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loophole in the salary cap for rich teams?

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Old
05-17-2009, 11:41 PM
  #26
Jeffrey
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There are on currently loophole that help the rich teams over the small ones.

The longterm deals.

you can frontload the contract like crazy and offer little money at the end of that contract...

imagine a team has 4m$ in cap to sign a superstar worth 8m$

offer him 10m$ a year(or whatever the max is) for 15years and 30 years at the league minimum let's say 0.600m$(the player retire by that time)
total 168m$ for 45 years contract... cap hit : 3, 733 333m$, true salary = 10m$ a year....

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05-17-2009, 11:49 PM
  #27
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Quote:
Originally Posted by Jeffrey View Post
There are on currently loophole that help the rich teams over the small ones.

The longterm deals.

you can frontload the contract like crazy and offer little money at the end of that contract...

imagine a team has 4m$ in cap to sign a superstar worth 8m$

offer him 10m$ a year(or whatever the max is) for 15years and 30 years at the league minimum let's say 0.600m$(the player retire by that time)
total 168m$ for 45 years contract... cap hit : 3, 733 333m$, true salary = 10m$ a year....
The league would never approve a contract like that - it is VERY unlikely that the league would approve a long term front loaded deal that would take a player much past his early 40's. The league would not approve an SPC where there is virtually zero chance of a player completing it.

Yes, some teams can skirt the boundaries with contracts like Franzen's - but not much more blatant than that.

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05-17-2009, 11:50 PM
  #28
LadyStanley
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The longest deal the NHL has approved to date was DiPietro's 15 year deal (which in retrospect due to the injuries may be a huge cash/cap drain).

They are scrutinizing long contracts to see if they are "reasonable" in length (and not a cap circumvention).

Chelios aside, having a deal that goes past age 40 for most players is ludicrous.

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06-15-2009, 04:48 PM
  #29
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Quote:
Originally Posted by kdb209 View Post
Players cannot be loaned from Euro teams to the NHL.

Under the CBA, a player under NHL contract may be loaned to a team in another league. However there are no provisions for players under contract in another league to be loaned to an NHL team.

League Rules (most recently reiterated during the Malkin soap opera) prohibit NHL teams from signing an SPC with a player with a current valid contract with another team/league (modulo Russia's now closed two week notice rule and IIHF transfer agreement rules).
is that in the CBA? or on some NHL rule website

or is that what article 26 is stating

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06-15-2009, 06:10 PM
  #30
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Originally Posted by Ziostilon View Post
is that in the CBA? or on some NHL rule website

or is that what article 26 is stating
To play in the NHL, you must be signed to either a Standard Player Contract or to an Amateur Tryout Contract. The former, we all know about; the latter is good for one (1) day only and can only be extended under emergency conditions. A player signing in Europe isn't signing an SPC valid for the NHL.

In other words, it's called "common sense."

Also see: Article 11.1 of the CBA


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Originally Posted by Ziostilon View Post
remind me about the Vitaly Vishnevski situation

say if he was on a 2-way contract, could he still have gone to Lokomotiv
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Originally Posted by kdb209 View Post
Players can be loaned to a Euro team - just like loaning a player to the AHL.
In the case of Vishnevski, he was never officially loaned to anyone. The Devils simply told him, "go ahead and find someone else to play with," let him sign with that team, then voided his contract when he failed to show up for training camp.

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06-15-2009, 06:13 PM
  #31
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Originally Posted by Irish Blues View Post
To play in the NHL, you must be signed to either a Standard Player Contract or to an Amateur Tryout Contract. The former, we all know about; the latter is good for one (1) day only and can only be extended under emergency conditions. A player signing in Europe isn't signing an SPC valid for the NHL.

In other words, it's called "common sense."

Also see: Article 11.1 of the CBA

In the case of Vishnevski, he was never officially loaned to anyone. The Devils simply told him, "go ahead and find someone else to play with," let him sign with that team, then voided his contract when he failed to show up for training camp.
Except when players are on PTOs.

