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Every Scenario Regarding Ehrhoff and Recapture Penalties and Buyouts

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01-28-2014, 01:41 PM
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Sabretooth
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Every Scenario Regarding Ehrhoff and Recapture Penalties and Buyouts

Every time a trade scenario regarding Ehrhoff is brought up, either here or in the main boards, there are people confused about what the ramifications actually are. I created this post as a reference so that whenever a question is brought up, this post can be linked to, rather than trying to explain it again each time. The information herein is correct to the best of my knowledge based on the actual regulations listed in the actual Collective Bargaining Agreement.

Reference (full text 540 page CBA): http://cdn.agilitycms.com/nhlpacom/P...A_2013_CBA.pdf

What the CBA actually says about recapture, normal course buyouts, and compliance buyouts:
(provided for reference)

Quote:
Originally Posted by Article 50, 50.5, page 266
(B) For any period during which the Player under a Long-Term
Contract is no longer playing in the League during the term of that
Long-Term Contract by reason of retirement, "defection" from the
NHL or otherwise (but not death) (such that he is not playing and
is not receiving Salary pursuant to that Long-Term Contract)
, an
amount attributable to that Player shall nonetheless continue to be
included in his Club's Averaged Club Salary as described below.
(1) Upon that Player's failure to play in the League by reason
of retirement, "defection" from the NHL or otherwise (but
not death) (such that he is not playing and is not receiving
Salary pursuant to his Long-Term Contract) (assuming it is
prior to the conclusion of the Long-Term Contract)
, the
difference between the sum of the Actual Salary and
Bonuses received by that Player under that SPC and the
sum of the Averaged Amounts charged against the Club's
Averaged Club Salary under that SPC shall be calculated as
follows:
omitted
Quote:
Originally Posted by Article 50, 50.5, page 268-269
(iii) Treatment of Ordinary Course Buy-Outs for Purposes of Calculating
Averaged Club Salary.

As a result of the averaging rules set forth in this
Agreement, the actual Player Salary and Bonuses paid to a Player in a
League Year of an SPC may be either more, or less, than the Averaged
Amount of such SPC included in the Club's Averaged Club Salary for
such League Year. If a Club elects to buy out an SPC pursuant to the
Ordinary Course Buy-Out provision set forth in Section 50.9(i) below, the
disparity between the actual Player Salary and Bonuses paid in the earlier
League Year(s) of the SPC and the Averaged Amount included in the
Club's Averaged Club Salary in such League Year(s) is accounted for in
how the Buy-Out agreement is treated for purposes of averaging.
For a
Club that buys out an SPC pursuant to an Ordinary Course Buy-Out, the
amount to be included in the Club's Averaged Club Salary for each
League Year during the term of the Buy-Out agreement is determined as
follows:
omitted
Quote:
Originally Posted by Article 50, 50.9(i), page 288
(i) If a Player's SPC has been terminated and bought out by a Club pursuant
to the Ordinary Course Buy-Out provisions set forth in the SPC (which
SPC also eliminates the concept of the "lump sum" buy-out), the money
due and owing to the Player pursuant to the Buy-Out shall be paid out in
accordance with the terms of the SPC (e.g., one-third or two-thirds of the
remaining Player Salary due and owing, to be paid over twice the
remaining years of the terminated and bought out contract), and the
amounts paid under such Buy-Out agreement shall be included in the
Actual Club Salary and Averaged Club Salary (as set forth in this Article
50) of the Club that bought out the Player during any League Year in
which the Buy-Out is paid
, and the amounts paid under such Buy-Out
agreement shall also count against the Players' Share for any League Year
in which the Buy-Out is paid (an "Ordinary Course Buy-Out").
Quote:
Originally Posted by Article 50, 50.9(ii), page 288-289
Compliance Buy-Outs.

During the "Ordinary Course Buy-Out" periods
following the 2012-13 NHL Season and 2013-14 NHL Season, in addition
to any other Ordinary Course Buy-Outs a Club may want to effectuate
pursuant to Paragraph 13 of the SPC, each Club may elect to terminate and
"buy-out" the SPC of up to two (2) additional Players (in the aggregate
over the two (2) years) on a Compliance basis (a "Compliance Buy-Out")
(i.e., each Club shall be entitled to a total of two Compliance Buy-Outs
that may be exercised in one year or over two years). Such Compliance
Buy-Outs shall be effectuated on the same terms as are set forth in
Paragraph 13 of the SPC, except that (i) there shall be no charge against
the Club's Averaged Club Salary in any League Year on account of a
Compliance Buy-Out and (ii) any amounts paid pursuant to a Compliance
Buy-Out shall be counted against the Players' Share in the League Years
in which they are paid. Further, a Player who has been bought out under
the Compliance Buy-Out provision of this Agreement shall be prohibited
from rejoining the Club that bought him out (via re-signing, Assignment
or otherwise) for the 2013-14 League Year (if that Player was bought out
in 2013) or for the 2014-15 League Year (if that Player was bought out in
2014).
Ehrhoff's Contract:
Capgeek Link: http://www.capgeek.com/player/121

