Contract Question - When can a new deal be made from scratch vs Cap hits/Dead Money?

[Virgil]

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

[Warcodered]

7 minutes ago, Virgil said:

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

I mean maybe there's some NFLPA rule against it but I'd assume as long as he agreed to a deal it'd work but nobody would ever ***** do that. The only way to do it is to create one that somehow benefits him more while reducing the cap hit, and while we call Beane a wizard he doesn't have actual magic.

 

Though maybe I'm just not understanding what exactly you're saying.

[FireChans]

15 minutes ago, Virgil said:

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

I’m my understanding is that you can work in extensions that basically work as a restructure in regards to cap hit, adding on extra years that allow you to bring down the cap hit short-term. If those extensions don’t come at the end of the contract, say there’s two years left, the original terms are ripped up and the new terms are set.

 

The reason you wouldn’t do this is if the player is not going to be here long term or is a retirement risk.

 

Diggs is a good example.

 

The original terms of his contract went through 2024. We extended him two years early, effectively “ending” that contract, and bringing his cap hit down to $11M and $14M for the last two seasons.

 

You can play this game of chicken for awhile, but if the player becomes old and you need to move on or retires, you are going to accelerate that money and there will be some pain.

 

It’s why Josh’s impending cap hit doesn’t matter, much like Brees’ cap hit didn’t matter. There’s still going to be a sizable hit, but as long as you can keep the balls in the air with extensions and restructuring, the real pain of the cap hit is delayed until they depart from the team.

 

This is how the Buc’s signed Tom Brady. Due to his retirement, they had all his dead money floating around. But there’s no reason to not keep extending and restructuring cornerstones like franchise QB’s because it’s gonna suck when they retire regardless.

 

In the Von example, we can add years on and reduce his cap hit but why would we do that? If he retired next year, it would just be more pain. 

Edited February 23 by FireChans

[Virgil]

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

[Draconator]

6 minutes ago, Virgil said:

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

I don't hate that trade, but I'd go with a 4th instead of a 2nd. Knox does have value. 

[FireChans]

10 minutes ago, Virgil said:

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

I believe they do. IIRC, Brock Osweiler was such a deal. 
 

He was packaged to Cleveland with a second for like a 4th rounder back under the condition Cleveland picked up the part of the cap hit. 

[SoonerBillsFan]

I think the NFL and NFLPA  should allow Teams to dump 1 contract per year, with the agreement the team has to pay the player 1/2 of the remaining contract.

 

In other words, Terry pays Von 1/2 of what he owes on his contract, but it's 100% off our cap.

Edited February 24 by SoonerBillsFan

[eSJayDee]

1 hour ago, Virgil said:

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

Didn't the Browns or someone essentially did that when they traded for a player.  Basically, the Browns got a player, like a 2nd round pick in exchange for a box of tape.

 

As for your original question, think of (potential) dead cap space as a debt.  Like you, I'm not familiar w/ all the specifics, but basically if you've already paid for the performance of a player & that cost is amortized & kicked down the road, you still need to pay for that previously used asset.

i.e.  You sign a player worth $6m/yr for a 2 yr, $12m contract.  1st yr they get a $1m salary & a $5m signing bonus.  The cap hit that 1st yr is only $3.5m (& it'll be $8.5m the 2nd); if you cut them, you've essentially gotta pay for the benefit that you've already received but not paid for ($2.5m) but you save the pending $6m salary.

[BringBackFergy]

Soooo utterly confused. 
 

Carry on. 

[Virgil]

1 hour ago, FireChans said:

I believe they do. IIRC, Brock Osweiler was such a deal. 
 

He was packaged to Cleveland with a second for like a 4th rounder back under the condition Cleveland picked up the part of the cap hit. 

 

Yes, I was thinking about that deal too.  In that case, if I'm remembering correctly, it didn't save the dead cap hit, just the salary portion.  I could be wrong though

[Nephilim17]

First, I think it's useful to define where "dead money" comes from:
 

Dead money exists because of how salary cap accounting rules operate. Signing bonuses, option bonuses and certain roster bonuses are prorated or spread out evenly over the life of a contract for a maximum of five years. When a player is released, traded or retires, the remaining proration of these salary components immediately accelerate onto his team's current salary cap. 

