Buyouts and Recapture Penalties

[CalgaryFan1988]

Does this affect Luongo? Please say it does and that now he's untradeable, please.

Sorry, just seen Robbob's post.

[killer_carlson]

Great thread here. Fantastic catch.

I still want more info as to the methodology of this. Is it to essentially reset the cap hit sans the missing lowball seasons?

Why does the penalty get greater the longer the player plays? I assume it is related to the benefit the team recieved year after year increasing, but am not sure.

There are going to be some big cheques cut this year...wow.

[Bend it like Bourgeois]

Originally Posted by killer_carlson

Great thread here. Fantastic catch.

I still want more info as to the methodology of this. Is it to essentially reset the cap hit sans the missing lowball seasons?

Why does the penalty get greater the longer the player plays? I assume it is related to the benefit the team recieved year after year increasing, but am not sure.

There are going to be some big cheques cut this year...wow.

This might help: http://www.capgeek.com/new-cba/

CAP ADVANTAGE RECAPTURE (Roberto Luongo Rule)
Teams receiving a “cap advantage” from long-term contracts — defined as seven years or more for contracts signed prior to the January 2013 CBA — will be penalized in the event the player retires or “defects” from the NHL before the contract expires. A team receives a “cap advantage” when the player’s actual salary exceeds his cap hit in a given year.
Following retirement/defection, the “advantage” will be “recaptured” and charged against the club’s cap in equal amounts each year until the contract expires. This penalty applies to any team that received a cap advantage from the contract — ie. a traded contract — except in the event that the trade occurred prior to the new CBA coming into place in January 2013.
Teams do not receive a credit for seasons with negative cap benefit (where cap hit exceeds salary), the league confirmed to CapGeek.com.
Please note, contracts that fall under the "over-35" rule do not qualify for cap benefit recapture, the NHL has confirmed.

[Jacks]

It's a bit confusing but take Brad Richards contract for example.

LENGTH: 9 YEAR(S) VALUE: $60,000,000
2011-12 $12,000,000
2012-13 $12,000,000
2013-14 $9,000,000
2014-15 $8,500,000
2015-16 $8,500,000
2016-17 $7,000,000
2017-18 $1,000,000
2018-19 $1,000,000
2019-20 $1,000,000

They are penalized for the years where his salary exceeds the cap hit but they are not credited for the years where it is lower.

2011-12 actual pay $12,000,000 cap hit $6,666,667
The difference is $5,333,333

2011-12 $12,000,000 - $6,666,667 = $5,333,333
2012-13 $12,000,000 - $6,666,667 = $5,333,333
2013-14 $9,000,000 - $6,666,667 = $2,333,333
2014-15 $8,500,000 - $6,666,667 = $1,833,333
2015-16 $8,500,000 - $6,666,667 = $1,833,333
2016-17 $7,000,000 - $6,666,667 = $333,333
2017-18 Salary is lower than cap hit
2018-19 Salary is lower than cap hit
2019-20 Salary is lower than cap hit

Total benefit rounds up to $17,000,000, the penalty is then spread over the remaining years on his contract after he retires. so if he retires in 2017 then the cap hit is $5,666,667 over 3 years. If he retires in 2019 then the cap hit is $17,000,000 for 1 year. If he plays out the whole contract there is no penalty but that isn't likely to happen.

[ricardodw]

Erhoff has already accumulated 10M in buried cap

Detroit has Zetterberg getting paid 7.3 to 7.75 while they have a cap hit of 6.08 He is 32 and has 8 years left on his contract

Franzen averaging 5.25 in salary and cap of under 4... He is 33 and has 7 years left.


Kronwall (age 32) just signed a 7 year deal that saves 1.25 in cap space until he retires at 38 with 2 years left on his contract.


This CBA is nasty to the Wings.

[SebC]

Wouldn't the more logical rule be that only the remaing cap advantage gets recaptured? Or just make it so that when a player retires, his cap hit stays? These penalties seems excessive (to the point that I have a hard time believing they're even correct).

