Monday, February 9, 2009
Quick refresher on changing salary-cap rules
Posted by ESPN.com's Mike Sando
NFL accounting rules have changed this offseason as the league moves closer to life without an established salary cap. The timing is relevant here on the blog as we continue to make sense of salary-cap situations in the NFC West.
When teams released players in past offseasons, they often did so with June 1 in mind. Releasing a player on or before that date sometimes meant absorbing more of the cap consequences in the immediate term. Making the move after June 1 allowed teams to defer some of the cap consequences into the future.
The distinction no longer exists. As a result, teams must immediately and fully account for the salary-cap consequences of the moves they make. For example:
- Let's say a team paid a $10 million bonus to a player as part of a five-year deal signed before the 2007 season.
- One-fifth of the $10 million would count against the cap in each year of the deal, provided the player remained on the roster. That $2 million annual charge counts in addition to whatever salary the player receives.
- In our example, the team would have already taken $2 million charges against the 2007 and 2008 caps.
- Additional $2 million charges would be scheduled for 2009, 2010 and 2011.
- Releasing the player before the 2009 season would terminate the contract. The player would not receive salaries for the remaining three seasons, but he would keep the bonus money.
- How teams account for bonus money changes once the player is released.
- In our example, those annual $2 million charges for 2009, 2010 and 2011 would suddenly count against the cap all at once. The result would be a $6 million charge.
- In the past, releasing the player after June 1 would have allowed the team to count only $2 million of that $6 million against the current cap. The remaining $4 million would count against the cap a year later. This option no longer exists.