 

To use a simple example and only using signing bonus as the only bonus, if a player signs a 5-year deal for 15 million per year ($75 million over 5 years) and a signing bonus of $20 million ($4 million per year)...

 

If that player is no longer wanted after two seasons, the team can escape paying the player's base salary $15 million a year, but the signing bonus for every three remaining years accelerates at once and there is then 3 year's of "dead money," $12 million dollars.

 

So, as far as I know, midway through a deal, teams will convert base salary into signing bonus (thus spreading out the big base salary hit for a season when money is tight) but that money is equally distributed over the remaining years of the contract as bonus. The Bills have done that a fair bit lately.

 

But... I can't remember a situation where the INVERSE happens: the signing bonus is converted to salary which can be avoided. I think that's either your question or related to it: can a team escape the "dead money" hit of remaining signing bonus.

I don't think so. I don't even think if a player was willing if the CBA would allow for it. Possibly because bonus is "paid" immediately but just for accounting purposes it's spread over a deal. Maybe the concept is you can't take back a signing bonus that was paid upon signing and in the past. If not the simple reason of you can't take back something that was paid all at once in the past, I'm not sure why.

 

I'm about 85% sure of this. Someone correct me if I'm wrong please.

Edited February 24 by Nephilim17

[NoSaint]

3 hours ago, Virgil said:

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

Dead money is generally money you’ve already paid but not yet taken a cap hit for. 

there’s no getting out of accounting for money you paid a guy. 
 

sometimes it’s a future guarantee but rarely - that you could negotiate technically 

[SoonerBillsFan]

2 hours ago, Virgil said:

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

I Agree with you and don't get why the team trading the player has to eat the cap hit.

 

The player still gets paid so the team receiving the player should take the cap hit.

[NoSaint]

38 minutes ago, Virgil said:

 

Yes, I was thinking about that deal too.  In that case, if I'm remembering correctly, it didn't save the dead cap hit, just the salary portion.  I could be wrong though

Right, the future guarantee that no one would want to pay travelled with the player not an already paid sum that hasn’t been accounted for 

24 minutes ago, Nephilim17 said:

First, I think it's useful to define where "dead money" comes from:
 

Dead money exists because of how salary cap accounting rules operate. Signing bonuses, option bonuses and certain roster bonuses are prorated or spread out evenly over the life of a contract for a maximum of five years. When a player is released, traded or retires, the remaining proration of these salary components immediately accelerate onto his team's current salary cap. 

 

To use a simple example and only using signing bonus as the only bonus, if a player signs a 5-year deal for 15 million per year ($75 million over 5 years) and a signing bonus of $20 million ($4 million per year)...

 

If that player is no longer wanted after two seasons, the team can escape paying the player's base salary $15 million a year, but the signing bonus for every three remaining years accelerates at once and there is then 3 year's of "dead money," $12 million dollars.

 

So, as far as I know, midway through a deal, teams will convert base salary into signing bonus (thus spreading out the big base salary hit for a season when money is tight) but that money is equally distributed over the remaining years of the contract as bonus. The Bills have done that a fair bit lately.

 

But... I can't remember a situation where the INVERSE happens: the signing bonus is converted to salary which can be avoided. I think that's either your question or related to it: can a team escape the "dead money" hit of remaining signing bonus.

I don't think so. I don't even think if a player was willing if the CBA would allow for it. Possibly because bonus is "paid" immediately but just for accounting purposes it's spread over a deal. Maybe the concept is you can't take back a signing bonus that was paid upon signing and in the past. If not the simple reason of you can't take back something that was paid all at once in the past, I'm not sure why.

 

I'm about 85% sure of this. Someone correct me if I'm wrong please.

the inverse wouldn’t happen as it’s both worse for the player and the team 

[Ed_Formerly_of_Roch]

3 hours ago, Virgil said:

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

 

It kind of happened a few years back Cleveland traded to Houston their QB along with his massive contract plus draft picks so Texans would take the contract. Then if I remember right they cut him.  But the contract has to be written in such a way to do that without taking a big cap hit.

