Can 100% confirm the new CBA will include the cap benefit recapture formula. It will apply to existing deals “in excess of six years.”— James Mirtle (@mirtle) January 7, 2013
Part of the fun of a new collective bargaining agreement is learning about it.
Today I’ll try and(hopefully) explain a new twist to the new CBA, the cap benefit recapture formula. It’s a new rule that will help prevent GMs from circumventing the cap.
In short, the team that offered a ludicrous, back-ended deal will take a cap hit penalty for the amount of years that the player didin’t play on his deal.
I WAS TOLD THERE WOULD BE NO MATH. HOW DOES THIS WORK?
This new rule applies to deals that are 7 years or longer in length, and it applies to ALL contracts, not just new ones after this CBA gets ratfied.
Because he’s got a twelve year deal, we’ll use two scenarios with Roberto Luongo‘s contract. His hit is 5.333 for the duration of his contract. He’s scheduled to make $6.714M until 2018, but then his salary dips to 3.8M in 2018-19, 1.6M in 2019-20, and 1M in 2020-21 and 2021-22.
In other words, Roberto Luongo is making big bucks until 2019, where he’ll only be making ‘relatively’ big bucks. That is also to say, I don’t think he’ll be playing until he’s 42.
Let’s say that Luongo retires after his salary takes a dip to 1M. He’ll be 40 years of age then. That will leave two years on his deal.
To calculate how much the Canucks would be on the hook for, you subtract the cap hit from the actual salary made over the life of the contract. Any positive difference would be applied to the amount of years remaining on the contract, which in this hypothetical instance would be two.
Figuring out this ‘penalty number’ is no more difficult than taking a total, subtracting another total and applying the difference. If Roberto Luongo was to retire after the 2019-20 season, his actual dollars made vs. cap hit difference would be about 3.666M. The Canucks would be forced to carry that penalty for two years, or the remaining length of Luongo’s contract. That’s not 3.666M divided by two years, that’s a 3.666M penalty a year for two years.
Let’s ramp it up a bit, saying that Luongo wants off the ship after his money splits in half after 2017-18.
If Luongo retires after the 2017-18 season, it gets really interesting. The difference between the dollars paid vs. cap hit would be 7.62M, and the Canucks would be on the hook for that cap number for four years, or the amount time of the contract that Luongo didn’t play. Again, that’s not 7.62 divided over four seasons, that’s 7.62M cap hit per season. The cap ceiling will likely be around 73M in 2018, so a 7.62M cap hit would be over 10% of a team’s cap hit on a guy that wouldn’t be on the roster. That’s worse than paying Alexei Yashin 2.203M not to hang around Long Island.
NOTE: Even if Luongo gets dealt to the Leafs, the Panthers, the Lightning, or wherever, both Vancouver and the team that acquires Luongo will be on the hook for a percentage of the penalty if and when he retires early. I don’t know how the numbers work in this circumstance. I’m guessing that it would be based on a percentage of time spent in the new city versus old city.
I wonder how this works with Jeff Carter, the fifteen minutes he spent in Columbus, and the LA Kings.
Couple this rule with the new limit on salary fluctuation, and I bet you’ll see fewer and fewer of these ‘lifetime’ contracts.
More stuff like this as we get details.
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