Could someone explain how an incentive laden contract works vis a vis the salary cap?
For example, if I were to say to Earl Thomas, “I will give you
- an $6 million Signing bonus
- a salary guaranteed of $8mm for 3 yrs
- if we win the NFC chmp $3 mil bonus
- if we win Super Bowl a $3 mil bonus”
what is his cap number...and when?
It also matters if bonuses are designated (by the league/CBA) as "likely to be earned" or "unlikely to be earned," but I'm not exactly sure what the specific salary-cap ramifications of those designations are.
This is real long so you have been warned.
likely to be earned incentive is one that a player had achieved the year before. An unlikely to be earned incentive is if the player didn't earn it the year before. In KRKs example since the Seahawks did not win the NFC Championship or the SB last year both 3 million dollar bonuses would be "unlikely to be achieved" They would not count against the cap in 2019 If the Packers did win the SB he would earn both bonuses and they would count against next years cap.
I'm going to make a couple of assumptions. (1) you mean 8 million a year for 3 years guaranteed (like Buckeye suggested) if you did mean 8 million OVER 3 years you can subtract 5.3 million from the total I give you. (2) the salary is the same for each of the three years (not 6 million, 8 and 10 or some other breakdown) (3) the 3 million dollar incentives for NFCC and SB wins are in place for each of the three years. Finally, just to make my numbers clearer we assume the years are 2019, 2020, and 2021
2019) The cap hit for 2019 would be 2 million in signing bonus (6 million /3 years) plus year 1 salary. If you mean 8 million a year for 3 yrs guaranteed (like Buckeye said) it would be a 10 million. If you mean 8 million over 3 years guaranteed it would be 4.667 million cap hit in There would be no incentives paid in 2019 and the incentives are considered unlikely to be earned so they wouldn't count against the cap.
If the Packers do not go to the SB in 2019 the 2020 cap hit would be the same as 2019 (10 million
2020) If the Packers win the SB in 2019 his 2020 cap for salary
and signing bonus
would be the same as 2019 (again assuming an equal split for salary) Then you would add the the 6 million in incentives he earned for winning the SB in 2019. Since they were actually earned in 2109 but not counted against the cap in 2019 they would be counted against the cap in 2020. That brings us up to 16 million for 2020. But we are not done. Since he won the SB in 2019 the 6 million dollars in incentives for 2020 would now be considered likely to be earned (since he earned them the year before) and they would count in the current year. For a total of 22 million
cap hit in 2020. If the lose the SB in 2019 only the NFCC incentive would count so it would be 16 million for 2020
2021)If they do not make the SB in 2020 his cap hit for 2021 would be salary + signing bonus (10 million) since no incentive was earned in 2020 there would be no cap hit for them. BUT since they counted 6 million in likely to be earned bonuses in 2020 that he did not actually earn they would get a credit of 6 million in 2021 so their cap hit in 2021 would be 4 million.
If they win the SB in 2020 his cap hit for 2021 would be 10 million plus 6 million for the likely to be earned incentives (because he earned them in 2020.) However, because his incentives for wining the SB in 2020 were counted against the 2020 cap (they were likely to be earned in 2020 so they counted in 2020) they would not count against the 2021 cap for a total of 16 million.
If they do not make the SB in 2019 or 2020 but win it in 2021 the packers would carry a 6 million dollar dead cap hit in 2022 because the incentives were always considered unlikely to be earned and thus not counted against the current years cap Since he earned them in 2021 they need to be accounted for in 2022.
If they win the SB in 2020 and 2021 they will not have any dead money in 2022 because the 6 million incentive for 2021 would have been counted against the cap in 2021.
Lastly I figured it as if he played out all three years. If they cut him after 2019 the 4 million left for the signing bonus (they counted 2 in 2019) would be dead money as would 1/2 the remaining guaranteed salary and would go against the 2020 cap and the remaining 1/2 of the guaranteed salary would still count against the 2021 cap. If they cut him after 2020 they would count 2 million from the signing bonus and the remainder of the guaranteed salary in 2021. This assumes no SB wins in 201 or 2020
I am fairly confident I got this all right. It looks confusing because it is and because of the incentives. Since we are going to three peat I bolded the appropriate cap figures for each year. You would need to adjust downward for any SB loss since only 1 incentive would be earned.
You can see why teams may be reluctant to do this. In this example they would have to account for an additional 12 million in cap money in 2020 if they win the SB in 2019. It would be worth it for sure but it could mean having to do something drastic to fit it in.
Likely to be earned incentives are easier because they count right now but unlikely to be earned can add a surprise cap hit if the player gets hot. Lets just say for example the offer Kizer a 10 million dollar bonus for 2019 if he makes the pro bowl. Its a good target for him to shoot for and it seems pretty safe for the Packers since they hope he never sees the field. They are fine for 2019 because he didn't make the probowl in 2018 so the unlikely to be earned incentive doesn't count against the 2019 cap but if Rodgers goes down and Kizer plays lights out and makes the pro bowl the Packers will have to count an additional 10 million in 2020.
If you have a headache after reading all that how do you think I feel.
Hope it helps a little.