[Nephilim17]

1 hour ago, NoSaint said:

Right, the future guarantee that no one would want to pay travelled with the player not an already paid sum that hasn’t been accounted for 

the inverse wouldn’t happen as it’s both worse for the player and the team 

Sure, it's bad for a player, but if signing bonus was changed to salary, a team could cut the player and not be hit with dead money. That would be positive for a team.

 

But I don't think it's allowable. And the only reason for a player to agree, theoretically, is if the player wanted out so bad, he was willing to leave behind money to make himself tradeable and not give his current team a huge hit with dead money.
 

[NoSaint]

8 minutes ago, Nephilim17 said:

Sure, it's bad for a player, but if signing bonus was changed to salary, a team could cut the player and not be hit with dead money. That would be positive for a team.

 

But I don't think it's allowable. And the only reason for a player to agree, theoretically, is if the player wanted out so bad, he was willing to leave behind money to make himself tradeable and not give his current team a huge hit with dead money.
 

my assumption in this claim wasn’t that the team was  non guaranteeing payment of the bonus and then cutting the guy right after.
 

You know. Because that’s not really a viable repeatable strategy 

 

the only reason worth discussing is because for some reason the team wanted to speed up the cap hit while keeping a player and that’s the opposite of helpful for them 

[Niagara Dude]

On 2/23/2024 at 6:28 PM, FireChans said:

I believe they do. IIRC, Brock Osweiler was such a deal. 
 

He was packaged to Cleveland with a second for like a 4th rounder back under the condition Cleveland picked up the part of the cap hit. 

I think Knox will become one of the worse contracts in the NFL, essentially Beane gave him star TE money and he is not a star. Not sure if you could get any team to bite on that contract. 

[BarleyNY]

On 2/23/2024 at 5:33 PM, Virgil said:

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

 

The first thing to understand is that every dollar teams pay a player must be accounted for on the salary cap.* So if the Bills were to rework Von’s contract they would still be on the hook for cap hits for what they’ve paid him but hasn’t been account for. Think about it this way: There’s a running total of how much a team pays a player. Eventually the cap hits must equal that total. There is no way around that. 
 

*There are a few exceptions to this: 1) The Veteran Signing Benefit allows teams to give a small number of veteran players on vet minimum deals a small signing bonus that doesn’t hit the cap. 2) Cash that teams recoup from a player. 3) Salary forfeited by players who are suspended.

[John from Riverside]

I wonder if people can remember back far enough whenever the bills had a ton of money to spend and nobody wanted to come here
 

You know that you have a good team whenever you don’t have a lot of money to spend every year crappy teams always have millions to spend

[Tuco]

You can always sign a player to a new deal (well, mostly always). But you can never get rid of prorated bonus or dead cap.

 

As others have mentioned, prorated bonuses  are money already paid to the player. They have to be charghed to the cap at some point. And there are really only two choices. It stays prorated in the years it's supposed to, or the player gets cut, traded, etc. and is no longer on the team. At that point the prorated cap is accelerated and becomes dead cap.

 

The only exception to this is if a player gets suspended or incarcerated, or simply refuses to play or pulls a sudden retirement soon after signing a new deal. In such cases a linear amount of prorated cap can be refunded/credited to a team. But even then, it usually doesn't happen until the following year if at all.

[Sweats]

#likewtfveryconfused

[fergie's ire]

Back in the day, the Patriots used to do what you are suggesting.  I think they did it to Troy Brown, if I remember.  If they had a player who was not performing up to his contract, they would cut him...effectively tearing up the old contract...and then re-sign him.  It's also what teams like the Bills do at cut-down day at the start of the season.  There are a few problems, however.  A) The player needs to agree to a pay cut (which is not usually the case with the cut-down day players) B) You need to be confident that they won't jump to another team and C) You have to pay them any guaranteed money owed on the original deal.  NFL contracts have never been guaranteed (which is why the Patriots could just cut Troy Brown and not owe him anything), but in recent years players have been insisting on including more and more guaranteed money in their contracts.  Often, it's done through signing bonuses that get paid out right away but are spread out over the length of the contract for cap purposes.  You still have to count that money against the cap if you cut him.  The worst example of the guaranteed money problem is Deshaun Watson.  He's almost half way through his contract which is fully guaranteed and has barely played and hasn't played well.  Sure, they can cut him but they still have to pay the rest of the 230 million because it's guaranteed.

