Every year the MLBPA or the Major League Baseball Player's Association speaks during Spring Training to players.
Every year the messaging sounds the same and usually has some combination of this:
"You will be a former player a lot longer than you are a current player so make sure you understand all of your benefits."
One thing I realize now more than ever before is retirement planning as a professional athlete starts with understanding service time and league benefits.
Players from year 1 to year 5 hear this message and typically gloss over it. Players 5+ years in have seen enough to understand baseball doesn't last forever and those benefits are real.
To receive nearly all of those benefits requires one key factor, service time.
Service time is a calculation done based on the number of days a MLB player spends on the active roster.
In this blog, I am going to break down the service time eligibility, benefits, and milestones players should know.
MLB Service Time
It is estimated that roughly 7% of MLB players will ever reach the holy grail of MLB service time, 10 years.
To understand why that milestone is like climbing Mount Everest, we have to understand how MLB service time works.
A full year of MLB service time is defined as 172 days at the Major League level.
Players only receive service time in one of two ways:
They are on the active 26-man roster
They are on the MLB injured list
A full major league season consists of 187 days which means to accrue a full credited season a player must be on the active roster for nearly 92% of those days (172 days/187 days).
A large number of players find themselves on the active roster for a portion of the season but not the entire year.
These players accrue partial years of MLB service time.
Consider this example:
Season 1 - 86 days of MLB service time or .50 credited years.
Season 2 - 180 days of MLB service time or 1.00 credited years.
Season 3 - 129 days of MLB service time or .75 credited years.
After 3 seasons this player has earned 2.25 years of MLB service time. So, while he has only been credited with one full year of MLB service time from start to finish, the partial seasons add to his overall total.
This is why you will hear many MLB players say things like:
"I have parts of nine seasons and a total of just over 4 years of MLB service."
Their collective service time total, for MLB benefits, is equal to 4 years but it took them nearly nine seasons to accrue that total.
MLB Service Time Milestones
There are six key milestones for MLB players when it comes to MLB service time.
Some are worth their weight in gold and some are worth more than gold itself, let me explain.
Milestone 1
The first milestone is one day of MLB service time. Let's not overlook the fact to reach just one day of big league service time you have overcome all odds.
Remember how I said some accomplishments are worth their weight in gold? Well, this is certainly one of them.
For the rest of your life, you are a big leaguer and part of a fraternity that few belong to.
Milestone 2
The first level of league benefits is reached by players who achieve 43 days of MLB service time. At 43 days of MLB service, players unlock two key benefits.
The first is team contributions to the MLB 401(k) plan. Each year teams contribute a certain amount to players' 401(k) plans based on how much teams go into the luxury tax.
For a player to be eligible to receive those benefits a player must be on the active roster for 43 days or one-quarter of the season. These team contributions are often north of $10,000 per quarter.
In addition to team 401(k) contributions, players become eligible for the MLB pension with 43 days of service time. These benefits start at $6,875 per year for a player if they wait until age 62. With each additional quarter up to 40 quarters (10 years), players collect an additional $6,875 per quarter.
Milestone 3
The milestone most young players look towards is three years of MLB service time. Three years of MLB service time unlocks a player's arbitration legibility.
This is the first step in a player garnering a yearly salary in line with their production. The arbitration process compares players to similar positions, stats, and outputs of previous players to determine a
Today the MLB minimum stands at $740,000, the highest it has ever been. Yet in arbitration, players can earn upwards of 5X that amount in their first year.
Milestone 4
This milestone is one active players overlook but retired players cherish, it is four years of MLB service time. While you are an active player, you receive full healthcare benefits paid for by the team but in retirement, it depends on your level of service time.
At four years of MLB service time, a player has the ability to stay on the MLB healthcare plan. Something that as a current player can be an afterthought but is at the forefront as a former player.
Milestone 5
The biggest active milestone for an MLB player is six years of MLB service time. Do you know those massive free-agent contracts headlining an ESPN cover story? Those only come after six years of MLB service time.
At six years of MLB service time, a player is awarded the most leverage of their career, MLB Free Agency.
You have earned the right to have any team in MLB sign you for the amount they value you at.
Something many fail to realize is just how hard it is for a player to reach this stage. Consider for a second what this journey looks like for a Major League Player.
