The first of July is “Bobby Bonilla Day,” informally celebrated to highlight what some call the “greatest retirement plan in history,” which still benefits the long-retired Major League Baseball superstar and in a roundabout way involves Bernie Madoff’s Ponzi scheme.
Just as he has every year since 2011, today Bonilla receives a check for $1,193,248.20 from the New York Mets, and will continue to do so every July 1 through 2035.
It happens even though Bonilla last played for the Mets in 1999 and retired from baseball in 2001.
Heck, the 56-year-old Bonilla is making more from the Mets this year than 2019 All-Stars Pete Alonso and Jeff McNeil—COMBINED!
How did this happen?
It’s an interesting deferred compensation story that typically makes news every year at this time when payment is delivered.
“Nobody really knew about it until it came due,” Bonilla told Yahoo Finance recently in a rare interview. “All of a sudden, people had realized that me and Dennis had put this away 15, 20 years ago. So it was pretty funny that all of a sudden now it became this thing. And every time I look at Dennis, I say, ‘thank you.’”
“Dennis” would be Bonilla’s agent Dennis Gilbert, who negotiated the deal with the Mets that bought out the final year and $5.9 million due Bonilla for the 2000 season after a disastrous 1999 season where he batted just .160 in 60 games.
The Mets needed money immediately to pursue free agents, so they released Bonilla in January 2000.
But instead of accepting the $5.9 million up front, Gilbert and Bonilla agreed to defer the money for a little more than a decade in exchange for a guaranteed 8% interest rate.
By 2011, the $5.9 million had grown to $29.8 million. Spread across 25 years until 2035 results in the 1,193,248.20 annual payment. Bonilla is expected to bank an extra $23.9 million by waiting a decade for his first payment.
Not a bad little retirement plan, which will pay him that $1.19 million every July until he is 72 years old.
Why the Mets agreed to the deal
Bonilla, a six-time MLB all-star and winner of three Silver Slugger awards over the course of his illustrious career, rejoined the Mets in 1999 via trade after a couple of seasons with the Dodgers following the Marlins’ talent purge in 1998 (Bonilla won his only World Series with the Marlins in 1997).
Bonilla called that 1999 season with the Mets his “most difficult year in baseball,” and his struggles on the field extended to rifts with Mets management and the notoriously difficult New Yok media.
Because Mets owner Fred Wilpon was heavily invested in Bernie Madoff’s historic Ponzi scheme, which was promising 10%-15% yearly returns, Wilpon was amenable to the salary deferral idea proposed by Gilbert and Bonilla.
Wilpon and the Mets figured they’d make a significant profit if the Madoff investment delivered as promised—which, of course, it didn’t. Madoff pleaded guilty to his scheme in 2009 after defrauding thousands of investors out of tens of billions of dollars.
But in spite of all this, the Bonilla “retirement” deal wasn’t all bad news for the Mets. Releasing Bonilla allowed the team to sign ace pitcher Mike Hampton, who would be named the 2000 NLCS MVP and help the Mets to the World Series that year (which they lost to the Yankees).
When Hampton then signed as a free agent with the Colorado Rockies after that season, the Mets received a supplemental draft choice for the 2001 MLB draft, which they turned into Mets legend David Wright, who played his entire 14-year MLB career with the team.
The deferred compensation route
In baseball, deferred compensation deals are not all that uncommon—and Bonilla’s wasn’t even the first one for the Mets.
Former star pitcher Bret Saberhagen receives $250,000 a year from the Mets for 25 years with payments that started in 2004. That deal was the original inspiration for Bonilla’s deal.
Former Boston Red Sox star outfielder Manny Ramirez has a deferred compensation contract, where the Red Sox owe him $31 million dollars through 2027.
Washington Nationals ace Max Scherzer’s current contract pays him $105 million, which will be paid out through 2028, long after the now 34-year-old Scherzer has thrown his last Major League pitch.
Scherzer signed a 7-year contract with the Nationals in 2015, and in exchange for pitching for them for those 7 years, the Nationals agreed to pay him $210 million in salary, which looks like $30 million per year. But the way the deal was structured, the Nationals pay Scherzer $15 million per season, but will be doing so for 14 years total; they deferred half of each season’s salary seven years into the future.
Effectively, they signed Scherzer for $105 million over the seven years that he’ll pitch for them, and then they’ll pay him the next $105 million after the contract ends, making this the most deferred money contract in baseball history.
Still, Bonilla’s deal remains the most famous case of deferred compensation in baseball—and the only one deemed worthy of its own “day.”
The much-publicized deal isn’t even Bonilla’s only one with the Mets. A second deferred compensation plan involving the Mets and Orioles started paying him $500,000 per year in 2004, and continues through 2029.
It’s no wonder Bonilla has nothing but kind words for his agent Dennis Gilbert.
“I’m a big believer in deferred compensation, and we recommend that for attorneys, doctors and everybody,” Gilbert told Yahoo Finance. “Remember it’s not what you make or what you have, it’s what you keep. And deferred compensation helps you keep your money.”
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