[SoCal Deek]

Let’s see if I understand it:

 

The Team enters into a 4 year, $40 million contract with a player, but they agree to pay him only $5 million for each of the first two seasons instead of the $10 million it averages out to. If the two sides agree to either part ways or the player is cut, the Team still owes him the remaining $5m for each of those first two years, and therefore that remaining $10m would count against the next year's cap even though he’s no longer on the Team. 

[DCofNC]

On 2/23/2024 at 3:28 PM, FireChans said:

I believe they do. IIRC, Brock Osweiler was such a deal. 
 

He was packaged to Cleveland with a second for like a 4th rounder back under the condition Cleveland picked up the part of the cap hit. 

Not the same, he had guaranteed money, but it wasn’t all tied to signing bonus.  What screws us with the Von and Diggs deal is the amount of signing bonus/salary converted to bonus.  Upfront, it allows you to pay a guy, and the cap hit gets spread out over the remainder of the contract.  However, the minute he leaves you accelerate all the cap hit to that year.  Os just had big guaranteed money, so they could trade that away, if anyone would take it.   The basically paid in draft picks for a team to eat it.

[BarleyNY]

8 hours ago, SoCal Deek said:

Let’s see if I understand it:

 

The Team enters into a 4 year, $40 million contract with a player, but they agree to pay him only $5 million for each of the first two seasons instead of the $10 million it averages out to. If the two sides agree to either part ways or the player is cut, the Team still owes him the remaining $5m for each of those first two years, and therefore that remaining $10m would count against the next year's cap even though he’s no longer on the Team. 

 

 

Not quite, it depends on the contract structure. For a contract that large there would be a signing bonus. So let’s look at a 4 year, $40M contract with the following structure: $10M signing bonus and salaries of $4M, $6m, $9.5M and $10.5 M. The cap hit associated with the signing bonus would be split among all 4 years. Here are the cap hits and cash payments:

 

Y1: $6.5M (salary + 1/4 of signing bonus) [$14M cash]

Y2: $8.5M [$6M cash, $20M total]

Y3: $12.0M [$9.5M cash, $29.5M total]

Y4: $13.0M [$10.5M cash, $40M total]

 

Now, let’s say the player gets cut in March of Y3. The caps hits would be thus:

 

Y1: $6.5M (salary + 1/4 of signing bonus) [$14M cash]

Y2: $8.5M [$6M cash, $20M total]

Y3: $5M (remainder of signing bonus) [$0 cash]

 

So it is easy to see why teams use signing and restructure bonuses to kick out cap hits. And why players like that. 

Edited February 27 by BarleyNY

[Beck Water]

On 2/23/2024 at 4:33 PM, Virgil said:

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

 

I may not be clear on what you're asking, so feel free to help me better understand.

I think you're asking if a player's amortized bonuses, which have either already been paid or are already committed to the player and guaranteed, can be "given back" as part of a new contract.

 

The only circumstance of which I'm aware where signing bonuses can be given back, is if the player retires before his contract is complete.  And then, it's usually only if the player retires pretty immediately after he signs the contract, not a couple years down the line (in theory, the team could request repayment but often don't).

So fundamentally, the contract consists of two types of money: yearly cash (salary, per game roster bonuses, and workout bonuses; incentives), and bonuses already paid, but amortized over the length of the contract.  The yearly cash can be re-worked  as a new contract. 

 

The bonuses already paid can not.

For example, when a player is traded, his bonuses stay with the trading team, but he is still under contract to the new team with the yearly cash specified in his deal for the duration of the deal.  The new team can negotiate a new contract and tear up the old contract, but old team can't (in the immortal words of Eric Wood to Aaron Maybin) say "Give back some of that (bonus) money you ain't *****in' earned!"

[Beck Water]

13 hours ago, SoCal Deek said:

Let’s see if I understand it:

 

The Team enters into a 4 year, $40 million contract with a player, but they agree to pay him only $5 million for each of the first two seasons instead of the $10 million it averages out to. If the two sides agree to either part ways or the player is cut, the Team still owes him the remaining $5m for each of those first two years, and therefore that remaining $10m would count against the next year's cap even though he’s no longer on the Team. 

 

Not quite.

