The CBA Glossary
An explainer thing for the NBA's Collective Bargaining Agreement
Pensions
NBA players, clearly, make a lot of money. But they get more than just that.
Standard waiver rules Tax calculations Tax Rates Repeater taxPensions
1. Contract "Years of Service" ? Benefits eligibility The NBA defines "Years of Service" in this agreement, but that definition cannot be used to determine eligibility for any player benefits. So it does not count for things like: Pension Plan 401(k) Plan Health and Welfare benefits (including retiree medical coverage) Health Reimbursement Accounts (HRA) Tuition reimbursement Post-career income programs In short: contract accounting rules do not control retirement or benefit entitlements. 2. Separate system for benefits credit Instead, players earn benefit credit only through a different system, based on: The specific rules in the NBA's benefit plans (Article IV programs), not this definition of service years. So even if a player has "Years of Service" under the contract rules, that alone doesn't automatically increase pension or healthcare eligibility. 3. When this "Years of Service" definition does apply This section's definition only applies to: Seasons covered under this current Collective Bargaining Agreement Meaning it is forward-looking and limited in scope. 4. Older seasons use older rules For seasons before the 2005 CBA, service credit is determined using the rules from the 1999 CBA, not this agreement or the current definition. Simple Example A player has 6 "Years of Service" under the current contract definition. That does not automatically mean 6 years toward pension eligibility. Pension eligibility is calculated separately under the benefit plan rules. One-Sentence Version "Years of Service" in this agreement is only used for contract-related purposes and cannot be used to determine pension or other benefit eligibility, which are calculated separately under the NBA's benefit plans and older CBA rules for earlier seasons.
Under no circumstances shall the definition of Years of Service
herein be used for purposes of determining a player’s years of credited
eligibility, benefit, and/or vesting service under any benefit plan or program
provided for under Article IV of this Agreement, including, without
limitation, the Pension Plan, 401(k) Plan, Health and Welfare Benefit Plan
(including the Retiree Medical Plan, HRA Benefit, and tuition
reimbursement program), or Post-Career Income Plan. Players shall be
credited with Years of Service pursuant to this Section 1(iiii) only in respect
of Seasons covered by this Agreement. Years of Service credit for Seasons
prior to the 2005 NBA/NBPA Collective Bargaining Agreement shall be
determined in accordance with the provisions of the 1999 NBA/NBPA
Collective Bargaining Agreement.
Standard waiver rules Tax calculations Tax Rates Repeater tax
MAIN TAKEAWAYS:
- The more your team are over the luxury tax threshold, the more your team will pay.
- The more regularly your team is over the luxury tax threshold, the more your team will pay, too.
- Teams under the tax threshold not only avoid penalty, but get rebates, which do not change their salary cap picture but which do improve the cash position.
- In addition to the luxury tax - whose effectiveness as a payroll deterrent had dwindled in light of the Golden State Warriors' extravagant spending - the NBA has recently introduced the "apron" thresholds, which exist in addition to the tax, and which are designed to reduce excessive spending not just through extra payments but through reduced spending options. See the Aprons page for more.