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May 09, 2011
The LPGA beat the men to the punch, but its plan is nowhere near as lucrative
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May 09, 2011

A Rainy-day Fund

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The LPGA beat the men to the punch, but its plan is nowhere near as lucrative

In 1982, about six months before the PGA Tour unveiled its retirement plan, the LPGA rolled out an initiative of its own. The plan sets aside money in an active player's account, based on the number of tournaments played and official dollars earned. (An active player is defined as one who plays 10 tournaments a year, or one-third of the official events on the schedule, whichever is less.) A player becomes 100% vested after competing in at least 10 tournaments for 10 years. The player selects her investment vehicles from a collection of mutual funds. Changes can be made once a year. Money is distributed when a player reaches age 50 or two years after she stops playing, whichever is later. Depending on the account balance, the plan participant may receive a lump-sum payment or a 25-year annuity.

Dottie Pepper starred on the LPGA tour for 17 years. She played in 298 events, made 257 cuts, won 17 times and pocketed $6,827,284. In March 2007, two years after she retired, Pepper received a distribution of $101,600 from a second supplemental retirement account. (In 1995 the LPGA introduced a plan that allows players to set aside a maximum dollar amount as deferred compensation.) Pepper paid the tax due on the $101,600 and reinvested. As of last Thursday her new fund was valued at $124,600.

"It was groundbreaking in the world of independent-contractor sports," Pepper says of the LPGA initiative. "It is not a pension plan because there is no employer-employee relationship or union involvement such as there is with baseball, the NFL, the NBA. The LPGA plans were never sold as something to live on. Rather, they were considered supplemental vehicles for saving for retirement, a rainy-day fund, so to speak."