[Signing] Ducks re-sign Frank Vatrano (3 years, $4.57m AAV, deferred salary)

[Paulie Walnuts]

Originally Posted by The Cobra

Why would players want it removed? They aren’t force to take deferred payments.

If it’s something the owners love the players probably don’t want it.

This next CBA is going to be interesting. The NHL caved with the Olympics and international games with the 4 team exhibition series. That was a big bargaining chip previously.

[The Cobra]

Originally Posted by Paulie Walnuts

If it’s something the owners love the players probably don’t want it.

This next CBA is going to be interesting. The NHL caved with the Olympics and international games with the 4 team exhibition series. That was a big bargaining chip previously.

The owners don’t love it per se. it’s doesn’t help reduce the cap. It’s a tax planning tool used by owners and players by agreement.

[Enoch Root]

Originally Posted by Strange Brew

It’s deferred money. The contract doesn’t go beyond 8 years.

A lot of employers have deferred comp arrangements, which are of value to people should they move to lower tax states in retirement (and be in lower federal tax bracket).

Semantics. It very much does go beyond 8 years, as he is paid until 2045.

Yes, lots of people have deferred comp arrangements. Those people don't work within a salary cap structure.

[The Cobra]

Originally Posted by Enoch Root

Semantics. It very much does go beyond 8 years, as he is paid until 2045.

Yes, lots of people have deferred comp arrangements. Those people don't work within a salary cap structure.

Deferred compensation arrangements like pension plans are specifically allowed in Canada to allow employees to plan for retirement.

You start deferring your salary in Canada without the benefit of a registered retirement plan will not work.

[Jason14h]

Originally Posted by The Cobra

The owners don’t love it per se. it’s doesn’t help reduce the cap. It’s a tax planning tool used by owners and players by agreement.

They “love” it in the sense they can (usually) get a better guaranteed ROI for the funds they segregate then the CBA real time value rate , so they can put less real money into segregation to meet their future obligations then paying cash today .

Small % (if even a %) but it’s “free” money for an owner in the long run

[FlamesAddiction]

Originally Posted by devo22

notable for the weird structure. Some might call this, you know, cap and/or tax circumvention, but what do I know ... certainly never seen anything like this in the NHL.

The contract Seth Jarvis signed back in August also had a deferred salary structure.

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

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.

I am not a big fan of this unless the team also has to have it count against their cap for the years the player is still getting paid but not playing, similar to what it would be in a buyout situation. I just don't see how it is in the spirit of having a cap to pay salary to a player and not have it count against the cap.

[All In Good Time]

Originally Posted by The Cobra

Deferred compensation arrangements like pension plans are specifically allowed in Canada to allow employees to plan for retirement.

You start deferring your salary in Canada without the benefit of a registered retirement plan will not work.

Sure, go ahead, defer whatever you want to whenever you want.
Just calculate all the money into the AAV. Not this bull#### “perceived value” garbage
Because
Nobody has an actual clue what the value will be

[Paulie Walnuts]

Originally Posted by All In Good Time

Sure, go ahead, defer whatever you want to whenever you want.
Just calculate all the money into the AAV. Not this bull#### “perceived value” garbage
Because
Nobody has an actual clue what the value will be

Or we just get rid of this stupid #### and these guys who won the lottery in life pay their fair share of taxes and the have owners pay up and deal with the cap hit.

[Hackey]

Having your 3 year contract dripped to you over 20 years doesn't seem like a great deal for the player. I assume his agent is smart enough to have worked it all out to make sense though.

[Jason14h]

Originally Posted by Paulie Walnuts

Or we just get rid of this stupid #### and these guys who won the lottery in life pay their fair share of taxes and the have owners pay up and deal with the cap hit.

I fully expect California will alter their tax code to stop this

[Enoch Root]

Originally Posted by Jason14h

They “love” it in the sense they can (usually) get a better guaranteed ROI for the funds they segregate then the CBA real time value rate , so they can put less real money into segregation to meet their future obligations then paying cash today .

Small % (if even a %) but it’s “free” money for an owner in the long run

It would be out of their hands, and held in Trust by a law firm - there would be no ability to outperform the discount rate.

But even if they could, for the sake of argument, it is pointless and not worth their efforts. Even if they could arb 2% per year on this deal (and they can't), that's a whopping $180k/yr before fees and before taxes.

Organizational payroll is well over $100M/yr

So no, I doubt they "love" it.

[Jason14h]

Originally Posted by Hackey

Having your 3 year contract dripped to you over 20 years doesn't seem like a great deal for the player. I assume his agent is smart enough to have worked it all out to make sense though.

It is if you move from California to Florida and retire . You are taxed at $100K a year in Florida vs $4.56 million a year in California

It’s effectively a pension plan self created to defer taxes

[Strange Brew]

Originally Posted by Enoch Root

Semantics. It very much does go beyond 8 years, as he is paid until 2045.

Yes, lots of people have deferred comp arrangements. Those people don't work within a salary cap structure.

No he is deferring his comp which is earned over the term of the contract.

If the Flames took $1 million of the amount owed to Huberdeau this year, and put it in an institutional class bond fund that he could begin to draw from in10 years would you be arguing they extended the term of his contract.

Because that is all that is happening here. His cap hit stays the same, the cash outflow stays the same. The player benefits from lower taxes in the future (lower marginal federal bracket, potentially lower state taxes, no social security or fica taxes). It’s a great deal for anyone whose earnings are likely to fall off a cliff and want to be tax efficient. Usually you have to leave your money in the deferred comp vehicle for at least 5 years for tax reasons.

I see zero salary cap issues with a player deferring his pay.