 

The 4 year, $40 million contract will include a signing bonus, which will be paid to the player** up-front.  Let's say in this case the player received a $12 million signing bonus.  The player puts $12 million in his piggy bank, but for accounting (cap) purposes, the team gets to amortize it over the length of his contract, so $3M each year for 4 years.

 

Then the player will typically be paid a lower salary in his first year (because he got a fat signing bonus) and more money the rest of the contract.

For example, in 2021, when Tre White's contract extension took effect, he was paid less than $1M in salary (NFL minimum).

Let's say the player's salary will be $1M the first year, $8M his 2nd year, $8M his 3rd year, and $11M his 4th year.

So his cap hit is:

1: $1M + $3M = $4M

2: $8M + $3M = $11M

3: $8M + $3M = $11M

4: $11M + $3M = $14M

 

Hold on, next wrinkle: $20M of the player's contract was guaranteed, meaning his $12M signing bonus, plus $1M of 1st year salary, plus $7M of his next year salary.

So if the team cuts the player in year 2, they owe him $7M additional cash, and that $7M PLUS the $9M of his remaining year's salary bonuses count against the cap.

They have $16M dead cap for that player.

On the other hand, if the team cuts the player in year 3, they're only on the hook for $6M (two years of amortized signing bonus) dead cap, which is already in the player's bank account.  In year 4, they're on the hook for $3M, since none of his $11M salary was guaranteed.

 

Now let's say in year 3, the team was cash-strapped.  So they converted $7M of the player's $8M salary to "restructure bonus".  They can amortize it against the length of his contract

3:$1M + $3M(signing) + $3.5M (restructure) = $7.5M   This gives the team an extra $3.5M in cap space to sign a low-tier FA or 2, but the player gets paid the same.

4: $11M + $3M(signing) + $3.5M (restructure) = $17.5M.

But, if the team cuts the player in year 4, they now take on $7.5M dead cap instead of $3M

 

There are more games that can be tucked into contracts to try to manage the cap while bidding competitively for players - option bonuses, void years, etc but this is just a basic example.

 

One more piece.  Let's say the player hasn't quite lived up to expectations and in year 3 has no guaranteed money.  Maybe they go to the player and ask if he'd be willing to take a $3M pay cut, to $5M salary.  The player sees his status on the team is in jeopardy, but he likes his chances to start and play well with this team.  So he says "OK, I'll do that, but in return, I want you to fully guarantee my $5M salary and $3M of my salary next year".  The player is, at minimum, still guaranteed the same amount of money as he'd get this season (just spread over 2 years), the team gets cap relief, and the player is trading guarantees for a reduction in his overall contract value.

 

[Ethan in Cleveland]

It's called dead money for a reason. Once you pay the signing bonus you have to account for it. That is done over the length of the remaining years on the contract. A restructure can be done anytime but it doesn't impact the dead money that needs to be accounted for at some time. 

A guy can agree to a pay cut instead of getting cut. Morse did this a couple years ago. They may do the same with White instead of just cutting him. That can lower his cap figure for this year because it is salary money.  

[Ethan in Cleveland]

3 hours ago, Beck Water said:

 

Not quite.

 

The 4 year, $40 million contract will include a signing bonus, which will be paid to the player** up-front.  Let's say in this case the player received a $12 million signing bonus.  The player puts $12 million in his piggy bank, but for accounting (cap) purposes, the team gets to amortize it over the length of his contract, so $3M each year for 4 years.

 

Then the player will typically be paid a lower salary in his first year (because he got a fat signing bonus) and more money the rest of the contract.

For example, in 2021, when Tre White's contract extension took effect, he was paid less than $1M in salary (NFL minimum).

Let's say the player's salary will be $1M the first year, $8M his 2nd year, $8M his 3rd year, and $11M his 4th year.

So his cap hit is:

1: $1M + $3M = $4M

2: $8M + $3M = $11M

3: $8M + $3M = $11M

4: $11M + $3M = $14M

 

Hold on, next wrinkle: $20M of the player's contract was guaranteed, meaning his $12M signing bonus, plus $1M of 1st year salary, plus $7M of his next year salary.

So if the team cuts the player in year 2, they owe him $7M additional cash, and that $7M PLUS the $9M of his remaining year's salary bonuses count against the cap.