Sharks had Freisen on a PTO last year during training camp.

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06-15-2009, 06:55 PM
  #32
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Originally Posted by kdb209 View Post
The league would never approve a contract like that - it is VERY unlikely that the league would approve a long term front loaded deal that would take a player much past his early 40's. The league would not approve an SPC where there is virtually zero chance of a player completing it.

Yes, some teams can skirt the boundaries with contracts like Franzen's - but not much more blatant than that.
there's also a rule about yearly salary decrements....it can't decrement by anything more than half I think, right?

8-4-2-1-0.5

so this loophole would work if both parties agree to it and yes, I believe it is a loophole that is being exploited and needs to be changed.

Example: Player X signs a 10 year/60 million dollar contract when he is 28.

8m-10m-12m-12m-6m-4m-3m-2m-1.5m-1.5m

Averages out to a caphit per year of 6mil. The team buys him out when he is 35 and he has 2 years left on his contract at 2m-1.5m-1.5m.

at 2/3s it would be 3.33m divided over 6 years that would be 0.55m caphit for those next 6 years.

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06-15-2009, 07:02 PM
  #33
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Originally Posted by WalterSobchak View Post
there's also a rule about yearly salary decrements....it can't decrement by anything more than half I think, right?

8-4-2-1-0.5

so this loophole would work if both parties agree to it and yes, I believe it is a loophole that is being exploited and needs to be changed.

Example: Player X signs a 10 year/60 million dollar contract when he is 28.

8m-10m-12m-12m-6m-4m-3m-2m-1.5m-1.5m

Averages out to a caphit per year of 6mil. The team buys him out when he is 35 and he has 2 years left on his contract at 2m-1.5m-1.5m.

at 2/3s it would be 3.33m divided over 6 years that would be 0.55m caphit for those next 6 years.
No. It cannot decrement by more than 50% of the year 1 or year 2 salary (whichever is smaller).

Quote:
Originally Posted by CBA Article 50.7
50.7 "100 Percent Rule" for Multi-Year SPCs. The difference between the stated
Player Salary and Bonuses in the first two League Years of an SPC cannot exceed the
amount of the lower of the two League Years. Thereafter, in all subsequent League
Years of the SPC, (i) any increase in Player Salary and Bonuses from one League Year to
another may not exceed the amount of the lower of the first two League Years of the SPC
(or, if such amounts are the same, that same amount); and (ii) any decrease in Player
Salary and Bonuses from one League Year to another may not exceed 50 percent of the
Player Salary and Bonuses of the lower of the first two League Years of the SPC (or, if
such amounts are the same, 50 percent of that same amount).
And no - the cap hit for the buyout is not that simple. For front loaded contracts, the buyout cap hit may be significantly greater than the buyout payment. Effectively all of the cap benefits accrued by the averaging over the life of the contract before the buyout are paid back over the remaining post-buyout years.

The actual buyout dollars is just 2/3 the remaining salary (1/3 if under 26 yo) paid out over 2x the remaining term.

For the cap hit for the remaining term of the SPC you take the original cap hit and deduct the "Buyout Savings" (the difference between the original salary due and the buyout payment). For the years that extend past the end of the SPC, the cap hit is the same as the buyout payments.


Last edited by kdb209: 06-15-2009 at 07:11 PM.
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Old
06-15-2009, 11:03 PM
  #34
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I don't see why teams don't just hire players as consultants after they retire. For example, we want to hire you for 5 years at 7 mil per, but we can't afford the cap hit. So, we'll sign you for 5 mil per year and owe you 10 mil (2x5). The year after you retire, we will you hire you as a special advisor and consultant for game #1. You have to show up to the game and we'll pay you 10 mil to do so.

