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NFL 101: How cuts, retirements and trades affect the salary cap

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In our final salary-cap installment of NFL 101, we'll take a look at how cuts, retirements and trades make things nuttier than a Snickers bar.

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The NFL season is full of jargon that can be a big confusing to the uninitiated: what is a "football move", for example. But, if in-season talk can be a little troublesome, the off-season conversations are oftentimes downright mindboggling. This series of "primers", known as "NFL 101", aims to break down the communication barriers between Joe and Jane Football Fan and those of use who obsess over every detail.

NFL contracts make all the sense in the world -- just as long as the player plays that contract out to its conclusion.

It seems logical that a player would see the contract through. After all, he's getting paid for playing a game, right? The team knew what they were paying for from the start, right? And what player would walk away from millions of dollars...right?

Unfortunately, rare is the contract that survives to its conclusion untouched by the accountants and magicians in front offices. Sometimes, a player simply never sees the end -- period.

Cuts

There are times when a player just doesn't work out in a particular team's system. Sometimes, the team just took a chance on him, and he didn't prove to be as talented as he looked at first glance. Or, perhaps, it's more economical for a team to cut an expensive-but-skilled player because the drop in production to his cheaper replacement is outweighed by the money saved. Whatever the reason, the Collective Bargaining Agreement allows teams to escape contracts for basically any reason (the only real exception to this is that a player cannot be cut while he is on the team's injury report unless an injury settlement is reached).

So, what happens to a player's salary cap hit if he is cut? That depends heavily on when he's cut.

If a player is cut between the beginning of a league year and June 1 of that year, the move is considered a pre-June 1 cut. If he's cut after June 1, he is designated a post-June 1 cut. This is important, because it determines how any remaining, prorated bonus money is accounted.

For any player cut before June 1, all remaining, prorated bonus money accelerates so that it is counted in the current year. For instance, let's assume a player is given a five-year contract with a $10 million signing bonus. Now, assume he is cut from the team after year two. There will still be $6 million in bonus money ($2 million per season) unaccounted for. Because he was cut before June 1, all $6 million of that money is automatically counted against the team's current-year salary cap rather than spreading it over the remaining three years.

For post-June 1 cuts, though, the accounting changes. In this case, only the current year's bonus money is counted against the team's current-year salary cap. All remaining bonus money after the current year -- in the case of our example, the last $4 million -- is accelerated onto the next year's cap. So, the team would be on the hook for $2 million this year, and $4 million next year.

There is one caveat to the June 1 rule: a player can be cut at any time before June 1 and still be given this designation. It has no effect on the team's accounting -- they will be treated as if they were cut after June 1 if the team chooses to designate them as a June 1 cut. What it does, though, is give the player the chance to sign elsewhere, at any time. The player is entirely unaffected by the designation. The team simply cannot spend the money saved by giving the player the June 1 designation until after June 1.

Regardless of when a player is cut, though, the team still saves money. Most often this is simply because the team is no longer responsible for paying the player's salary for the current and remaining years of the contract. They also can save money, depending on the timing of the cut, by avoiding certain bonuses. If a player is cut before the start of the new league year, the team will avoid having to pay any roster or workout bonuses for the remaining years. Additionally, any option bonuses that have not yet begun will be voided, as well.

Retirements

Teams can end a contract at any time, but so can players. In a player's case, though, the only way they can do this is by retiring. In the end, though, the math looks pretty much the same as if the player had been cut -- and the June 1 rule applies here, too.

For instance, if our player from the example above had retired instead of being cut, his money would account the same way as if he had been cut by the team. If he files his retirement paperwork on or after June 1, the money counts as if he was cut on or after June 1.

Just like anything else in the NFL, though, there is a "but" for this rule, too: if the player retires with time remaining on his contract, then chooses to come back into the league later, he is not a free agent. Contracts apply, in most cases, to accrued seasons, not calendar years. If the player doesn't play, he doesn't accrue a season. Therefore, his return to the field would put him back under the control of the same team, unless that team chooses to cut him. This rule is part of the reason why Barry Sanders chose to retire: the Lions refused to cut him, and he decided he'd rather stop playing altogether than play another season for Detroit. Conversely, Brett Favre retired, and then the team chose to cut him while he was retired. He was then able to return to the league later as a free agent.

Okay, there are actually two "buts" for retirements. When a player retires, the team has the option to pursue the return of a portion of the signing bonus equal to the unplayed portions of the contract, and that money is no longer counted against the salary cap. This is typically done through an arbitrator. This is known as the "Barry Sanders Rule" because this is exactly how the situation played out in his case, as he was required to pay back a portion of his bonus. The difference between now and then is there was no precedent when Sanders played; now, it's explicitly written into the CBA to allow for this arbitration.

Trades

Sometimes, players are traded away, and this affects the salary cap in much the same way as a cut or a retirement. The team from which a player is traded is no longer on the hook for unpaid salaries or future bonuses, but is still responsible for accounting for any bonuses that have already been paid. That may just be remaining, prorated signing bonus money, but it can also include things like a roster bonus that was paid at the beginning of the current league year. Again, this all depends heavily on when the player is traded.

However, the big accounting difference in a trade is that, when a player is traded, the team is still getting something back in return for the player. Typically, this is one or more other players, so those players' salaries would then be counted against the acquiring team's salary cap. The incoming players' prorated bonuses, however, continue to stay with their previous team.

There you go -- clear as mud.