[GGG]

I for see long term injuries to a lot of these players. Their injury will me not good enough to play due to age. The LITR seems the only loop hole left. The other might be t o suspend he player but does that count as a defevction?

[Robbob]

Originally Posted by SebC

Wouldn't the more logical rule be that only the remaing cap advantage gets recaptured? Or just make it so that when a player retires, his cap hit stays? These penalties seems excessive (to the point that I have a hard time believing they're even correct).

the whole backloading issue is that years were added so teams and players could get substantial money in the first few years. Looking at most of these contracts the big cap advantage years have already been played. This is essentially a poison pill to punish the teams for circumventing the cap in a legalish manner. The fact that even if the contract is traded the original signing club still being on the hook is a big f you from the NHL. Teams can either buy out for big money or get an untimely cap hit for term left after retiring.

[Robbob]

Originally Posted by GGG

I for see long term injuries to a lot of these players. Their injury will me not good enough to play due to age. The LITR seems the only loop hole left. The other might be t o suspend he player but does that count as a defevction?

these contracts aren't insurable so it will still be money out of pocket, plus the NHL doctors review litr cases to make sure they pass the smell test. Diminished ability would not be a legitimate reason.

[PeteMoss]

Originally Posted by Vinny01

Agreed but Feaster offered Richards an 8 or 9 year deal at $7M per. We are lucky he chose NY

I don't see how you can blame Feaster or any of these teams that signed these contracts for a rule that came into place after these contracts were signed. Unless they had a magic ball its pretty hard to plan for rules you don't know will exist.

EDIT: The Richards contract would have been stupid even without this rule.

[GGG]

Originally Posted by Robbob

these contracts aren't insurable so it will still be money out of pocket, plus the NHL doctors review litr cases to make sure they pass the smell test. Diminished ability would not be a legitimate reason.

The cost isn't an issue to the teams that signed these contracts. 1 million dollars for 5 million in cap space is a pretty good trade off. 1 million for 17 million in cap space is a no brainer. Doctors would look at them but take a look at whats his name in Vacouver who got the eye injury. He could play hockey but was also injured enough to be on the LITR. Same with Warener in his last year in Calgary. At 38 a lot of these hockey players will be broken enough to go on the LITR for a year or so.

[Robbob]

Originally Posted by GGG

The cost isn't an issue to the teams that signed these contracts. 1 million dollars for 5 million in cap space is a pretty good trade off. 1 million for 17 million in cap space is a no brainer. Doctors would look at them but take a look at whats his name in Vacouver who got the eye injury. He could play hockey but was also injured enough to be on the LITR. Same with Warener in his last year in Calgary. At 38 a lot of these hockey players will be broken enough to go on the LITR for a year or so.

But the player can't be forced to stay if he wants to retire. A lot of time goes into training and if the player isn't up to it and wants to retire the team can't force him not to submit his retirement papers. Malholtra and Warener I think are different in they sustained pretty bad injuries. Warner din't have any cartilage left in his shoulder and Malholtra had a freak eye injury which I think both are special circumstances.

Can you think of any of the players that would stay a year or two once they have banked 80 to 100 million?

Bottom line there really are only a handful of contracts that have players playing well into their early 40's. Those are the contracts I think are specifically being targeted.

[ricardodw]

Marc Savard will stay on the LITR until his contract runs out in 5 years.

He was supposed to get paid $6.5M this last season and 5M next year. There is one vote to accept whatever the owners offer to stay off strike? (would his LITR payments stop during the work stoppage?)

If some Dr. says that he is concussion free and ready to resume his NHL career at age 36 the Bruins might have to injury him in training camp as if he retires they would lose 8-9 M of future cap space.

When Chara retires in 4 years at age 40 the Bruins will have few million knocked off their cap.


Can anyone explain how the signing bonuses impact the cap.