I'm being silly with the title and duties on purpose, but if the player trusts the team, this seems like an easy way around the cap.
26.15 Examples of Circumvention f) A Club or Club Actor pays a Player or Player Actor for a "no-show" job,
or for a job in which the payment to the Player or Player Actor clearly exceeds the fair
market value of the services rendered.

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Old
06-16-2009, 06:42 AM
  #35
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"Loophole in the CBA for the rich teams" -- for real this time...

This is hardly news, but I thought I start a thread about the Franzen type of deals to get some talk gooing on the subject and get a place where everyone can ship in with some info and talk about it in the media. So far I've heard pretty little about it.

For example lets say NYR offers Mike Komisarek a 16 year deal:
11.5, 11.5, 8.5, 8.5, 4.25, 2.5, 1.5, .75, .5, .5, .5, .5, .5, .5, .5 and .5.

The deal's total would be 52m. Realistically Mike Komisarek will probably make around 5y*5m + 6y*6m =60m (very high counted) in the rest his career, natrually give or take some; with a ton of ifs and buts natrually. With this offer he would just have made 40m when he hits 30 years of age, like put 20 of thooes in the bank at 5% rent for 6 years and he will have made up for the little diffrence in less then 6 years, and he takes away all the ifs and buts.

The caphit would be 3.25.

And Mike Komisarek would be very tradeable by the time he hits 31 y/o. Like a poor team could get him for 1m per over the comming 5 seasons, if he is any good at that time he could definitly be worth a fortune for a team like Buffalo who got their own self imposed cap, or many other franchises.

Their is some downside in it for Komisarek, like lets say that he stands there as nothing more then a steady 6th D when he is 37 y/o and with a burning desire to play 4 more years for a cheap sum. Allot of teams would love to have him, for a cheap sum. But nobody wants him for a caphit of 3.25m. But I don't think thats very likely actually...

In the CBA a team isn't supposed to be able to eat salary nor spend more then the cap. But in this case the NYR would both spend more then the cap and make Komisarek a extremely valuble asset by in principle eating his salary.

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06-16-2009, 06:48 AM
  #36
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for real this time? there is a thread exactly like this every two weeks.

It's not a loophole, it's a legitimate strategy. At some point, i expect the NHL to limit term of contracts, but it is still a huge risk to teams. What if the player starts playing terribly after 1 year? What if they have chronic injury problems? What if they demand a trade after the biggest frontloaded years?

There are a number of risks on the owners' side that prevent this from becoming a big deal, but one thing the NHL will have to regulate is contract length w/regards to age, or maybe change the 35 and older rule to apply those players' hit's as buyouts if they retire.

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06-16-2009, 06:54 AM
  #37
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Quote:
Originally Posted by danishh View Post
for real this time? there is a thread exactly like this every two weeks.

It's not a loophole, it's a legitimate strategy. At some point, i expect the NHL to limit term of contracts, but it is still a huge risk to teams. What if the player starts playing terribly after 1 year? What if they have chronic injury problems? What if they demand a trade after the biggest frontloaded years?

There are a number of risks on the owners' side that prevent this from becoming a big deal, but one thing the NHL will have to regulate is contract length w/regards to age, or maybe change the 35 and older rule to apply those players' hit's as buyouts if they retire.
Typical...

I search the board and scanned back like 3-4 pages of threads without finding any thread about it...

Do you remember what the thread was called?

BTW, I did write that it was hardly news to anyone, so...

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06-16-2009, 06:58 AM
  #38
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Also, I agree that there is allot of downside to it (besides the big positives).

But, chronic injury -- is what you have insurances for.

If he demands a trade after 4-5 years, by all means trade him because he will be really valuble for the teams with selfimposed caps atleast and you could get a big return for him.

Will Komisarek have any motivation after 4-5 years? After 1 year? Thats a good question.

Would it give NYR or which ever of the rich clubs that opens the vault a circus stamp? Yeah probably. And especially in NYR's case thats not something they need again.

So there definitly is some downsides with it.

