nonqual deferred compensation

It’s One of the Most Talked-About Nonqual Deferred Compensation Agreements in Sports

Fulcrum Partners Fulcrum Partners News

It’s July 1, and former Major League Baseball player, Bobby Bonilla, just banked another million or so of the estimated $29 million he draws from his extremely well-designed nonqual deferred compensation agreement with the New York Mets. Bobby Bonilla had a sixteen-year run in professional baseball. After helping the Pittsburgh Pirates take National League East Division titles in 1991 and 1992, Bonilla was acquired by the New York Mets, signing a five-year, 29-million-dollar contract. At the time, it made Bonilla the highest paid player in the National League.

But about this time, Bonilla’s career faltered. He had limited playing success in New York, followed by short-lived stints with the Orioles, the Marlins, and the Dodgers before winding up back with the Mets, which is when the dynamics of Bonilla’s subsequent exit agreement get really interesting.

Deferred Compensation for the Squeaking Wheel

Unhappy that his return to the Mets didn’t include starting for the team or even much playing time, Bonilla became a grumbling voice in the dugout, the locker room, and to the press. With both Bonilla and the Mets anxious to end the relationship, the Mets jumped at an agreement put forth by Bonilla’s agent.

Bobby Bonilla would exit the Mets, putting an end to the negativity, and he’d be perfectly happy waiting a decade to start drawing the nearly $6 million the Mets owed him at the time. There was only one caveat. When the money was paid, Bonilla would like to receive $1,193,248.20 on July 1, 2011, and again every year thereafter for 25 years.

The Potential Win-Win of Deferred Comp Agreements

Although the Mets are often criticized for entering into this nonqualified deferred compensation arrangement with Bonilla, what price do you put on a World Series appearance? The following year, free of the Bonilla drama and immediate cost, the Mets were able to trade for the Houston Astros’ Mike Hampton who helped lead the team to a National League Championship and the 2000 Subway Series run at the World Series.

Setting the value of a World Series appearance aside, this nonqualified deferred compensation agreement could have been more financially beneficial for the Mets had their owners not chosen to invest heavily with their personal friend, Bernie Madoff.

And according to Bloomberg BusinessWeek,  “Bobby Bonilla and the True Story Behind Baseball’s Most Notorious Contract,” Bonilla didn’t spend ten years empty handed. Instead, he benefited from, “a similar, smaller arrangement from Baltimore that kicked in before the Mets deal.”

Two lucrative nonqualified deferred compensation agreements? Well played Mr. Bonilla.

Sources used in preparing this article:

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