What about the Cap Hit for the Packers

[fuji869]

Favre wants the Packers to release him, the media wants the Packers to do Favre’s bidding but I have not heard the media mention salary cap hit the Packers will have it the release Brett?!?!?

Is it true that if a team releases a player they have to the remainder of his signing bonus (aka guaranteed money) and depending on when he is releases the have to suffer a salary cap hit that season or the next season?

I remember because that was the argument with Deion Sanders and the Redskins in 2001 Prime Time wanted to be cut so he could keep his entire $8 Million Bonus. When Ricky Williams retired he had to come back because the Dolphins wanted some of that signing bonus because he retired.

Correct me if I am wrong but if a player leaves of his own free will the team does not have to pay all his guaranteed but if he is released by the team he gets it all. That is why agents make a big deal of the signing bonus during contract negotiations.

Now I do not know how it works in this case because Brett Favre retired in March. But if he Packers have to suffer a salary cap hit and pay the remainder of his signing bonus if they do release him why isn’t the media mentioning his because I think he has like 3 years left on his contract?

[Larry]

Their cap hit if they cut him is exactly the same as if he retires.

Now, their cap hit if he shows up, may be better or may be worse than if he "stays retired".

Both involve "dead money": Any money that a player's been paid, that hasn't been counted against the cap, yet.

Typically, this is signing bonus money, but it can come from other sources. The way it works is that the signing bonus is

earned

when the player signs a contract. (Even though the player may not

receive

the money until the next year. There may be tax advantages to receiving it later, and of course, the team has an advantage in not having to cough up the cash all at once.) But for salary cap purposes, it gets divided up equally among the life of the contract.

(If a player gets a $15M signing bonus on a 5-year contract, then the bonus gets counted as $3M against the team's cap, every year.)

If that player leaves after 2 years of his contract, then he's been paid $15M, but only $6M of it has been counted against the cap. He still has $9M in "dead money".

The rules are, is a player retires/gets cut are:

If he leaves before June 1st, than all of his dead money "accelerates": It hits the next season. The hypothetical player will count $9M against the cap, even though he doesn't play a single down.

If he leaves after June 1st, then one years worth of his bonus counts that year, and whatever's left counts the next year. (The hypothetical player counts $3M the year after he leaves, and $6M the year after that.)

If he plays, then the team's cap gets hit for one year's dead money plus whatever his salary is for that year.

So it doesn't matter to the Packers whether he retires or gets cut. But it might matter when he leaves.

[fuji869]

Thanks for the explanation Larry.

This is what I thought:

Lets take your 5 year $15 Million Signing Bonus Player.

If the team releases him 3 years into the contract they owe him the whole $15 million and will take the cap hit.

But if he quits, retires or leaves on his own he has to pay back $6 Million to he team.

[Larry]

Thanks for the explanation Larry.

This is what I thought:

Lets take your 5 year $15 Million Signing Bonus Player.

If the team releases him 3 years into the contract they owe him the whole $15 million and will take the cap hit.

But if he quits, retires or leaves on his own he has to pay back $6 Million to he team.

Nah, he earns the signing bonus by, well, by signing the contract. (There may be some reasons why he doesn't get paid the money for a year or two, but it's his.)

That's why players love signing bonuses. They're the only money in the contract that's guaranteed. (Whereas, if a player signs a contract that pays him $4M a year for 5 years, and in his first game he gets paralyzed for life and gets cut, then he gets paid for one game: 1/16th of $4M, and that's it. If that $20M contract had been $10M signing bonus and $10M salary, then he'd get his entire $10M signing bonus for playing one game.)

(This also means that, if Favre shows up at training camp, the Pack can cut him basically one day before the first game. They don't have to pay him a dime of salary. And none of his salary will count against their cap (because he didn't get paid any). But it will be too late for him to go anywhere else.)

And the entire bonus is going to get counted against the team's salary cap, sometime.

(BTW, it just occurred to me: That explanation should have said "retires, gets cut, or gets traded. If Favre comes back, and somebody offers the Pack a draft pick, and Favre gets traded to, say, Tampa, then GB takes the same cap hit as if he retired. In that case, Green Bay takes the hit for whatever bonus hasn't been counted, yet. And Tampa's cap takes the hit for whatever salary Favre was scheduled to make this year.)

[MartinC]

Nah, he earns the signing bonus by, well, by signing the contract. (There may be some reasons why he doesn't get paid the money for a year or two, but it's his.) QUOTE]

Not strictly true Larry.

Take Jake Plummer he was paid a signing bonus by the Broncos on a 5 year deal as I recall. He played 3 of those years and was then traded against his wishes to Tampa. Rather than report he retired. Tampa owned his contract at that point and filed a greivance against Plummer which he settled before it went to arbitration but essentially he had to repay to Tampa part of the signing bonus he had received from the Broncos.

It does depend how the contract is drawn up but essentially a signing bonus is an advance payment for future services. If a player withdraws those services they have to repay part of the signing bonus IF the team decides to persue the player. Ricky Williams and Barry Sanders are other players who have fallen foul of this.

[Shilsu]

I found an article saying he has 3 years remaining on his contract, and since he got a $10M signing bonus for a 10-year contract...

The answer is $3M.

Concerning players who retire, here's what I found from the Falcons web-site:

"If a player retires, the remaining signing bonus that has not been included in salary accelerates, and is included in that year's team salary. Thus, the team will take an immediate salary cap hit of the remaining signing bonus. However, recent cases have sided with the team in the cash recovery of signing bonuses for players who retire (the Barry Sanders case), which allows for a signing bonus rebate."

http://www.atlantafalcons.com/People/Fans/Salary_Cap_101/Signing_Bonus.aspx