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https://www.dailyfaceoff.com/news/so...rred-structure

The Carolina Hurricanes and restricted free agent Seth Jarvis have agreed to terms on a new eight-year, $63.2 million contract, sources tell Daily Faceoff. It’s an important piece of business for the Canes, locking up the heartbeat of their team for the foreseeable future, but the way the contract is structured may be important business for the NHL’s other 31 clubs.

That’s because Jarvis’ new deal is set to become one of the first in NHL history to have a salary cap hit substantially lower than the typical average annual value because he was willing to defer salary.

Nearly every NHL contract in the salary cap era, since 2005, has been prescribed a simple cap hit: Take the total dollars ($63.2 million) and divide it by the length of the deal (eight years) and you arrive at $7.9 million per year on the team’s salary cap chart. With this deal, Jarvis will land on the Canes’ books at approximately $7.5 million per year, a savings of $400,000 each season.

No source was willing to divulge precisely how much money has been deferred, or in which year(s) of the deal the money is deferred, but there is a deferred signing bonus payment that is scheduled for July 1, 2032 – which is one day after the contract officially expires on June 30, 2032.

Because that payment is technically scheduled for Year 9 of the eight-year deal, there is no Year 9 cap charge for the Hurricanes, and the cap hit for the Hurricanes over the course of the eight-year deal is charged on what is actually paid out during that time.

Deferred payments have been allowed in the Collective Bargaining Agreement, but to this point, the Hurricanes are believed to be the first NHL team to cross this threshold in a meaningful way. Sources indicated the NHL’s Central Registry and the NHL Players’ Association have been briefed and signed off on the structure of this deal before terms were agreed upon; the deal is expected to be registered on Saturday.

The NHL’s CBA calls for a time value of money discount calculation. It is easy to understand the value of money over time – we would all rather have $1 million today than $1 million three years from now. So, the NHL has a formula that estimates how much the time value of money is, based on the current interest rates, and adjusts for that. That way the $1 million that you deferred today for payment three years from now might only count on the books as if you received $850,000 today.

Of course, there is risk here. This type of contract structure requires understanding from Jarvis and his agent, Gerry Johannson of Edmonton-based The Sports Corportation, on a varying number of topics including investment vehicles, tax structures and elements, plus a healthy risk profile on things such as escrow rates, the possibility of a buyout or trade that could change every calculation. So, this was a mature conversation that evolved over the last two months to the point where everyone is comfortable, and Johannson and the NHLPA believe this is good for Jarvis – not just the Hurricanes. This deal was the brainchild of GM Eric Tulsky and his staff, which includes Darren Yorke, Aaron Schwartz and now Tyler Dellow, and there is risk for Carolina too, but it can be minimized or eliminated with returns on investment of the deferred money.