[Jason14h]

Originally Posted by Enoch Root

It would be out of their hands, and held in Trust by a law firm - there would be no ability to outperform the discount rate.

But even if they could, for the sake of argument, it is pointless and not worth their efforts. Even if they could arb 2% per year on this deal (and they can't), that's a whopping $180k/yr before fees and before taxes.

Organizational payroll is well over $100M/yr

So no, I doubt they "love" it.

The Dodgers have literally done this to the tune of 1 billion and there are articles about the savings. 2% on a billion is $20 million

They can because they can secure a better guaranteed ROI then the rate they use to calculate currently value so in todays $ they segregate less then they would have to pay the athlete .

And you don’t think owners care about a “whopping $180k for free ?

You really are grasping now - owners don’t care about free $$

[Enoch Root]

Originally Posted by Hackey

Having your 3 year contract dripped to you over 20 years doesn't seem like a great deal for the player. I assume his agent is smart enough to have worked it all out to make sense though.

It makes enough sense for someone in California to consider it. The highest state tax in California is 13.3%. Compare that to Florida or Texas, where it is zero.

That is a $1.2M tax savings on the $9M that is being deferred.

[Enoch Root]

Originally Posted by Jason14h

The Dodgers have literally done this to the tune of 1 billion and there are articles about the savings. 2% on a billion is $20 million

They can because they can secure a better guaranteed ROI then the rate they use to calculate currently value so in todays $ they segregate less then they would have to pay the athlete .

And you don’t think owners care about a “whopping $180k for free ?

You really are grasping now - owners don’t care about free $$

I can only speak for Canada, where the money would be held in trust by a legal firm - no chance for the payor to invest it on their own, to do better.

If California allows that, that is crazy. The reason it is held in trust by lawyers is to guarantee delivery. Also, it is no longer as asset of the payor, it is an asset of the payee, so they should not have an ability to capitalize on it.

I would love to see the article on what the Dodgers are doing. I suspect that it isn't straight deferral, but there is actually some payments that will not be owing until some point in the future (unlike a deferral, which is due now)

[1qqaaz]

Isn't this kind of similar to what Ohtani did in baseball?

[Jason14h]

Originally Posted by Enoch Root

I can only speak for Canada, where the money would be held in trust by a legal firm - no chance for the payor to invest it on their own, to do better.

If California allows that, that is crazy. The reason it is held in trust by lawyers is to guarantee delivery. Also, it is no longer as asset of the payor, it is an asset of the payee, so they should not have an ability to capitalize on it.

I would love to see the article on what the Dodgers are doing. I suspect that it isn't straight deferral, but there is actually some payments that will not be owing until some point in the future (unlike a deferral, which is due now)

Sorry - Let me clarify . It isn't that the Dodgers (or another NHL team for example) are "investing" on their own. It's that they can get a better guaranteed ROI on the large amount they have to segregate to cover their obligations (or borrow the $$ at a lower rate then their can get off their cashflows ROI) then the interest rate 'offered' to the players when they want to defer.

For easy math take an $11 million contract, where the player wants to defer $10 million into 10 equal $1million payments starting in 2035.

While we say "They deferred $10 million of the contract" they reality is they deferred some unknown amount based on an interest rate negotiated between the team and them (OR - They said I want 1 million this year and $1 million each year from 2035-45) The "contract" value is calculated using CBA formulas (for both sports) but that rate isn't necessarily what the team and player used to negotiate. This is where the team can arbitrage a bit.

A professional sports team (especially the Dodgers) can get very favorable rates to borrow this money and put into the segregated account/lawfirm guaranteeing the future payouts. OR if they are using their own cash, they are getting a better ROI on the guaranteed "note" that pays $1 million in 2035-45 then they offered the player when they negotiated. IE - Dodgers would say we are offering 4% a year for deferral but can get 5.5% on the guaranteed note paying the $1million in the segregated account, meaning they put less real money into the segregated account/lawfirm to eventually equal $1million per year from 2035-45.

If they weren't deferring, they are paying that money up front/yearly to the player (Duh) . Effectively a team can lower the real payments over a long term on a contract by a few % points because of their ability to leverage better guaranteed ROI's then a player (And because players get the tax savings they can take a smaller yearly rate - Or potentially even NO interest rate if the tax savings are worth it)

On a small contract like this you are correct its probably $100K in savings, but if Anaheim convinces all their players to talk to Vartano's accountant and see the tax savingings and ends up deferring 50-60% of everyone's salary, a % point of 60 million a year adds up.

The only issue really could be the HOW CBA calculates the current value of the contract for cap purposes.

If California teams all convince their players to defer money into the future with a lower interest rate then is defined in the CBA (or discount the salary before applying the defined rate to zero sum it out for cap purposes) there is the opportunity for teams to gain a few % points on their cap.

I am just not sure who would raise this as a CBA concern. It's advantageous to owners and players. I guess low tax teams might complain they are losing their existing low tax cap advantage over higher tax jurisdictions ?

[Jason14h]

Originally Posted by 1qqaaz

Isn't this kind of similar to what Ohtani did in baseball?

Yes Ohtani found the avoid California taxes loophole

[Jay Random]

Originally Posted by Enoch Root

Semantics. It very much does go beyond 8 years, as he is paid until 2045.

The contract of employment lasts three (3) years. It is a three-year contract. The payments are deferred, but it's still a three-year contract. That's not semantics, that is how it works.

Yes, lots of people have deferred comp arrangements. Those people don't work within a salary cap structure.

So what? The CBA specifically allows deferred compensation under exactly this kind of arrangement. The owners and the PA agreed on these terms. It isn't cap circumvention when it is expressly spelled out in the rules of the cap.