2022 RULES: Contract Restructure Options
Posted: Tue Mar 22, 2022 12:22 am
These days you're reading more and more about contract restructures with crazy competitive off-seasons. Lots of talk of converting salary to signing bonus to save against the cap or adding voidable years, etc.
Arguably we're a little out-dated with our existing simpler contract restructure which mostly just defers salary until later and adds some signing bonus to the player for doing that. I don't think you really hear about contract restructures much like that these days.
The most popular restructure currently I believe is to take a player's base salary (ex. 11M) and convert that into a guaranteed signing bonus -- so the money's the same for them, but the team can spread a signing bonus over multiple years unlike base salary. That 11M salary would go down to veteran minimum (just say 1M for simple math) and an extra 10M would be added to signing bonus left spread out over the remainder of their contract.
The maximum way to create even more savings through that in reality is to add voidable years to the contract. As I understand it, 5 years is the max for prorating signing bonus but if a player only has 3 years left on their deal you don't have to just prorate that over 3 years but you can add another 2 years (for 5 max) for prorating the signing bonus. That makes the annual SB/yr even smaller and maximizing your cap savings in that restructure of getting most of the player's salary this season into a signing bonus and then spreading it out as much as you can for cap accounting.
It's kind of tricky how we'd incorporate voidable years (if we wanted to) as those are years the player isn't really under contract. They have no base salary and aren't on the team. Don't know all the complexities with that, but perhaps we'd make a cap hit entry for the last few seasons that would be voidable to add cap hits of those prorated salary amounts and teams would just be charged that at those future seasons.
As we look at contract restructures here, we have a few questions:
- Do we update and change how we do those, adding in the popular convert salary to signing bonus option. If so, do we standardize how that's done or can we allow flexibility for team to say how much of the salary they're converting to SB based upon where they are.
- Do we keep both the current restructure way (deferring money until last season while cutting in half this year) and add the new option, giving teams more choices? Or simpler to just get rid of the old and make everything the new restructure.
- Is it overly confusing for players to allow teams to add voidable years if they want to maximize cap savings to spread the signing bonus over 5 years even if the player has less under contract? Is it overly complicated in how we have our teams setup technically?
- Currently we only allow one contract restructure per contract. Do we keep it at that, or do we allow player's contracts to be converted to signing bonuses every year if a team wanted to? With big annual salaries for top players, the SB could get monsterous if you could convert to SB every year and keep adding that up, but think maybe some players may have done that more than once on their deal in reality? If we allow multiple restructures for the same player on the same deal and allow voidable years, does that create situations with massive future year costs that teams could quit and get out of leaving big problems for new GMs?
- Do we keep our current limit on contract restructures (2 per off-season for each team, plus allowing one more during the season since more difficult to create cap space then), or do we allow teams to do more since that seems to line up with some teams doing more restructures than that? Maybe one extra one to start without getting too crazy.
There may be some other options to think about too, if you want to throw out some thoughts.
Arguably we're a little out-dated with our existing simpler contract restructure which mostly just defers salary until later and adds some signing bonus to the player for doing that. I don't think you really hear about contract restructures much like that these days.
The most popular restructure currently I believe is to take a player's base salary (ex. 11M) and convert that into a guaranteed signing bonus -- so the money's the same for them, but the team can spread a signing bonus over multiple years unlike base salary. That 11M salary would go down to veteran minimum (just say 1M for simple math) and an extra 10M would be added to signing bonus left spread out over the remainder of their contract.
The maximum way to create even more savings through that in reality is to add voidable years to the contract. As I understand it, 5 years is the max for prorating signing bonus but if a player only has 3 years left on their deal you don't have to just prorate that over 3 years but you can add another 2 years (for 5 max) for prorating the signing bonus. That makes the annual SB/yr even smaller and maximizing your cap savings in that restructure of getting most of the player's salary this season into a signing bonus and then spreading it out as much as you can for cap accounting.
It's kind of tricky how we'd incorporate voidable years (if we wanted to) as those are years the player isn't really under contract. They have no base salary and aren't on the team. Don't know all the complexities with that, but perhaps we'd make a cap hit entry for the last few seasons that would be voidable to add cap hits of those prorated salary amounts and teams would just be charged that at those future seasons.
As we look at contract restructures here, we have a few questions:
- Do we update and change how we do those, adding in the popular convert salary to signing bonus option. If so, do we standardize how that's done or can we allow flexibility for team to say how much of the salary they're converting to SB based upon where they are.
- Do we keep both the current restructure way (deferring money until last season while cutting in half this year) and add the new option, giving teams more choices? Or simpler to just get rid of the old and make everything the new restructure.
- Is it overly confusing for players to allow teams to add voidable years if they want to maximize cap savings to spread the signing bonus over 5 years even if the player has less under contract? Is it overly complicated in how we have our teams setup technically?
- Currently we only allow one contract restructure per contract. Do we keep it at that, or do we allow player's contracts to be converted to signing bonuses every year if a team wanted to? With big annual salaries for top players, the SB could get monsterous if you could convert to SB every year and keep adding that up, but think maybe some players may have done that more than once on their deal in reality? If we allow multiple restructures for the same player on the same deal and allow voidable years, does that create situations with massive future year costs that teams could quit and get out of leaving big problems for new GMs?
- Do we keep our current limit on contract restructures (2 per off-season for each team, plus allowing one more during the season since more difficult to create cap space then), or do we allow teams to do more since that seems to line up with some teams doing more restructures than that? Maybe one extra one to start without getting too crazy.
There may be some other options to think about too, if you want to throw out some thoughts.