Look at Erhoff's and Chara's contracts.

It seems that Buffalo was able to get Erhoff 40M in salary plus 13M in signing bonus for a 4M cap hit over 10 years.

For Chara the cap hit goes down in the last year of his contract to 4M..... his actual salary should he be playing at age 42.

His salary 45.5 = his total cap hit but his cap hit is 6.916M for 6 years and then 4M for the last year. Why wouldn't his cap hit be 6.5M for the whole 7 years?


Chara's contract seem to be somewhat ethical with spreading out the cap hit a bit and a salary of 4M at age 42 rather than 1M.....

[GreenLantern]

Originally Posted by opendoor

Weber's is the worst. $33M penalty divided by however many years left on his deal when he retires. Though the Parise/Suter combo is pretty bad as well. $40M combined for the two of them.

For some of these guys I expect we'll see traditional buyouts near the end of their deals. For instance, here are the options for a guy like Hossa if he wants to call it quits with a couple of years left on his deal:

Cap recapture:

About $9M a year for 2 years
No cash spent


Traditional buyout:

$4.6M a year for 2 years and then $300K for 2 more years
$1.2M in salary paid


So the Hawks could spend $1.2M and gain abut $4.4M in cap space for those 2 seasons.

I was just going to say, can't they just wait and buy them out before they retire? Sort of a gentlemans agreement between the player and the team? What prevents this?

[getbak]

Originally Posted by ricardodw

Can anyone explain how the signing bonuses impact the cap.


Look at Erhoff's and Chara's contracts.

It seems that Buffalo was able to get Erhoff 40M in salary plus 13M in signing bonus for a 4M cap hit over 10 years.

For Chara the cap hit goes down in the last year of his contract to 4M..... his actual salary should he be playing at age 42.

His salary 45.5 = his total cap hit but his cap hit is 6.916M for 6 years and then 4M for the last year. Why wouldn't his cap hit be 6.5M for the whole 7 years?


Chara's contract seem to be somewhat ethical with spreading out the cap hit a bit and a salary of 4M at age 42 rather than 1M.....

Signing Bonuses are already included in the total compensation, they're not in addition to the regular salary. So, if Erhoff's total compensation for a season is $10M with an $8M signing bonus, that means he received an $8M lump sum payment upon activation of the contract, and $2M paid over the course of the season.

Chara's has two different cap hits because his contract was one of the ones affected by the agreement the league and PA made over the Kovalchuk contract. Any contract years that start after the player's 40th birthday are counted separately from the rest of the contract. The cap hit for any 40+ year is charged at the full compensation level for that season.

[ricardodw]

Originally Posted by GreenLantern

I was just going to say, can't they just wait and buy them out before they retire? Sort of a gentlemans agreement between the player and the team? What prevents this?

The buyout results in retaining the cap.

If the wings buyout Zetterberg June15 2018 when he is 37 they are left with a cap hit and no Zetterberg in the line-up for 6 years

from capgeek

2018-19: $3,327,778
2019-20: $5,677,778
2020-21: $5,677,778
2021-22: $594,444
2022-23: $594,444
2023-24: $594,444


The plan was to have zetterberg retire at 37 and come off the Wings books after getting paid a pile more money than allowed under the cap.

[You Need a Thneed]

I don't believe that these huge numbers in the last year are correct. By the last year of the contract, most of the benefit of cap reduction is gone, as the player will have played a few years for less than the cap hit to mostly even it out.

The penalty is the worst when retiring in the off season before the salary drops below the cap hit.

The ways it's being stated here doesn't make any sense. The idea is to recapture the salary cap benefit received, not to severely punish the team on top of recapturing the benefit.

It should work out that a player retiring before the final year of a contract in which he would make 1 million but his cap hit is 5 million, that his team would have a $4 million recapture penalty in the following season, no matter what the contract terms were beforehand.

It doesn't make sense to "recapture" $17 million when the difference between the salary paid and the total cap hit to date is only $5 million.

