplayed the change, stressing no teams had done such a thing yet.

Yesterday, the Red Sox were among the first group of teams to put this new rule into practice by cutting the pension plans of non-uniformed personnel such as scouts, front office workers, and clubhouse staff. Anyone vested in the plan already is not affected but new employees will not be able to reach vesting and subsequent employees will not have pensions as part of their compensation. The team says this gives the employee “more flexibility” since they don’t have control of how the pension money is invested, but it is guaranteed, unlike a 401(k) which can disappear if the market tanks, no matter how much the business increases the amount they will match from the employees. MLB stresses this increased contribution match as an offset for the cutting of pensions.

If you were an employee in an industry that had nine billion dollars of revenue, would you think the industry would have to start cutting pensions? If you were a worked for a member of that industry, which was valued at $1.5 billion by Forbes magazine, the third highest in the industry, would you think your benefits could get cut? The Postal Service is losing more than a billion dollars a year, yet it still has its pension plans.

In terms of the product of the field, or who gets traded for who, this doesn’t have much effect. It just speaks to the reality of the business side of baseball and the entertainment industry in general. Can anyone recall the outrage when it came out that Walmart was cutting health benefits for workers? As with Walmart, which continues to flourish, baseball, played professionally back to the 19th century (Cincinnati Reds are considered the first oldest professional team, established 1871), has become part of the fabric of society.

There is a certain segment of fans that say, “I don’t watch baseball anymore because the salaries are too high”. There are also some people who won’t shop at Walmart either. Yet, both of them roll on without much of a hitch and the average salary inches toward $4 million dollars. The Walton family, founders of Walmart, remain among the richest people in the world. But, it is well known, that Walmart does not have the best benefits. This practice is part of the reason they can offer such good prices. Should that be the same with Major League Baseball?

In the last two seasons, when the Red Sox ticket prices did not rise, you probably imagined that this meant they would have less money to pay for the team on the field. In cutting these pensions, the Red Sox, and all the other teams that follow suit in this practice, will find a quieter way to counteract that lack of increase in revenue: cutting benefits for employees.

Feel free to leave a comment about this new practice in Major League Baseball.