Here's what the CBA says on Deferred Salary...
Quote:
Deferred Salary
“Deferred Salary” means any Paragraph 1 Salary that is earned during the term of an SPC during which the services attributable to that Paragraph 1 Salary are performed, but is not paid until after the expiration of such SPC. By definition, Deferred Salary that is earned during the term of such an SPC may not be paid until after the expiration of such SPC. Player Salary denominated as “Deferred” but payable within the term of the SPC shall be counted in the League Year in which the Player Salary is paid and shall not be treated as Deferred Salary. For purposes of calculating your Club’s Actual Club Salary, Deferred Salary counts as Player Salary in the League Year in which the Player performs the services for which it is earned, at the Deferred Salary’s present value at 1-Year LIBOR plus one and one-quarter (1.25) percent at the time the SPC is registered (unless the Deferred Salary is to be paid with interest, in which case it counts in the League Year in which the Player performs the services for which it is earned, at the Deferred Salary’s stated cash amount). Other than Deferred Salary or Deferred Bonuses as set forth below, any other compensation must be paid in the year that it is earned.
For SPCs entered into prior to the date of the CBA any Deferred Salary that will be earned for services to be rendered during the 2012-13 League Year or any subsequent League Year should be included in your Club’s Actual Club Salary at its present value as previously determined at the time the SPC was registered.
Illustration #1: A Player signs a two-year SPC for the 2013-14 and the 2014-15 League Years. The SPC provides for Deferred Salary payable during the 2015- 16 League Year that is attributable to playing services for the 2013-14 League Year. Such Deferred Salary shall be paid to the Player in the 2015-16 League Year, but for purposes of reporting Actual Club Salary, the present value of such Deferred Salary shall be included in the 2013-14 League Year (assuming it was not to be provided with interest) and shall not be included in the 2015-16 League Year.
Illustration #2: An SPC entered into in the 2011-12 League Year and expiring after the 2012-13 League Year provides for Deferred Salary to a Player to be paid in 2014-15, for playing services rendered in 2012-13. Such Deferred Salary shall be paid to the Player in the 2014-15 League Year, but for purposes of reporting Actual Club Salary, the present value of such Deferred Salary shall be included in the 2012-13 League Year (assuming it was not to be provided with interest) and shall not be included in the 2013-14 League Year.
Illustration #3: A Player is owed Deferred Salary during the 2014-15 League Year that is attributable to playing services for the 2008-09 League Year. For purposes of reporting Actual Club Salary, such Deferred Salary shall not be included in the 2014-15 League Year. Please note that in the event of “Overage” or “Shortfall” as defined in subparagraph 50.11 (“Reconciliation and Distribution Procedures”) of Article 50, the amount of the actual deferred cash payment due (i.e., Club Obligation) relating to the League Year in which the Deferred Salary (or Deferred Bonus) was earned must be adjusted by the factor of the “Overage” or “Shortfall”. This, however, applies to the actual “deferred” cash obligation payment due only and not to the amount of Deferred Salary to be charged to Actual Club Salary pursuant to this Section.
|
Someone a lot smarter than me can decipher this, but as I understand it, basically it recognizes that a dollar today is worth more than a dollar in the future. To compensate for that, it uses a formula to ensure the money you have on hand today (plus any gains that money will make in future) can cover the payments you will make in the future.
If I understand it correctly, they're not really getting away with a trick here. It's essentially an agreement between the player and team to say he will defer some part of the money he earned in a given season to after the end of the contract and as compensation, the team will pay him slightly more money when they pay out that deferment.
Whether this is a good deal for the player or the team depends on how good that calculation is.