Quote:
Originally Posted by danishh View Post
There are a number of risks on the owners' side that prevent this from becoming a big deal, but one thing the NHL will have to regulate is contract length w/regards to age, or maybe change the 35 and older rule to apply those players' hit's as buyouts if they retire.
This is basically the real topic -- will it become a big deal? I am not saying that it will or won't.

There is a risk for it to become a big deal IMO for sure. Like Franzen and Zetterberg are two examples already of less extreme deals like that.

Could Komisarek or Hossa be the first UFA's who signs thoose type of deals?

Where will the NHL draw the line?

Mod: deleted.

So where do they draw the line? Would the deal above be OK? Could a player be signed untill he is 43? 45? 55? 75? Natrually somewhere they got to draw a line.


Last edited by Fugu: 06-17-2009 at 06:23 AM. Reason: need links for this stuff
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06-16-2009, 07:23 AM
  #39
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Quote:
Originally Posted by Ola View Post
This is hardly news, but I thought I start a thread about the Franzen type of deals to get some talk gooing on the subject and get a place where everyone can ship in with some info and talk about it in the media. So far I've heard pretty little about it.

For example lets say NYR offers Mike Komisarek a 16 year deal:
11.5, 11.5, 8.5, 8.5, 4.25, 2.5, 1.5, .75, .5, .5, .5, .5, .5, .5, .5 and .5.

The deal's total would be 52m. Realistically Mike Komisarek will probably make around 5y*5m + 6y*6m =60m (very high counted) in the rest his career, natrually give or take some; with a ton of ifs and buts natrually. With this offer he would just have made 40m when he hits 30 years of age, like put 20 of thooes in the bank at 5% rent for 6 years and he will have made up for the little diffrence in less then 6 years, and he takes away all the ifs and buts.

The caphit would be 3.25.

And Mike Komisarek would be very tradeable by the time he hits 31 y/o. Like a poor team could get him for 1m per over the comming 5 seasons, if he is any good at that time he could definitly be worth a fortune for a team like Buffalo who got their own self imposed cap, or many other franchises.

Their is some downside in it for Komisarek, like lets say that he stands there as nothing more then a steady 6th D when he is 37 y/o and with a burning desire to play 4 more years for a cheap sum. Allot of teams would love to have him, for a cheap sum. But nobody wants him for a caphit of 3.25m. But I don't think thats very likely actually...

In the CBA a team isn't supposed to be able to eat salary nor spend more then the cap. But in this case the NYR would both spend more then the cap and make Komisarek a extremely valuble asset by in principle eating his salary.
How are they spending more than the cap? Do you mean in actual salary and not just in the actual cap hit? Don't you think that the richer teams looked at this as a good thing when they had the cap forced on them? I mean the reason for the cap in the first place is becaue alot of the smaller market teams were struggling financially and they implemented a system to placate those teams. On the flip side, there HAD to be something in the cap that would allow the larger market teams to somewhat flex their financial muscle and this is the way they are doing that.

How are they eating salary? Again, we can't have a system totally driven and structured to only help those teams that are not able to spend the way the Rangers, Red Wings and Flyers can. There has to be menchanisims that allow teams to spend. 4 years down the line when the actual $$ amount paid to Komisarek is 1 million, his cap hit will remain 3.25 million. Some teams may be in position to take that one, some other's won't be. The value does lie on the back end of the deal, but I think that a perfectly fine way to do things.

The key is to get the young star player to agree to that type of deal the way the Flyers got Mike Richards to sign on the dotted line and the way the Red-Wings got Franzen (and will probably get Hossa) to agree to terms.

It's more than fair and the GM's had to know it was their for the taking.

I think that the reason it wasn't used any sooner than the Ricky D contract was similar to the way GM's for years refused to extend offer-sheets. No one wanted ot be the first to do it due to potential public back-lash (see the Islanders on the Ricky D contract, not a dig here guys, but I'm sure some of you guys regret that contract)

I think that as long as the actual cap hit is reasonable, regardless of the actual annual payout, a guy like Franzen is valuable, a guy like Komisarek becomes valuable. More valuable in the later years od the deals no doubt, but valuable nonetheless.