They have $16M dead cap for that player.

On the other hand, if the team cuts the player in year 3, they're only on the hook for $6M (two years of amortized signing bonus) dead cap, which is already in the player's bank account.  In year 4, they're on the hook for $3M, since none of his $11M salary was guaranteed.

 

Now let's say in year 3, the team was cash-strapped.  So they converted $7M of the player's $8M salary to "restructure bonus".  They can amortize it against the length of his contract

3:$1M + $3M(signing) + $3.5M (restructure) = $7.5M   This gives the team an extra $3.5M in cap space to sign a low-tier FA or 2, but the player gets paid the same.

4: $11M + $3M(signing) + $3.5M (restructure) = $17.5M.

But, if the team cuts the player in year 4, they now take on $7.5M dead cap instead of $3M

 

There are more games that can be tucked into contracts to try to manage the cap while bidding competitively for players - option bonuses, void years, etc but this is just a basic example.

 

One more piece.  Let's say the player hasn't quite lived up to expectations and in year 3 has no guaranteed money.  Maybe they go to the player and ask if he'd be willing to take a $3M pay cut, to $5M salary.  The player sees his status on the team is in jeopardy, but he likes his chances to start and play well with this team.  So he says "OK, I'll do that, but in return, I want you to fully guarantee my $5M salary and $3M of my salary next year".  The player is, at minimum, still guaranteed the same amount of money as he'd get this season (just spread over 2 years), the team gets cap relief, and the player is trading guarantees for a reduction in his overall contract value.

 

Perfect analysis!

I would only add one thing to your last paragraph.  The two parties may agree to a lower salary but also build in performance bonuses so the player can earn back the total of his previous deal.

This is exactly what White and Beane should do.  If they cut White, his value in free agency may be very little. So he would be wise to lower his salary this year, take it in a lump sum and then add some performance escalators. Otherwise he gets cut, Bills take the dead cap hit but save overall cap space, and White probably has to wait until next season to sign a practice squad deal coming off two major injuries. 

[GunnerBill]

1 hour ago, Ethan in Cleveland said:

Perfect analysis!

I would only add one thing to your last paragraph.  The two parties may agree to a lower salary but also build in performance bonuses so the player can earn back the total of his previous deal.

This is exactly what White and Beane should do.  If they cut White, his value in free agency may be very little. So he would be wise to lower his salary this year, take it in a lump sum and then add some performance escalators. Otherwise he gets cut, Bills take the dead cap hit but save overall cap space, and White probably has to wait until next season to sign a practice squad deal coming off two major injuries. 

 

But they can't cut him until he can pass a medical by which time the additional guarantee has triggered and the money saved by cutting him is reduced further... which is a further reason why they should negotiate in exactly the way you say. 

[GunnerBill]

Basically the easy way to think about it is dead money is money that has been paid already but not accounted for on the cap yet. 

[Matt_In_NH]

On 2/23/2024 at 6:28 PM, SoonerBillsFan said:

I think the NFL and NFLPA  should allow Teams to dump 1 contract per year, with the agreement the team has to pay the player 1/2 of the remaining contract.

 

In other words, Terry pays Von 1/2 of what he owes on his contract, but it's 100% off our cap.

That would make the CBA garbage.  Why would the owners do that?  It would also mean the cap is toilet paper.  
 

you live with contracts you agree to

Edited February 27 by Matt_In_NH

[SoonerBillsFan]

1 minute ago, Matt_In_NH said:

That would make the CBA garbage.  Why would the owners do that?

Not really. 1 per offseason is no big deal. AND the player gets guaranteed money in hand and can sign with another team.  

 

It's a win win.

[GunnerBill]

On 2/23/2024 at 11:28 PM, SoonerBillsFan said:

I think the NFL and NFLPA  should allow Teams to dump 1 contract per year, with the agreement the team has to pay the player 1/2 of the remaining contract.

 

In other words, Terry pays Von 1/2 of what he owes on his contract, but it's 100% off our cap.

 

Teams can dump as many contracts as they like and not have to pay players anything further. When a team cuts a player the money that is left behind on the cap is money ALREADY paid. If the Bills cut Von tomorrow they don't own him a single extra penny. The dead cap is all money he already has. 

