Defer your salary for 10 years — athletes do it, would you?Bill Sayer
Bobby Bonilla hasn’t played in an MLB game since retiring in 2001, but the New York Mets are paying him more than $1 million this year and will continue to until July 2035. Bonilla is collecting deferred compensation, an unusual but significant factor in pro-sports contracts.
Bonilla’s 1999 season with the Mets was a disaster. Hitting just .160, Bonilla still wanted his playing time and was arguing with coach Bobby Valentine. The worst incident came at the end of the season during Game 6 of the National League Championship series. While the rest of the team was fighting to stave off elimination in extra innings, Bonilla was playing cards with Rickey Henderson in the Mets clubhouse.
After that season, the Mets wanted to get rid of Bonilla at any cost. Bonilla had one year left in his contract with a guaranteed $5.9 million. The Mets wanted to buy out the final year so they could cut ties with him, but they also needed to use that cash to sign players. The two sides came to an agreement to defer payments until 2011-35, with a healthy 8 percent compound interest. That final year of his contract will be worth more than $29 million total, which will be paid to Bonilla in annual installments of $1,193,000 for 25 years.
While Bonilla’s story is exceptionally rich, it’s not unusual. Bonilla made a similar deal with the Orioles for a smaller amount. The Mets also are paying Bret Saberhagen $250,000 per year through 2029. My other favorite is former pro-football quarterback Steve Young.
Young came out of BYU in 1984 after a stellar college career with several NCAA records and a second-place finish in Heisman Trophy voting. The USFL was in its second year of existence, and billionaire J. William Oldenburg had bought the LA Express franchise with plans to spend big. The Express signed Young to what was then a record sports deal — $40 million for 10 years. The contract paid Young $5.9 million for four years, which was not unusual. On top of that, the team also purchased an annuity for Young valued at $34.5 million, to be paid out annually from 1990 to 2027.
For all of that compensation and over those years, Young would play less than two seasons for the Express. Oldenburg went bankrupt the following year following the savings and loan crises. The Express fell apart along with the USFL, and by 1985, Young was signed to the Tampa Bay Buccaneers. He is now working as a TV analyst, with 15 years of salary left from the Express deal.
Say your company wanted to use its funds for investment now. They offer to defer $25,000 of your 2012 compensation for 10 years at 5 percent interest. In 2022, this will be worth $40,772. Is this a deal you would take?
Bill Sayer is a financial analyst in the insurance industry and holds a degree in economics. A native of Upstate New York, Bill enjoys watching college football, the NFL, NHL and Premier League soccer from his home in Palmyra. Have a suggestion, link or question?