How the Flyers Just Saved $800k from Next Year's Cap

I have no faith that they were even aware they were doing this, since Holmgren didn't mention it today. But it happened.

I explained all of this back in September. I'm going to just copy and paste it over to here with minor tweaks:

I. Eligibility for Performance Bonuses

Only players over 35 years of age (Type A) and players on Entry-Level contracts (Type B) are eligible for performance bonuses in their contracts. Performance bonuses count against a salary cap for the team. One of the variables we have to determine is which salary cap they apply to.

II. Calculating Performance Bonuses

How the cap calculations of performance bonuses actually function is complicated.

A. Preseason

Let's set our scene in October of 200x. At this time, NHL TEAM has a number of contracts for players which include performance bonuses for the upcoming season. The total potential value of those bonuses count against the team's salary cap right now.

However, in consideration of the fact that not every performance bonus will be met, the CBA includes a "Bonus Cushion". This cushion amount is 7.5% of the year's salary Upper Limit.

Why? Well, for instance, let's say that both Chris Pronger and Kimmo Timmonen have a bonus clause in their contract for winning the Norris Trophy. This obviously can't happen, yet the Flyers would have to drag both cap hits all season because the award isn't handed out until July. With the bonus cushion, you can offer bonuses that conflict and not be penalized under the salary cap for it. You can also award highly unlikely bonuses (leading the league in goals scored, playing 82 games, etc.) and not be forced to eat that cap space all season. Keep in mind, this is only to the extent of 7.5% of the current salary cap, so you can't go crazy with the bonuses.

So, back to our NHL TEAM. How much room do they have under the cap for performance bonuses?

(Salary Cap Upper Limit) - (Salary Against the Cap) + (Salary Cap Upper Limit x 7.5%) = Room for Performance Bonuses

B. Midseason

As soon as a performance bonus becomes unattainable, it no longer counts against the team's cap. (For instance, a clause for playing 82 games is given to a player who has the flu and is scratched opening night. That bonus no longer counts against the team's cap. But a bonus for playing 50 games would be counted against the cap until the player missed his 33rd game of the season.)

C. End of Season

Okay, season over, awards show in Vegas over, now NHL TEAM has to pay out those performance bonuses. Makes perfect sense. Here's a check to our third line center for being better than +15 this year... here's a check to last year's 1st round draft pick for playing more than 40 games on the NHL roster...

What does this mean for the salary cap? Page 216 of the CBA, Section 50.5(h)(iii) reads:

At the conclusion of each League Year, the amount of Performance Bonuses actually earned... shall be determined and shall be charged against the Club's Upper Limit and Averaged Club Salary for such League Year.

So we go back and count all these bonuses achieved last season against last season's cap to make sure that, now that we know which bonuses were in fact achieved, our NHL TEAM didn't actually exceed last year's Upper Limit. Because we certainly can't be paying out salary to players and have it disappear into thin air; it has to count against a salary cap or else there's a wide open door for circumvention.

NHL TEAM never thought that much bonus money would have to be paid out and now that its retroactively applied to our salary cap, it turns out they were over the Upper Limit. Do they have to give the Stanley Cup back?

(continued from above section)
To the extent a Club's Averaged Club Salary exceeds its Upper Limit as a result of [bonuses] then the Club's Upper Limit for the Next League Year shall be reduced by an amount equal to such excess.

Looks like NHL TEAM needs to dump some salary this offseason.

The bonus cushion serves as both a protection from being screwed over by carrying unattained performance bonuses and a cap of 7.5% of the Upper Limit in order to keep this loophole under control.

III. JVR's Contract

So, to the topic at hand: What is JVR's contract?

No one knows. His contract is for a cap hit of $875,000. He then has Type B Performance Bonuses which can equal as much as $800,000 more. But no one knows what those bonuses actually are.

However, I'm assuming that JVR will attain all of his performance bonuses, and that $800k is going to be applied retroactively after the season.

IV. Conclusion

As a result of not making a deal today, the Flyers have more than $2 million in cap room this season, and will be able to apply the JVR bonuses to this year's cap.

This item was written by a member of this community and is not necessarily endorsed by <em>Broad Street Hockey</em>.