The NHL and NHL Players’ Association (NHLPA) have agreed in principle to a new, amended collected bargaining agreement which is now being sent to the respective parties—the NHL Board of Governors (BOG) and the players—for a final vote to ratify it. The biggest changes have been addressed several times already, but Michael Russo of the Athletic dropped another bit that, if true, has a big impact on the Predators:
SOURCE: Cap recapture (Parise/Suter) amended in new NHL – NHLPA CBA
There is no longer a charge greater than the contract’s AAV in any year, but charge continues until full overage is paid off.
You can read about cap recapture in this #mnwild storyhttps://t.co/JvVnezfyQg
— Michael Russo (@RussoHockey) July 6, 2020
Our own Sarah Hager went into further detail about salary cap recapture back in February, discussing the risk involved to the Predators with to Shea Weber’s 14-year, $110-million contract that he signed back in 2012. As you all remember, Weber signed an offer sheet from the Philadelphia Flyers for that amount, meaning that Nashville had to meet these terms in order to retain Weber—and they did.
The contract was extremely front-loaded, meaning that the Preds paid Weber a majority of his salary at the start of his contract, but the length of the contract meant that they spread the cap hit evenly over the entire 14 years. Prior to the current CBA being ratified in 2013, this was standard practice by several teams, as it effectively acted as a loophole teams could (permissibly, at the time) use to ease the cap hit.
During the four years that Weber remained on the team after signing his contract, something called a net cap benefit accrued. In a nutshell, each year, the cap advantage represented the amount of the total salary paid minus the cap hit. As the contract went on, the net cap benefit was the cumulative total of each year’s cap advantage. With Weber’s front-loaded contract, even though Nashville was paying Weber much higher than his salary cap average annual value (AAV), they were accruing the net cap benefit, which totaled $24,571,428 when he was traded to the Montreal Canadiens for P.K. Subban in 2016.
At that point, Nashville would no longer accrue the net cap benefit (Montreal would take over from this point), but conversely, the Predators wouldn’t be able to lower the net cap benefit either. As Weber’s contract continued on, the lower salary (only $1 million from 2023 though 2025) is much less than the AAV paid, so the negative net cap benefit lowers.
Enter an element of the 2013 NHL CBA—one of the things added by the league acted to effectively close the loophole of front-loaded contracts used by players like Weber, Zach Parise, Ryan Suter and Roberto Luongo. From that point on, if a player retired before their contract was completed, the net cap benefit would be owed by the team, spread over the years remaining of the contract. This is known as the cap recapture penalty.
Had Weber remained in Nashville the entire length of the contract, and retired in 2024, for example, Nashville would’ve been on the hook for the remaining $6,857,141 over the last two years—a meager $3,428,571 cap hit each of those years, much less than the $15,714,286 in AAV if he was active.
However, as we know, the Predators traded Weber to Montreal in 2016, meaning as long as Shea Weber was still active in the NHL, his salary was the responsibility of the Canadiens—unless Weber retired early. Since Nashville’s $24+ million net cap benefit stays the same (since they aren’t paying a salary and his contract doesn’t count against the cap), Nashville is now on the hook for that benefit until his contract is completed. Sarah broke it down in the article linked above, but the Athletic’s Pierre Lebrun created this handy picture to really drive home how bleak the future could be after Weber’s retirement.
Yikes. The longer Weber plays, the higher risk Nashville assumes in having to pay the cap recapture penalty, all the way up to a possible $24.5 million cap hit if Weber retires in 2025. Up to this point, the risk has been known, but the assumption was that something would eventually have to happen to change this, as this could dramatically impact a team like Nashville, who would have over a quarter of their $81.5 million salary cap covered by a single player. Since the CBA ratified in 2013 was originally planned to last until 2022, nobody expected anything to change until at least then.
Enter the new CBA. Let’s revisit Michael Russo’s tweet:
SOURCE: Cap recapture (Parise/Suter) amended in new NHL – NHLPA CBA
There is no longer a charge greater than the contract’s AAV in any year, but charge continues until full overage is paid off.
You can read about cap recapture in this #mnwild storyhttps://t.co/JvVnezfyQg
— Michael Russo (@RussoHockey) July 6, 2020
Now, the full text of the new NHL CBA has yet to be released until after a vote by both the BOG and the players, but if true, this change could have two impacts for Nashville upon Weber’s potential retirement.
The Good: If the charge can no longer be greater than the AAV per year, that means Nashville would only be responsible for paying $7,857,143 per year until the recapture penalty is paid off (if the amount they are responsible for is greater than the penalty spread out over the remaining years). So in the nightmare scenario above, instead of Nashville having to pay out $24.5 million in a single year, they would pay $7.85 million per year for four years (in my assumption, they pay the max each year until the remaining amount is less, so 3 years of the AAV then a final year at around $1 million). Obviously, Weber retiring earlier than 2025 would still provide some relief, but this helps in the short term.
The Bad: With this change, however, Nashville can be on the hook for the recapture penalty for longer than the final year of Weber’s contract. Weber’s contract would be on the books for Nashville until 2030 in the scenario above. While this might be good in avoiding a possible $24.5 million single-year cap hit, $7.85 million a year is still a large amount—only Matt Duchene, Ryan Johansen and Roman Josi currently have larger AAVs than the potential penalty.
I’ve attempted to break down the penalty structure that would take place if Weber retired prior to each of the upcoming seasons. Since they can only pay the AAV for each year remaining on the contract, after the 2022-23 season, Nashville will keep paying the balance after the end of the contract.
The final column represents the cap hit for Nashville after the AAV is paid each year until 2026.
Yes, this change is a welcome one that—if ratified—would remove the $24.5 million Sword of Damocles hanging above Nashville’s salary cap, but it does instead expose them to salary cap trouble longer, potentially until the 2029-2030 season.
The many proposed ways Nashville could seek to eliminate the recapture penalty, such as trading for Weber if and when he plans to retire and placing him on LTIR, are still in play, as the contract will still have a tremendous impact going forward. Still, let’s hope it doesn’t come down to that.