[Tuco]

1 hour ago, GunnerBill said:

 

But they can't cut him until he can pass a medical by which time the additional guarantee has triggered and the money saved by cutting him is reduced further... which is a further reason why they should negotiate in exactly the way you say. 

 

Actually they can. They can't cut an injured player during the season he's injured. But if he still can't play by the next season he can be cut. But it's not a free and clear cut like most people think. The CBA contains an injury protection clause, and if Tre has no other, higher injury guarantee in his contract (and according to OTC and Spotrac he doesn't), the Bills would still have to give him $2.05 million, of which $1.23 million would be considered salary. This would reduce the often-quoted cap savings of $6.07 million down to $4.84 million. Less than most people think, but it can be done.

 

I'm not saying they should or shouldn't. And the injury guaranteed amount isn't a whole lot different than his $1.5 mil roster bonus. Just pointing out they can let him go before the season if they choose to.

[GunnerBill]

17 minutes ago, Tuco said:

 

Actually they can. They can't cut an injured player during the season he's injured. But if he still can't play by the next season he can be cut. But it's not a free and clear cut like most people think. The CBA contains an injury protection clause, and if Tre has no other, higher injury guarantee in his contract (and according to OTC and Spotrac he doesn't), the Bills would still have to give him $2.05 million, of which $1.23 million would be considered salary. This would reduce the often-quoted cap savings of $6.07 million down to $4.84 million. Less than most people think, but it can be done.

 

I'm not saying they should or shouldn't. And the injury guaranteed amount isn't a whole lot different than his $1.5 mil roster bonus. Just pointing out they can let him go before the season if they choose to.

 

Yea they can't cut him without the additional guarantee coming into place. That was my point. I was trying to keep it quite simple.

[Tuco]

1 hour ago, GunnerBill said:

 

Yea they can't cut him without the additional guarantee coming into place. That was my point. I was trying to keep it quite simple.

 

Okay. But there are numerous posters all over who say they can't cut him while he's injured like it's not possible to do so. And they are wrong. I may have been thrown off by your first sentence that begins . . . "They can't cut him until he passes a medical. . . "  So I was pointing out, yes, they can. Glad you understand it. Many here do not.

[GunnerBill]

6 minutes ago, Tuco said:

 

Okay. But there are numerous posters all over who say they can't cut him while he's injured like it's not possible to do so. And they are wrong. I may have been thrown off by your first sentence that begins . . . "They can't cut him until he passes a medical. . . "  So I was pointing out, yes, they can. Glad you understand it. Many here do not.

 

Yea they can but basically the implication is the same.... whether they cut him pre-medical or cut him post medical but also post guarantee activating they end up with their 2024 cap savings reduced from roughly 6 to 4.5. 

[Bleeding Bills Blue]

On 2/23/2024 at 5:33 PM, Virgil said:

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

 

Easiest way to look at this is bonuses are already paid.  So you can spread them out over multiple seasons (im sure theres a billion parameters on how to do this).  So you can't just throw out certain aspects of contract because it was originally paid out as a bonus in 2022 and spread across 5 years to lessen cap charges in year 1.  The same goes for restructure charges.  You are essentially converting game check base salary into a bonus, so that bonus can then be spread across multiple seasons.  So essentially all of that money is already "paid" and must remain on the cap.  

 

Von's probably a tough example, 10M of his 2024 salary is guaranteed, and the rest guarantees on March 18th.  We already restructured him once, and any further would likely result in having to keep him for another season.  He has no further guarantee's beyond this season, so the only way id see it is if he signed like a new 2 year deal or something to drastically reduce base salary over the next 2 years.

 

https://www.spotrac.com/nfl/buffalo-bills/von-miller-7717/

 

So signing bonus is spread over 5 years, and then they restructured in 2023 and spread that 13M across another 5 years.  When you trade or release a player that all loads up into the dead cap number.  3yrs at 3.705+4yrs at 2.669 = 21.79M.  His base salary guarantee is 10.71M (until 3/18).  Add that up for ur dead cap number (if you had guaranteed salaries anywhere else those also get added in the cap charge).  While you might have offset language that reduces the actual outgoing cash to a player (new team pays their salary and it is offset by language in the contract so we pay the difference), the cap charge is unaffected.