CBA 101 Part 5: Long Term Injured Reserve

Image courtesy of openingfaceoff.netLong Term Injured Reserve (LTIR) is a designation within the Collective Barganing Agreement that teams can utilize in order to see some cap relief for an injured player. However, placing someone on LTIR is not the same as cap space, and many incorrectly treat it as such.

CBA Section 50.10(d)

In the event that a Player on a Club becomes unfit to play (i.e., is injured, ill or disabled and unable to perform his duties as a hockey Player) such that the Club’s physician believes, in his or her opinion, that the Player, owing to either an injury or an illness, will be unfit to play for at least (i) twenty-four (24) calendar days and (ii) ten (10) NHL Regular Season games, and such Club desires to replace such Player, the Club may add an additional Player or Players to its Active Roster, and the replacement Player Salary and Bonuses of such additional Player(s) may increase the Club’s Averaged Club Salary to an amount up to and exceeding the Upper Limit

As stated in the CBA excerpt above, the player being placed on LTIR must be unfit to play for at least 24 calendar days and 10 games. Assuming those conditions are met, the team would be allowed to exceed the upper limit by that player’s cap hit. Please note the phrasing “exceeding the Upper Limit”, which is very different from the player’s cap hit simply not counting.

Additionally, once a player is removed from LTIR, the team must reduce its team cap hit to be below the Upper Limit.

CBA Section 50.10(d)(iv)

…when the unfit-to-play Player is once again fit to play (including any period such Player is on a Bona Fide Long-Term Injury/Illness Exception Conditioning Loan to another league), the Club shall be required to once again reduce its Averaged Club Salary to a level at or below the Upper Limit prior to the Player being able to rejoin the Club.

Typically teams tend to be careful in adding substantial salary to their team in order to replace a player on LTIR. Several years ago, the Flyers had a rash of injuries with multiple players going on LTIR. They then acquired Andrew Alberts and Matt Carle. When the players on LTIR came back there were a string of moves made throughout the remainder of the season in order to stay cap compliant and dress a full team:

  • waived Ossi Vaananen and Glen Metropolit
  • sent Claude Giroux to the American Hockey League at times because he was the only waiver-exempt player that had a large enough cap hit so they could recall a defenseman in order to dress six
  • traded Scottie Upshall and a second-rounder to Phoenix for Dan Carcillo and a few hundred thousand dollars in cap space
  • signed David Sloane and Jamie Fritsch off the street to amateur try-out deals, during a playoff race, because they didn’t have cap space to make a call-up.

Let’s look at the case of someone like Chris Pronger, who barring a fairly dramatic improvement (or CBA changes), will be placed on LTIR for the upcoming season. Pronger’s $4.921 million cap hit, still counts against the cap, but the Flyers would be allowed to exceed the upper limit by a total of $4.921 million for the year if they so choose. So what does that really mean?

The key comes back to the phrase “banking” cap space which I used in Part 4 on Cap Space Calculations. As I explained in Part 4, the cap is actually calculated daily. For every day a team isn’t spending to the cap, they are effectively “banking” that money which can be used later. The team must use their banked cap space before they can start utilizing their LTIR space each day. So unless the team is already operating right at the Upper Limit, they won’t be taking full advantage of the LTIR space they are granted. Additionally, with LTIR, the phrase “use it or lose it” is applicable.

Continuing with the Pronger example, his $4.921 million cap hit equates to roughly $26,602 a day. So if Pronger were on LTIR for an entire season, the Flyers could exceed the upper limit by $26,602 every single day. However, very rarely does a team use every penny of the LTIR exception. For the sake of this example let’s assume the Flyers are spending to 100% of their Daily Limit.

If the Flyers brought in a player at $16,602 to replace Pronger, that is $10,000 of LTIR exception that they are not using, and that is $10,000 each day, that they cannot get back; or “bank” for later.

Let’s use some invented numbers, like in Part 4, to illustrate how LTIR works. Again we are using a $100 upper limit, over a 10 day season. However, in this scenario, the Flyers have a $20 player on LTIR, resulting in an allowed $2 of LTIR every day. The Flyers open the season with a $110 payroll, or $11 a day.

