CBA Explained: Cap Advantage Recapture penalty

This week CBA Explained will dive into one of the more unique aspects of the new collective bargaining agreement; the “Cap Advantage Recapture” provision. It is designed to penalize teams for signing players to “back-diving” contracts that serve to reduce a player’s cap hit. It has the potential to haunt teams that signed players to these cap circumventing deals, even if those players were traded away. This led to some worry for Flyers fans in the cases of Mike Richards and Jeff Carter.

As stated in the summary of terms:

“For all existing SPCs with terms in excess of six (6) years (“long-term contracts”), a “Cap Advantage Recapture” provision will become applicable. Specifically, for years in which the Player under a long-term contract is no longer playing in the League … any “Cap Advantage” that may have been gained by a Club …will be “Recaptured,” and charged against the Club’s Upper Limit from year-to-year in equal amounts over the remaining term of the Player’s SPC. 

If the contract in question is ever traded or assigned to one or more other Clubs in the League, each Club will be subject to being charged with any and all “Cap Advantage” amounts it receives while being obligated pursuant the contract.

The “Cap Advantage Recapture” provision will not apply to “Cap Advantage” amounts a Club may have gained prior to trading a Player’s contract, where such trade occurred before the execution of the new Agreement (including any binding MOU).

The Flyers luck out based upon that last paragraph. Because the contracts were traded prior to this CBA, they would not be subject to the rule. However, I’d like to proceed as if they were, for the sake of illustration.

Elliotte Friedman explained the intricacies of the rule. I strongly suggest you read his article in which he uses Roberto Luongo as an example.

Essentially, in the event of early retirement for heavily front-loaded contracts, if a team is paying a player a large salary,while their cap hit is much lower, they will be punished accordingly for that “cap savings” as compared to the real salary dollars.

It is also weighted based upon how many years they spent with the team.

So how would this apply to the Flyers in the situations of Mike Richards and Jeff Carter if they weren’t exempt?

In the case of Jeff Carter, as described in Elliotte’s article, because the formula takes into account how many years the player spent with the team under that contract, the Flyers would not be responsible for any penalties should Carter ever retire prior to his contract ending.

Carter signed an 11 year contract with the Flyers, however the first year of that contract was 2011-2012; a year he spent with the Columbus Blue Jackets and Los Angeles Kings. Carter was traded from the Flyers before his contract ever took effect.

Mike Richards, however, did play three season with the Flyers as part of his 12 year contract. In those three seasons he made $5.4, $5.6, and $6.4 million dollars for a total of $17.4 million.

Richards’ cap hit is $5.75 million. Over three seasons that comes to $17.25 million in cap hit “dollars”. Per Elliotte’s explanation, if we subtract the $17.25 million in cap hit, from the $17.4 million in salary, we get $150,000.

That $150,000 is the total “cap benefit” the Flyers received during Richards’ time with the team. If Richards were to ever retire early, the Flyers would be penalized that $150,000 amount over however many years of the contract Richards did not fulfill.

Obviously, even if the Flyers had to take the full penalty in a single season, $150,000 is pretty much negligible. If Richards retired with multiple years remaining on his contract, that amount would be divided up over the remaining unused contract years.

I personally find the rule to be good in theory, however the fact that the “penalty” gets applied over however many years are remaining in the contract upon retirement does not make much sense to me. Teams essentially get punished if the player plays longer. If a team were at risk of a cap recapture penalty, they could prefer that they retire earlier so it is spread out over a longer period of time (depending upon how the rest of the salary is structured).

  • http://www.facebook.com/parker.smith.71 Parker Smith

    Couldn’t agree with you more, Kevin. I thought this was an interesting attempt to aid teams that trade for an aging player or gamble on someone who has a preexisting injury. However, as you pointed out, the penalty aspect probably serves to the detriment of younger players who have yet to pull in their big payday.

    As always – great explanation here and very well written.

    • http://www.flyersfaithful.com/ Kevin Christmann

      Thank you Parker, and I’m glad you enjoyed it!

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