Photo: Jim Rogash/Getty Images
There’s a relatively simple way to create salary cap room out of thin air, and it’s happening all over the NFL right now.
Here’s how it works:
The NFL has a hard salary cap of ~$122 million — meaning the annual contracts of a team’s players cannot exceed that number.
But there are two different types of salary — base salary and signing bonuses — and they count against the cap differently. 100% of a player’s base salary in a given year counts against the cap, but the cap hit from signing bonuses is divided over the life of the contract.
So if Player X signs a three-year contract and gets a $9 million signing bonus, that bonus will count $3 million against the cap in each of the years, not $9 million in Year One.
With that in mind, teams have discovered a clever short-term trick: If you convert a player’s base salary into a signing bonus, you can create cap room out of nothing.
So all over the league, teams are tearing up players’ contracts and drawing up new ones that are heavily weighted toward signing bonuses.
For instance, today Pittsburgh Steelers quarterback Ben Roethlisberger restructured his deal. In his new contract, $9 million of his $11.6 million base salary in 2013 was converted into a signing bonus.
Since Roethlisberger has three years left on his contract, the bonus will only count as $3 million against the cap this year. So the team saves $6 million in salary cap space in 2013.
Photo: Wikimedia Commons
Tom Brady and Eli Manning both restructured their contracts last year for the same reason. The Patriots, comically, went so far as to only pay Brady $950,000 in base salary last year (20x less than he’s worth on the open market).This year the New Orleans Saints caught on, restructuring the contracts of four different players to create cap room.
The Steelers have done it with Big Ben and wide receiver Antonio Brown so far.
It’s technically a loophole, but it’s a benign loophole, because when you take a closer look it’s actually beneficial for everyone involved.
It’s good for players because it ensures that they’ll get paid. NFL contract are (controversially) non-guaranteed. A player can be cut at any time for basically any reason, and he won’t see a dime of the remaining money he is owed.
Converting a portion of a player’s base salary to a signing bonus effectively makes a bulk of that contract guaranteed.
Yes, restructuring is a sneaky way for teams to get create salary cap space, but they do so at the cost of losing the ability to get out from under a bad contract if a player isn’t performing.
These sort of restructuring maneuvers violate the spirit of the salary cap rules, for sure. But ultimately no one gets hurt, players get guaranteed money, and teams get the cap room to sign better players.
So whenever you see that a star player has “restructured,” this is the reason why.
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