How The FedEx Cup Bonus Works
Players are paid in a mix of cash and deferred compensation.
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Today At A Glance:
The winner of the FedEx Cup Playoffs will take home $18 million. But the prize money won’t be all in cash. There will be some form of deferred compensation. Today’s newsletter breaks down the FedEx Cup bonus payouts.
Read Time: 4 minutes.
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Hey Golfers —
Tens of millions of dollars are at stake this week in Atlanta, Georgia — $75 million, to be exact. But the prize money may not be paid out how you think it is.
The FedEx Cup was announced in 2005 — and the inaugural season was played in 2007. Tiger Woods won $10 million for his first-place finish in the 2007 FedEx Cup Playoffs. But Tiger didn’t receive any money in 2007 — instead, the $10 million prize was paid in deferred compensation.
The payout model of the FedEx Cup bonuses has since changed — but it still incorporates deferred compensation as a part of the bonus. And it pays big to be in the Top 30 — we will get to that in a minute.
An ESPN article ran in 2007 stated that the PGA Tour was concerned about legislation regarding deferred compensation. And some stories theorized how Tiger Woods could have $1 billion in his retirement account at age 45. So the PGA Tour changed the 2008 FedEx Cup payout structure — $9 million would be paid in cash, and $1 million would be paid in deferred compensation. The payout model follows a similar form today.
Payouts have gotten larger — much larger. First place will receive a total of $18 million this year. The first-place prize was $10 million from 2007 — 2018. And in 2019 — the number jumped to $15 million. The last two years have been $18 million.
Rory McIlroy has dominated the FedEx Cup. Not only has he won three times — he has won $22 million more than the 2nd highest earner. Rory has won over $50 million during his career in FedEx Cup bonuses. That number is good enough for 14th all-time on the PGA Tour money list. And keep in mind — FedEx Cup bonus winnings aren’t included in the money list or career money list.
Back to the Top 30.
FedEx Cup bonuses are paid to the Top 150 places in the FedEx Cup standings. But 31st — 150th are paid in only deferred compensation. The Top 30 are paid in a mix of cash and deferred compensation.
While it’s nice to have money placed into your retirement account — most golfers won’t see that money for decades. Players in the Top 30 will see some form of cash for their high finish.
Deferred compensation payouts from 31st — 150th range from $250,000 at 31st to $85,000 at 150th.
Let’s take Harry Higgs, for example. He finished 144th on this year’s money list earning $684,000. He also will receive $85,000 in deferred compensation.
FedEx Cup bonuses are important to a golfer’s non-qualified deferred retirement plan. PGA Tour players have two ways to earn money for their retirement plans.
Cuts Plan
FedEx Cup Bonus Plan
The FedEx Cup bonus plan immediately vests for a golfer. Whereas the Cuts Plan takes five years to fully vest. And to have a year that counts in the Cuts Plan — a golfer must play in 15 PGA Tour events.
Golfers can begin taking money from their FedEx Cup bonus plan when they turn 45. The deferred compensation has a massive compounding effect.
Take Jordan Spieth, for example. He earned $10 million for his FedEx Cup win in 2015. For the victory — he collected $1 million in deferred compensation. Jordan was 22 years old. If that money earns 7% per year — he would see around $4.75 million at 45.
Tom Kim is the youngest player in the Tour Championship field at 21. I am sure the compounding effect of his deferred compensation is the last thing on his mind. But at minimum, he will earn $255,000 in his non-qualified deferred retirement plan. Whatever he makes this week in deferred compensation — could be worth five times as much when he’s 45.
Have yourself a great Monday. Talk to you next week!
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Every sport now days has huge compensation plans but it does seem like the Tours retirement fund for their players is a very nice plan. I would be interested to compare the PGA tour to other major sports entities like the MLB and NFL. There are more players who would technically be on the top stage of their sports like the 150 guys are for the PGA so I’m not sure how the comparison would work but it does sound interesting.
Also besides getting injury deferment time to recover from injuries do PGA players have the option of Tour supplied health insurance or do they have to select a private insurer?
Hi Jared. Are the deferred compensation funds placed into a Rabbi Trust or similar non-qualified entity? If so, those still remain assets of the PGA Tour until payout and would be subject to their creditors should something happen to the PGA Tour financially. That adds another element to the stress over the PGA/PIF deal and speculation with respect to the financial ramifications.