Report 2004-134 Summary - July 2005

State Athletic Commission:

The Current Boxers' Pension Plan Benefits Only a Few and Is Poorly Administered

HIGHLIGHTS

Our review of the State Athletic Commission (commission) and the boxers' pension plan revealed that:

  • Under the current plan only four boxers per year are vesting.
  • The current plan will likely give an average 55-year-old vested boxer a pension benefit of $170 per month, while the original plan would have paid $98 per month.
  • During the four-year period from 2001 through 2004, payments for pension plan administration costs were six times greater than the amount of benefits paid to boxers.
  • Since the inception of the current plan, the commission met the minimum funding requirement in only one out of nine years.
  • Poor administration of the pension plan resulted in untimely recording of pension contributions, inaccurate reporting of boxers' eligibility status, and incorrect account balances.

RESULTS IN BRIEF

To provide a small amount of financial security for professional boxers, the Legislature authorized the creation of a boxers' pension plan and gave the State Athletic Commission (commission) exclusive control of all funds in the plan. In 1982 the commission established a defined benefit plan (original plan), which promised participants a specific monthly benefit at retirement. Boxers, managers, and promoters were required to make contributions to this plan. The original plan was changed to a defined contribution plan (current plan) on May 1, 1996. Under the current plan, no specific benefits are promised. Rather, benefits depend on the size of an individual boxer's account, which is partially determined by total ticket sales during the years in which the boxer fights. On December 31, 2003, the boxers' individual pension accounts totaled $3.39 million.

Only a small percentage of participating boxers will ever receive a pension. Under the original plan, an average of 37 boxers a year vested, which means they will be eligible for benefits upon retirement. The current plan requires four years of participation before qualifying for benefits rather than the three required by the original plan; this contributed to lowering the average of new boxers vesting to four per year. We considered the impact of eliminating the requirement that boxers must fight at least 10 scheduled rounds during any 36 consecutive months (break in service) while keeping the requirement of 75 rounds regardless of the number of years it took to fight them. This liberalizing of the vesting criteria would only increase the average annual number of boxers vesting from four to 10.

While the original plan guaranteed a specified small pension, the current plan may allow a larger pension benefit. Under the original plan's age 55 benefit rate of 80 cents per month per round fought, boxers currently at age 50 to 54 would have qualified for a pension benefit averaging $98 per month. Based on the size of these boxers' accounts, the current plan will likely give them a benefit rate of $1.39 per month per round fought, or $170 per month.

During the four-year period from 2001 through 2004, benefits distributed to boxers totaled $36,000 while payments for administrative costs totaled $227,000, six times the amount of benefit payments to boxers. It is also unlikely that benefit payments will exceed administrative costs on a consistent basis in the near future.

The commission has many problems with its day-to-day administration of the boxers' pension plan. For example, it has not adjusted its 88-cent-per-ticket pension contribution assessment in order to meet the minimum funding level for the current plan as required by law. According to a March 1996 memo from the Department of Consumers Affairs (Consumer Affairs) legal office to the then executive officer of the commission, the base amount to fund the current plan would be $95,000 beginning in 1996, and it would increase annually thereafter based on the consumer price index applicable to California. The commission only met the target in one of nine years and to date has undercollected by a total of $300,000.

Additionally, the commission is both slow and inaccurate in performing its administrative duties related to the boxers' pension plan. Problems include untimely depositing of incoming checks to the Consumer Affairs bank account, untimely remittance of pension contributions to the State Treasurer's Office, and missing support documents. Lastly, the commission's lack of monitoring may have contributed to the pension plan administrator's errors in determining boxers' eligibility going undetected.

RECOMMENDATIONS

The Legislature may want to reconsider the need for a pension plan for retired professional boxers since so few boxers annually meet the current criteria of a professional boxer.

If the Legislature decides to continue the boxers' pension plan, we recommend the following steps:

  • If the commission believes the current vesting criteria exclude professional boxers for which the pension plan was intended, the commission should consider eliminating the break in service requirement and/or reducing from four to three the number of calendar years that a boxer must fight.
  • To maximize pension fund assets, the commission should do the following:
    • Raise the ticket assessment to meet targeted pension contributions as required by the law.
    • Promptly remit pension contributions from Consumer Affairs bank account to the boxers' pension fund.
  • To ensure receipts are deposited in a timely manner, the commission should implement the corrective action proposed by the acting executive officer to Consumer Affairs related to ensuring timely deposit of checks.
  • To ensure boxers' information concerning eligibility status and pension account balances are accurate, the commission should do the following:
    • Retain all official documents from each boxing contest.
    • Immediately work with the pension plan administrator to correct errors related to boxers' eligibility status and account balances.
    • Periodically review a sample of newly vested and pending boxers, and verify their eligibility status and pension account balances.

AGENCY COMMENTS

The commission agrees with the findings and conclusions. In addition, the commission agrees with the recommendations and plans to address them promptly.


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