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06-16-2009, 10:12 AM
  #40
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But, chronic injury -- is what you have insurances for.
Not the NHL blanket policy, the whole time, as that insurance only covers up to 7 years in duration.

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06-16-2009, 10:16 AM
  #41
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Quote:
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No. It cannot decrement by more than 50% of the year 1 or year 2 salary (whichever is smaller).

ok, well lets use this link:
http://www.hockeybuzz.com/cap-central/team.php?team=CGY

take a look at this player:
Kiprusoff, Miikka

Also look at his yearly salary decrements:
8,500,000
7,000,000
7,000,000
6,000,000
5,000,000
1,500,000

and tell me who is wrong.

There are other examples (a few Red Wings) but you get the idea.

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06-16-2009, 10:20 AM
  #42
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Half of year 2 is 3.5 million

the biggest decrease there is 5 million to 1.5.. which is 3.5 million?

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06-16-2009, 10:22 AM
  #43
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Quote:
Originally Posted by jessebelanger View Post
Half of year 2 is 3.5 million

the biggest decrease there is 5 million to 1.5.. which is 3.5 million?
and in my example, half of 8 million is 4 million, so change my example to reflect this if its important. the drop of 6 mil isn't the point, but feel free to nitpick all you'd like if it makes you feel better.

You are overlooking the point.

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06-16-2009, 12:16 PM
  #44
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How are they spending more than the cap? Do you mean in actual salary and not just in the actual cap hit? Don't you think that the richer teams looked at this as a good thing when they had the cap forced on them? I mean the reason for the cap in the first place is becaue alot of the smaller market teams were struggling financially and they implemented a system to placate those teams. On the flip side, there HAD to be something in the cap that would allow the larger market teams to somewhat flex their financial muscle and this is the way they are doing that.
.
In the sense that they would pay more money then what the cap is over the course of the contract... In how many ways can you spend more money then the cap is?

Like if a player signs a 3 year deal worth 9 m, and gets 4m, 3m and 2m per a team might also spend more money then the cap is one year -- which is intended to be possible -- but after 3 years the cap hit is 9 m and the money paid is 9 m.

But if a player signs a contract till he is 45 y/o and stops playing when he is 37 y/o, and have intended to do so all along, and the contract is constructed like the example above the team will infact pay a helluva lot of more money then what the cap hit have been.

Also, I am not at all that this is made on purpose by the NHL...

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06-16-2009, 12:19 PM
  #45
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And BTW, their have to be a some kind of limit to what extent this approch can be used.

Like according to the CBA from what I understand, you could basically sign a player to 10.000 year contract, with like years 7 to 10.000 beeing 500k per and youd get a caphit of 500k basically for a player who you in reality could pay like 11m per.

Now 10.000 years is of course only used as a example because its so ridiculos. But what if a GM signed a player untill he is 50? Even if thats allowed the cap basically looses its purpose completely in the end.

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06-16-2009, 12:33 PM
  #46
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Remember the NHL reviews every contract when it is signed/filed and can reject a contract for many reasons including the belief that the contract is intended to circumvent the cap system.

So far the league hasn't approved a long-term contract that takes a player past age 40.

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06-16-2009, 12:43 PM
  #47
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They really dropped the ball on the Franzen and Zetterberg contracts then. It's pretty much obvious to everyone else here that Detroit was able to circumvent the cap system by tacking on additional years at minimal salary that in all likelyhood the player will either retire or be bought out with no real penalty to lower the overall cap hit.

Does anyone here really think Franzen or Zetterberg are going to be playing on the wings at 39 with their cap hits?