Reach the big leagues
Perform well enough each year to reach arbitration
Perform better each year through arbitration (remember the team is giving you a raise each year)
Reach free agency playing at a level where teams are vying for your services
It is quite a road for a player to put himself in a position to capitalize on six years of MLB service time.
Milestone 6
The last and final milestone for an MLB player is 10 years of MLB service time. 10 years of MLB service time is looked at as the holy grail for MLB players. Less than 10% of MLB players will ever reach this plateau.
At 10 years of MLB service time, a player is eligible for full pension benefits. in 2024, full MLB pension benefits are $275,000 per year at the age of 62. A benefit that is worth millions of dollars in lifetime value.
MLB Service Time Benefits
MLB service time awards players three key benefits mentioned above.
Below is a further breakdown of the key points each of those benefits provides:
401(k) Benefits
In 2024, a player can contribute $23,000 in “pre-tax” money to his 401(k) plan. This means he would receive a tax deduction for his contribution.
Example: A player making $1,000,000 contributes $23,000 to the plan and has a taxable income of $977,000 instead of the full $1,000,000. A potential tax savings of more than $8,500 assuming the 37% federal tax bracket.
Unlike most company 401(k) plans the MLB 401(k) plan provides no match. Instead, teams provide direct contributions to players 401(k) plans.
The exact number is calculated based on the luxury tax teams’ pay.
MLB Pension Benefits
While most pensions are going away, the MLB pension remains. In fact, it is one of the best in the world.
Each year the pension benefits increase to the highest allowable by law.
In 2024, the current pension benefits are as follows:
43 days of MLB service time = $6,875 pear
1 year of MLB service = $27,500 per year
10 years of MLB service = $275,000 per year
Players receive these benefits with each quarter (43 days) of MLB service time they acquire.
To achieve full pension benefits players need to wait until age 62. Players do have early access to pension benefits at the age of 45.
MLB players need experts in athlete wealth management to provide calculations on when would be most optimal for them to take their pension benefits.
Health Care Benefits
While every player added to the 40-man roster is automatically added to the MLB health care plan, certain service time thresholds provide additional benefits.
Players who acquire four years of MLB service time are eligible to stay on the health care plan in retirement.
Players who choose to stay on the plan are required to cover the premium (cost of the policy) payments.
A few key notes on the policy:
· Enrollment/Changes to the policy are due by opening day.
· There are three policy options (active, base, and buy down).
· Each policy option provides varying benefits and premium amounts.
· If a player elects to move off the plan, he cannot get back on the plan.
Players must understand this benefit and how it works.
MLB Service Time Things To Know
MLB service time provides players benefits that can equate to millions of dollars in lifetime benefits. As a player, the key is ensuring you have the right team of advisors who understand these benefits.
This is not the time to be putting your trust in someone who is learning about your situation.
You want to make sure your team has the:
Knowledge to maximize this
Experience to provide options
Willingness to make this a priority
I have seen far too many players come to us unaware of these benefits or how they work. As a result, many failed to maximize or create a plan that incorporates these benefits.
MLB service time isn't just the cherry on top of the benefits you receive as an MLB player. I would argue it is an entire piece of the pie.
It should not be overlooked the role that MLB service time players in retirement planning as a professional athlete.
If you are a current or former Major League Baseball player looking for help understanding the MLB service time schedule a call with our team.
Get in Touch With An Advisor
Frequently Asked Questions
Here are some answers to questions received regarding MLB service time:
How do MLB players collect service time? Players collect service time by either being on the active roster or on the MLB injured list.
Do players on the Injured list accrue service time? Players who are on the MLB injured list do accrue service time. It is important to note that players on the MiLB injured list do not accrue service time.
What are the key benefits of MLB service time? There are four key benefits of MLB service time. They are contract status, healthcare benefits, MLB 401(k) benefits, and MLB pension benefits.
What percentage of players achieve 10 years of MLB service time? The MLBPA estimates that less than 10% of MLB players achieve 10 years of MLB service time.
What should current players know about MLB service time? MLB players should understand that service time can unlock benefits valued at millions of dollars. It is important for MLB players to be planning for how to maximize these strategies both as a current player and as a former player.
What should retired players know about MLB service time? Retired players should understand what their service time affords them in lifetime benefits. The two most common benefits retired players can have access to are the MLB pension and the MLB healthcare plan.
*Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.
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