Deferred Compensation Agreement is a Multi-Million Dollar Home Run

This Deferred Compensation Agreement Is a Multi-Million Dollar Home Run

Fulcrum Partners. Deferred Compensation News

How does your retirement plan stack up to Bobby Bonilla’s deferred compensation agreement?

If July 1, 2020 came and passed and you didn’t realize it was “Bobby Bonilla Day”, don’t worry. He probably did enough celebrating to make up for anyone else who missed the date.

You see, each year on the first day of July, Bonilla, a former Major League Baseball third baseman, receives a $1,193,248.20 pay out from the New York Mets.

And he hasn’t played professional baseball in 19 years.

Fifty-seven-year-old Bronx-born Bonilla retired from baseball in 2001 after a less-than-stellar season with the St. Louis Cardinals. His last year with the Mets was 1999.

After roughly 20 years in the game, and All-Star fame, Bonilla’s career was already waning when the Mets signed him to a 5-year contract. In January 2000, the Mets cut him with a year still left to go on the agreement. Rather than accept the $5.9 million owed him, Bonilla wisely signed a deferred compensation agreement that would allow him to defer receipt of the money in exchange for receiving 8 percent interest on the amount owed.

Bobby Bonilla’s Deferred Compensation Agreement

Bonilla’s deferred compensation agreement payouts reportedly* commenced in 2011 and will end in 2035. Per the timing and form of his agreement with the Mets, Bonilla’s $5.9 million had, with interest, more than doubled, reaching what we estimate to be, nearly $13 million with a total payout to Bonilla over the years of more than $29 million. Divided into 25 equal payments, Bonilla picks up a single payment each year worth more than the annual pay of many Major Leaguers still actively in the game.

Ironically, the arrangement could have been a win-win for both Bonilla and the Mets. As Dan Mullen explains on his ESPN.com article, It’s Bobby Bonilla Day! Why Mets pay him $1.19 million today and every July 1, “At the time, Mets ownership was invested in a Bernie Madoff account that promised double-digit returns, and the Mets were poised to make a significant profit if the Madoff account delivered — but that did not work out.”

But for Bonilla, the story keeps getting better. Bonilla had entered into not one but two deferred pay agreements with the Mets. Jointly with the Baltimore Orioles, the Mets have been paying him an additional $500,000 annually since 2004, a deferred comp arrangement that will remain in effect until 2029.

#retirement #deferredcompensation #deferredpay #BobbyBonillaDay

*Sources used in the preparation of this article:

ESPN: www.espn.com/mlb/story/_/id/29388441/bobby-bonilla-day-why-mets-pay-119-million-today-every-july-1

CBS Sports: http://www.cbssports.com/mlb/news/its-july-1-and-that-means-bobby-bonilla-is-getting-paid-by-the-mets-today

MarketWatch: https://www.marketwatch.com/story/the-mets-are-paying-bobby-bonilla-over-1-million-a-year-because-of-bernie-madoff-2015-07-01

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

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