[getbak]

I think CapGeek has grossly misinterpreted how this will be done. It doesn't make any sense to penalize a team worse if a player plays 9/10 of his contract than if he plays 6/10 of it.

I believe that when the league says a team won't receive a credit for a negative cap benefit it means that if a player is traded part-way through the contract, and at the end when the recapture is calculated, one team's recapture amount is less than zero, they won't receive a cap bonus for the negative recapture.

To really get an idea of how absurd that calculator is, look at Ovechkin. He has a 13 year contract that pays $9M per year for the first 6 years, and $10M per year for the final 7 years. Using the calculator, if he retired after playing 12 years of the contract, the recapture penalty would be $2.769M. The problem is that the way his contract is structured, the Capitals never receive any cap advantage on it. After 12 years, he will have been paid $114M, and the total charged against the cap will have been $114.46M. Somehow, they would be penalized nearly $3 million despite having negative cap benefit.



How it should work is to take the total amount the player has been paid and subtract the total amount that has been charged to the cap. If there is a positive difference, the amount is divided by the number of years remaining on the contract at the time of the player's retirement, and that's the total recapture value. That number would be split proportionally between all of the teams who received some cap hit benefit from the contract.

[You Need a Thneed]

Originally Posted by getbak

I think CapGeek has grossly misinterpreted how this will be done. It doesn't make any sense to penalize a team worse if a player plays 9/10 of his contract than if he plays 6/10 of it.

I believe that when the league says a team won't receive a credit for a negative cap benefit it means that if a player is traded part-way through the contract, and at the end when the recapture is calculated, one team's recapture amount is less than zero, they won't receive a cap bonus for the negative recapture.

To really get an idea of how absurd that calculator is, look at Ovechkin. He has a 13 year contract that pays $9M per year for the first 6 years, and $10M per year for the final 7 years. Using the calculator, if he retired after playing 12 years of the contract, the recapture penalty would be $2.769M. The problem is that the way his contract is structured, the Capitals never receive any cap advantage on it. After 12 years, he will have been paid $114M, and the total charged against the cap will have been $114.46M. Somehow, they would be penalized nearly $3 million despite having negative cap benefit.



How it should work is to take the total amount the player has been paid and subtract the total amount that has been charged to the cap. If there is a positive difference, the amount is divided by the number of years remaining on the contract at the time of the player's retirement, and that's the total recapture value. That number would be split proportionally between all of the teams who received some cap hit benefit from the contract.

Exactly. The blogs out there on this are wrong. Period.

The line about not receiving credit for negative benefit is only designed to keep teams from stockpiling cap space for future years. They can't GAIN cap space in future years, they can only lose cap space.

If there wan't such a clause, a team could sign a player to a long term contract, with a cheap year at the beginning, have the player retire after one year, and that team could have extra cap space the next year.

Capgeek's calculator used to actually calculate this correctly, but now it appears to be changed - likely due to this misinformation.

As I said before, the logic to get the numbers being talked about here doesn't make sense. Teams can still be screwed by a player retiring, but not to the silly extreme being talked about here.

I do think it is interesting that a player could be traded this offseason, never play for the original team again, but could all of a sudden take some cap space away from the original team ten years into the future.

[opendoor]

Originally Posted by Robbob

But the player can't be forced to stay if he wants to retire. A lot of time goes into training and if the player isn't up to it and wants to retire the team can't force him not to submit his retirement papers. Malholtra and Warener I think are different in they sustained pretty bad injuries. Warner din't have any cartilage left in his shoulder and Malholtra had a freak eye injury which I think both are special circumstances.

Can you think of any of the players that would stay a year or two once they have banked 80 to 100 million?

Bottom line there really are only a handful of contracts that have players playing well into their early 40's. Those are the contracts I think are specifically being targeted.

Why wouldn't a player agree to still get paid while he sits on LTIR? It's not like he actually has to do anything; it's free money.