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06-16-2009, 01:00 PM
  #48
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Quote:
Originally Posted by mouser View Post
Remember the NHL reviews every contract when it is signed/filed and can reject a contract for many reasons including the belief that the contract is intended to circumvent the cap system.

So far the league hasn't approved a long-term contract that takes a player past age 40.
And note that even if the NHL approves and registers the contract that does NOT mean that it's kosher and there are no circumvention issues.

The fact that the league approved the deal does not prevent it from later investigating, presenting a case to an arbiter, and having it later ruled as circumvention - with all of the nasty Article 26 sanctions still possible.

Quote:
Originally Posted by CBA Article 26.10(b)
(b) The Investigator's authority to investigate (i) a possible Circumvention
relating to an SPC shall in no way be limited by the fact that such SPC was approved and
registered by Central Registry pursuant to Article 11 of this Agreement;


Last edited by kdb209: 06-16-2009 at 01:05 PM.
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Old
06-16-2009, 01:06 PM
  #49
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Komisarek is 27 now, so any team opting for this approach would probably cap the deal at 13 years, to have it end at age 40. Try for any more years, and the NHL will probably refuse to certify the contract.

Provided that the deal does not extend beyond age 40, however, and provided that annual salary does not dip by more than half from one year to the next, this should be possible. That is, of course, unless the NHL simply decided to refuse to certify it anyway, citing a vague 'breaking the spirit of the CBA' clause as its reason. When you get right down to it, the NHL doesn't really have to explain itself. If it thinks a deal breaks the spirit of the CBA, that is that. At some point, the NHL may simply put the word out that enough is enough, and no longer certify very long contracts.

13 years at $51.5M is a cap hit of $3.96M.

Right now, the NHL policy is to say that teams are entitled to sign players to long contracts if they want to do so... but you had better be sure, because one of these days a team is going to get stuck with a very long contract to a dud player. Not a player who is felled by injury, but a player who simply doesn't perform and is getting $5M/yr for the next decade. That player isn't going to retire, and he isn't going to be paid by insurance, and he is going to have a NMC.

The NHL is dealing with it right now by saying that the cap fluctuates, and that it is not going to bail out teams from their follies when such a time comes. So if you run a team and you are considering signing a player to a long contract, think long and hard as to whether this is the right player.

As a team, you are placing a lot of faith in the player's ability to play that long at a high level. That is the warning from the NHL office. Other than that, to date teams are entitled to sign long deals if they so choose. caveat emptor

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06-16-2009, 01:39 PM
  #50
Wetcoaster
 
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Quote:
Originally Posted by LadyStanley View Post
Not the NHL blanket policy, the whole time, as that insurance only covers up to 7 years in duration.
After the maximum period covered by NHL disability insurance for example the Isles on the Dipietro contract would have to buy supplementary insurance for the remaining eight years which can be prohibitive or self-insure.

Also it does not cover all the players on the roster. This was written during Eric Staal's contract negotiations and focuses on contract length and insurance issues:
Quote:
The league purchases its disability insurance through the BWD Group, a Long Island, N.Y., insurance broker that also obtains coverage for the NBA, WNBA and Major League Baseball. (One underwriter, the Chubb Corporation, touted its relationship with the NHL in its 2001 annual report.)

Each team pays a premium based on the salaries of its five highest-paid players, but is free to allocate that coverage how it wishes. Typically, a team will extend coverage to as many as seven players, Daly said. Coverage kicks in when a player misses at least 30 games.

Beyond that, individual teams are free to pursue additional coverage, but the heavy premiums make it a losing proposition. To insure a player under the league program, it costs about 5 percent of his salary. To insure additional players, it would cost substantially more.

“Usually it works out that we have five players under the league program,” Rutherford said. “When you get to a certain dollar amount, the premiums keep skyrocketing. I wish it was easier to get each [player] insured, but we can’t do that. …

“If you wanted, you could insure all the contracts, but it would be very expensive.”
http://proathletesonly.com/news/feat...nhl-contracts/

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