Explaining how the NFL works, Part 7: Dead money

Whether it’s when the NFL is in the full swing of its regular season or if it’s during the downtime of the early summer, there still is constant news and happenings with the league that has made itself relevant 365 days a year. When various things are discussed, sometimes there are terminologies and procedures where fans might have a general understanding of things. Even the most die-hard fans may have certain areas they don’t understand exactly what various things mean and wish to have a better understanding.

Over the next few weeks, I will take some time to do my best in thoroughly explaining some of the various inner workings of things in the NFL. These are not on-field items but more from an administrative standpoint. Whether it be understanding the waiver wire, the Reserve/Injured List, or the breakdown of the practice squad, we’ll take a look at some of the various terms that are thrown around and utilized in descriptions of things in the NFL but may not be fully understood.

Next up is the topic of dead money, which is even more important on today’s date.

Dead Money

The term dead money, which is used when looking at an NFL contract, is the amount of money which still needs to be accounted for on the salary cap after the player’s contract is no longer in effect. While it would be easier to say it is when “the player is no longer on the team,” that is not always the case which will be explained shortly. Dead money does not mean that the team still owes the player any part of their base salary or other bonuses, it is simply money the player has already been paid but has not been accounted for on the salary cap.

A good example to show the concept of dead money is where the Steelers recently released cornerback Ahkello Witherspoon. Last season the Steelers signed Witherspoon to a two-year deal worth $8 million. The structure of the deal paid Witherspoon $1.035 million in a base salary for 2022, a $2.965 million signing bonus, and a $4 million base salary for 2023. After looking how bonuses worked yesterday, Witherspoon signing bonus was split up to count $1,482,500 each of the two seasons. This kept Witherspoon’s cap number down to $2,517,500 last year and would have been $5,482,500 in 2023. When Witherspoon was released, the $4 million base salary went to cap savings but the additional $1,482,500 that was to go on this year’s salary cap and had already been paid to Witherspoon still counts on the salary cap for 2023 under the category of dead money.

Dead money but still on the team?

So how can a player have a dead money charge and still be on the team? This happens when a player has one contract terminated and then has another begin. The best example of this comes from Anthony McFarland Jr. Because he did not make the Steelers 53-man roster in 2022, he had a dead money hit for his remaining signing bonus. The fact that McFarland was signed back onto the practice squad, or even if he had been signed the 53-man roster at another point, it doesn’t change his dead money hit from the end of his rookie contract which was terminated when he did not make the team.

Void Years

Sometimes teams add void years onto a contract in order to spread out the salary cap hit of the initial signing bonus. A void year is simply fake years on a contract just to spread out the signing bonus but the player does not have a base salary for those years and are set to become a free agent once the contract voids. If a player has void years in their contract and they are not re-signed before the contract voids, all of the remaining money from any of the void years gets transferred into dead money for the next season.

A good example of this is Cameron Sutton. With 2021 being the only year the Steelers have ever used void years because of the salary cap going down, Sutton signed a contract for two years that also had three void years at the end. With a $3.5 million signing bonus, the Steelers saved $1.05 million on the salary cap for 2021 by having the void years at the end of the contract (the prorated bonus was $700k per year with the void years vs. $1.75 million if the contract only had two years). But when Sutton‘s contract voided in February, the remaining $700k from each of the three void years all was transferred as dead money into the Steelers 2023 salary cap and Sutton cost the Steelers $2.1 million this season. Even if Sutton would have re-signed with the Steelers during free agency, this dead money value still would have been there.

June 1

A very important date in the NFL calendar when it comes to dealing with dead money is June 1. If a player is cut or traded after June 1, the remaining dead money can be spread over two seasons instead of one as long as that player‘s contract was set to go this distance or beyond. If the player has multiple years left on their contract, only their prorated bonus for that season will count in the first year and all the remaining prorated bonuses added together would count for the next year. For example, if a player had three years left on their contract with $2 million in prorated bonus each season, they would count $2 million for the upcoming season in dead money and $4 million the following season in dead money if they were released after June 1.

One example of this comes from Stephon Tuitt’s retirement last year which occurred on June 1. By waiting until this date, the remaining dead money for Tuitt was able to be spread out across the 2022 and 2023 seasons.

Using the earlier example of Anthony McFarland, this is why he still has a dead money hit with the Steelers for 2023. Because he was released at the end of August before being signed to the practice squad, his dead money hit was spread out over 2022 in 2023. This is why he still has a $180k dead money hit for the season.

When June 1 isn’t June 1

But what if a team plans on releasing a player but wants to wait until June 1 in order to have the cap savings? Rather than hold that player hostage, teams are allowed to release as many as two players who they designate as a June 1 release although they release them much sooner. This allows the player to sign with any team once free agency begins, and the team can spread out the dead money into the following year (as long as their contract was to go beyond the upcoming season). The only other requirement that comes with this is that a player’s entire salary cap hit must stay with the team until June 1. So if a player has a large base salary, that stays on the team’s salary cap until the release is made official the start of June.

It should also be noted that neither trades nor retirements can be designated as a June 1 transaction. In order to have those benefits, they cannot be officially processed until that time.

Early Retirement

If a player signed a large contract with an extensive signing bonus for many years but then decides to step away from the game early, the only way a team can get around the dead money charge is too try to recoup some of the player’s signing bonus. In order for this to happen, the team and the player have to enter into arbitration. While this is possible, it is not something that comes into play very often, especially with the Pittsburgh Steelers.

In case you missed other parts of the series, they can be seen here: