CBA Explained: Retained salary transactions

One of the most interesting wrinkles written into the new Collective Bargaining Agreement (CBA) are retained salary transactions; or more simply, the ability for teams to retain salary on a player they trade away. This edition of CBA Explained will expand on the topic.

Many fans had been clamoring for this rule to be implemented for some time now. Major League Baseball allows you to include cash in a trade, which dramatically helps teams consummate deals involving highly paid players. I would suspect this to be the case in the NHL as well. While a highly-paid, under-performing player is typically unattractive, if something could be done to make them not so “highly paid”, well, it’s easier to move them.

From the CBA Summary of Terms:

“In the context of Player Trades, participating Clubs will be permitted to allocate the AA and related Salary and Bonus payment obligations between them, subject to specified parameters (“Retained Salary Transaction”). Specifically, the Club trading a Player may agree to retain a percentage of the SPC’s AA and related Salary and Bonus obligations for each of the remaining years of the Player’s SPC, up to 50% of the SPC’s AA. In each Retained Salary Transaction, the percentage allocation of the retained AA and retained Salary and Bonuses must be the same (i.e., the Salary and Bonus obligations as between Clubs would be allocated on the same percentage basis as the AA being allocated) and cannot be altered from year to year... A Club may have up to a maximum of three (3) SPCs on its Cap per League Year as to which a portion of the AA and Salary have been retained in a Player Trade, provided, however, that the aggregate amount of AA retained by a Club does not exceed 15% of the Upper Limit (e.g., 15% of $70.2 million or $10.53 million in Year 1; 15% of $64.3 million or $9.645 million in Year 2; or $12 million if the Upper Limit equals $80.0 million) in the aggregate for all such contracts in any one year. An SPC can be subject to a Retained Salary Transaction up to a maximum of two (2) times. 

In the case of one or more Retained Salary Transactions, and a subsequent SPC “buy-out” or termination such that the SPC is no longer in force, the resulting cash and cap consequences will be divided as between the Club parties to the prior transaction(s) on the same basis they originally agreed upon. In the case of one or more Retained Salary Transactions, and a subsequent Loan of the SPC, the prior Club(s) shall retain their portion of the SPC’s NHL cap charge that they agreed to retain for the balance of the Player’s contract (regardless of whether the Player is ever recalled), but will get the benefit of any reduced cash obligations to the Player during the time he is playing outside the League.

The Player shall be paid by the Club for which he currently plays (or most recently played for).

 

I’ve bolded the key components of the clause. For those of you that dislike large blocks of text:

  • a team can retain up to 50% of a player’s cap hit (or average amount)
  • salary and bonus obligations must be retained at the same percentage as the cap hit
  • that amount cannot change from year to year
  • a team cannot retain salary for more than 3 contracts in a single league year
  • the total amount of retained cap hits cannot exceed 15% of the upper limit
  • a single player’s contract could be involved in a retained salary transaction twice (meaning three different teams could be dividing up the player’s salary and cap hit)
  • if a player is ultimately loaned elsewhere, the prior team(s) are still responsible for the cap hit but would see the same cap benefits (if any) as the current team

I’m very excited to see how this ultimately plays out in the NHL. I can really see this assisting with the trading of expensive players on expiring contracts. A team trying to make a playoff push with limited cap space could acquire a player for cheaper, and a team out of the playoff race could find more suitors for an expensive, expiring contract.