By Daily Limit,  I essentially mean the maximum amount of money the Flyers could spend that day and each day throughout the remainder of the season and still be cap compliant. Daily Spend is how much of the Daily Limit they are using.

LTIR Limit is the total amount of money they could spend including LTIR. In this case, the $20 player in LTIR results in an extra $2 a day, or $12. Utilized LTIR is how much of the LTIR is actually being used on the given day; and Total Spend shows how much is being spent between the Daily Limit and the Utilized LTIR.

Day 1 2 3 4 5
Yearly $$ Left 100 90 80 70 60
Days Left 10 9 8 7 6
Daily Limit 10 10 10 10 10
Daily Spend 10 10 10 10 10
LTIR Limit 12 12 12 12 12
Utilized LTIR 1 1 1 1 1
Total Spend 11 11 11 11 11

Day 6 7 8 9 10
Yearly $$ Left 50 40 30 20 10
Days Left 5 4 3 2 1
Daily Limit 10 10 10 10 10
Daily Spend 10 10 10 10 10
LTIR Limit 12 12 12 12 12
Utilized LTIR 2 2 2 2 2
Total Spend 12 12 12 12 12

Over the first 5 days of the season, the Flyers are effectively spending $11 a day, while using $1 of LTIR each day. Then, halfway through the season, they add a player and are now spending $12 a day, utilizing the full $2 a day they are allowed. So how is this different from true cap space as explained in Part 4?

In Part 4, halfway through the season, with what appeared to be $20 in true cap space (remember…$80 payroll on a $100 upper limit), the Flyers added a $40 player.

In the LTIR example, with what appeared to be $10 in cap space (remember…spending $110 on an adjusted $120 upper limit thanks to LTIR), the Flyers added a $10 player.

This is because the Flyers were using LTIR, meaning they were over the cap and not “banking” any cap space. They also didn’t use $1 of potential LTIR every day, and if you don’t use it, you lose it.

To quote CapGeek again:

To understand how each team’s cap count is calculated, think of a bank account. For the 2011-12 season, teams got a “deposit” of about $347,567 each day which can be spent on player salaries [$64,300,000 salary cap upper limit / 185 days in the season]. The difference left over is “payroll room,” or the amount that has been “banked” for the future, if needed.

As stated, if you’re truly under the cap, you simply save the money you have left over from your “deposit” each day. If you need to use LTIR, the league will offer you some additional money, but if you don’t take them up on it, they’re taking it back.

CapGeek also has a wonderful chart that they use around the trade deadline that perfectly illustrates this. The chart shows two columns for every team, “Today” and “Deadline”; which show the team’s cap space at those respective times. Usually, the “Deadline” number is greater than the “Today” number, indicating the team would have more cap space at the deadline. This is because, $2 million would buy a team more at the deadline, than it would at any given day before it; because that $2 million is paying for daily salary over a shorter period of time. You don’t have to be a mathematician to understand that dividing a team’s remaining payroll by fewer days will result in a larger per-day number.

However, there are some teams – the Flyers are almost always one of them –  where the “Deadline” number is equal to (or perhaps just slightly larger) than the “Today” number. This is because these teams are using LTIR. So they do not see any sort of cap savings as we move closer to the Trade Deadline. There is no cap space to be “banked” when you are using LTIR; because by definition, you have no banked cap space.

In short, using LTIR is not a good thing. If you’re using it, you are not in ideal cap shape. The only way to fully take advantage of LTIR is to 1) already be spending to the upper limit – because LTIR is not in addition to any cap space the team already may have and 2) use every penny of the granted LTIR from Day 1. I think most would agree that that is unrealistic, as it isn’t the best idea to plan on having no wiggle room.

This isn’t to say that having to use LTIR is a death sentence. It isn’t. Plenty of teams, the Flyers included, have successfully operated within it. However, it does have its limitations and it does restrict the team to some capacity. Hopefully, the distinction between cap space and LTIR space is now a little clearer.

In case you missed it:
CBA 101 Part 1: Waivers and Re-Entry Waivers
CBA 101 Part 2: 35+ Contracts – The Chris Pronger Story
CBA 101 Part 3: Slide Contracts
CBA 101 Part 4: Cap Space Calculations