The Act requires the State Athletic Commission (the Commission) within the California Department of Consumer Affairs to establish a new state-run retirement benefit plan administered for the exclusive benefit of qualifying mixed martial artists and their beneficiaries. The Commission currently administers the Boxers’ Pension Fund for all professional and amateur boxing and kickboxing. This Act expands the role of the Commission to provide a similar retirement system for mixed martial artists called the Mixed Martial Arts Retirement Benefit Fund (the MMA Fund).
Effective January 1, 2024, the Act would add Sections 1888 et seq. to the California Business and Professions Code, which will govern the creation, funding, and administration of the MMA Fund.
Purpose
The Act and the creation of the MMA Fund are part of California’s health and safety regulatory scheme, designed to protect professional athletes. Bus. Prof. Code § 18888(d). Many athletes in the mixed martial arts trade suffer health-related hazards associated with their trade, and the purpose of the MMA Fund is to provide financial security to these individuals in retirement. Id., subd. (b)-(c).
Qualifications
There are two qualifications that must be met before an individual may receive benefits from the MMA Fund:
- The individual must be a “martial artist,” meaning “a licensed professional mixed martial artist, licensed professional kickboxer, licensed professional Muay Thai fighter, or athlete licensed by the [C]ommission other than a boxer.” Id. § 18888.1(b).
- The individual must participate in a Commission-sanctioned contest in California: Any martial artist who participates in a Commission-sanctioned contest in California on or after January 1, 2024 will become eligible to receive retirement benefits under the MMA Fund. Once a participating martial artist fights in at least 39 scheduled rounds in a Commission-sanctioned contest in California, such retirement benefits will become vested. Id. § 18888.1(e); Id. § 18888.6(b).
Benefits available from MMA Fund
Once such benefits are vested, participating martial artists are not entitled to distribution of the funds until they are at least 50 years of age. Id. § 18888.5(a). However, the Commission may award an early retirement benefit in its discretion to a participating martial artist who vested in the MMA Fund but is younger than 50 years of age, “for vocational, education, training, or medical need.” Id., subd. (b)(1). The Act also provides for benefits paid to the participating martial artist’s designated beneficiaries upon the participant’s death. Id. § 18888.5(e)(1).
Financing of MMA Fund
The Act requires the Commission to establish the methods for financing the MMA Fund, including which individuals will be required to make contributions. Id. § 18888.2. Methods of financing are limited to:
- An assessment of $1, which may be increased to a maximum of $2, per ticket sold for a professional MMA contest held in California.
- Sales revenue from special interest license plates and other Commission-branded items such as sports paraphernalia and souvenirs.
- Contributions by martial artists, managers, and/or promoters in an amount sufficient to finance the MMA Fund.
Notably, promoters may, but are not required to, add to the price of each ticket sold for professional MMA contests any amount they wish to specifically designate as a contribution or donation to the MMA Fund. Such additional amount will not be subject to any admissions taxes or any other deductions.
All contributions to finance the MMA Fund will be deposited in the California State Treasury and credited to the MMA Fund. Id. § 18888.3(b). Contributions will then be allocated to each participating martial artist’s regular account on the last day of the MMA Fund year according to the following calculations (Id., subd. (c):
- 50% of the contributions will be allocated based on each martial artist’s scheduled rounds fought during the then-current MMA Fund year in proportion to the total scheduled rounds fought by participating martial artists during the same period.
- 50% of the contributions will be allocated based on each martial artist’s total purses earned during the then-current MMA Fund year in proportion to the total purses for all fights fought by participating martial artists during the same period.
If a participating martial artist fails to become vested in the amount credited to the martial artist’s regular account before the martial artist’s death, the regular account will be forfeited and reallocated among the participating martial artists using similar calculations as described above. Id., subd. (d).
Comparison with other California government run public pension funds
The MMA Fund has several similarities to how state, county and local public retirement systems are run in California. Some of the fiduciary similarities are:
- Exclusive benefit rule: Monies in the MMA Fund can only be used exclusively for the purpose and administration of the MMA Fund. Id. § 18888.3(f).
- Actuarial competency: The Commission has the responsibility of ensuring that the MMA Fund is actuarially sound, requiring the Commission to conduct actuarial studies and valuations to achieve that goal. Id. § 18888.2(c).
- Prudent investment: The Commission is tasked with investing the monies in the MMA Fund so that the fund can pay out the promised retirement benefits. Investing fund assets allows the Commission to make up any shortfall in funding from the authorized methods of financing discussed above. As with other public pension retirement trustees, the Commission has a duty of prudence when investing, requiring the Commission to invest trust funds with “reasonable care, skill, and caution under the circumstances then prevailing that a prudent person acting in a like capacity would use.” Id. § 18888.3(g) (citing standard of care of Probate Code § 16040). In discharging its fiduciary duty of prudence in investments, the Commission may find useful the body of law applicable to California public pension funds as a reference point for guidance.
Reed Smith has a robust California public pension practice and can help navigate issues related to the newly created MMA Fund and the Commission’s administration of it.
Additional legislative background information
The Act was first introduced by California Assembly Member Matt Haney and coauthored by Assembly Members Blanca Pacheco, Wendy Carrillo, Robert Rivas, and Phil Ting. The Act also received support from the MMA community, including professional martial artists like Ronda Rousey, Cathilee “Cat” Zingano, and Josh Emmett, and even professional MMA referees like Mike Beltran.
Client Alert 2023-227