Length: 10 years
Value: $40,000,000
AAV/Cap Hit: $4,000,000 per year for 10 years beginning season of 2011-12.
Salary Table:
2011-12: $10,000,000
2012-13: $8,000,000
2013-14: $4,000,000
2014-15: $4,000,000
2015-16: $4,000,000
2016-17: $4,000,000
2017-18: $3,000,000
2018-19: $1,000,000
2019-20: $1,000,000
2020-21: $1,000,000

Contract Status at the conclusion of the current (2013-14) season:
Total Salary Paid: $22,000,000
Remaining Total Salary Due: $18,000,000

Total Cap Hit Acrued: $12,000,000
Remaining Cap Hit to be Acrued: $28,000,000

The $10,000,000 recapture amount comes from the first 2 years of the contract, where the total salary paid was $10 million more than the Total cap hit acrued. During the final 4 years of the contract, the salary paid will be less than the cap hit by $1, $3, $3, and $3 million respectively. By the end of the contract, the total salary paid and the total cap hit acrued will then be equal. The recapture amount is reduced by the $1, $3, $3, and $3 million each of the final 4 years of the contract so long as Ehrhoff remains a Sabre. If Ehrhoff is playing for another team when his salary is less than his cap hit and then retires before the end of his contract, the Sabres will not have earned any reduction off the $10 million recapture - they will be responsible for the full amount spread evenly among the remaining years of the contract.

The following details every possible retirement and buyout scenario regarding Ehrhoff - first if he remains a life-long Sabre, and then if he is traded. At the end, there is a short FAQ regarding some common scenarios/loop holes that have been proposed to avoid the recapture penalty.

Scenarios if Ehrhoff remains a life-long sabre:
Calculations performed by Capgeek.com persuant to Section 50.5 of the CBA, referenced above

Retirement/Defections

If Ehrhoff Retires following the the 2013-14 season, the sabres will be assessed a recapture penalty as follows:
Cap Benefit: $10,000,000
Years Remaining: 7
Penalty per season: $1,428,571 assessed 7 years from 2014-15 through 2020-21)

If Ehrhoff Retires following the the 2014-15 season, the sabres will be assessed a recapture penalty as follows:
Cap Benefit: $10,000,000
Years Remaining: 6
Penalty per season: $1,666,667 assessed 6 years from 2015-16 through 2020-21)

If Ehrhoff Retires following the the 2015-16 season, the sabres will be assessed a recapture penalty as follows:
Cap Benefit: $10,000,000
Years Remaining: 5
Penalty per season: $2,000,000 assessed 5 years from 2016-17 through 2020-21)

If Ehrhoff Retires following the the 2016-17 season, the sabres will be assessed a recapture penalty as follows:
Cap Benefit: $10,000,000
Years Remaining: 4
Penalty per season: $2,500,000 assessed 4 years from 2017-18 through 2020-21)

If Ehrhoff Retires following the the 2017-18 season, the sabres will be assessed a recapture penalty as follows:
Cap Benefit: $9,000,000
Years Remaining: 3
Penalty per season: $3,000,000 assessed 3 years from 2018-19 through 2020-21)

If Ehrhoff Retires following the the 2017-18 season, the sabres will be assessed a recapture penalty as follows:
Cap Benefit: $6,000,000
Years Remaining: 2
Penalty per season: $3,000,000 assessed 2 years from 2019-20 through 2020-21)

If Ehrhoff Retires following the the 2017-18 season, the sabres will be assessed a recapture penalty as follows:
Cap Benefit: $3,000,000
Years Remaining: 1
Penalty per season: $3,000,000 assessed 1 years in 2020-21)

(bolded values above show the reduction in the recapture penalty for the years in which Ehrhoff's salary is less than his cap hit.)

Normal Course Buyouts

If Ehrhoff is bought out (normal) following the the 2013-14 season, the buyout cost to the sabres will be as follows:

2014-15: $857,143
2015-16: $857,143
2016-17: $857,143
2017-18: $1,857,143
2018-19: $3,857,143
2019-20: $3,857,143
2020-21: $3,857,143
2021-22: $857,143
2022-23: $857,143
2023-24: $857,143
2024-25: $857,143
2025-26: $857,143
2026-27: $857,143
2027-28: $857,143

If Ehrhoff is bought out (normal) following the the 2014-15 season, the buyout cost to the sabres will be as follows:

2015-16: $777,778
2016-17: $777,778
2017-18: $1,777,778
2018-19: $3,777,778
2019-20: $3,777,778
2020-21: $3,777,778
2021-22: $777,778
2022-23: $777,778
2023-24: $777,778
2024-25: $777,778
2025-26: $777,778
2026-27: $777,778

If Ehrhoff is bought out (normal) following the the 2015-16 season, the buyout cost to the sabres will be as follows:

2016-17: $666,667
2017-18: $1,666,667
2018-19: $3,666,667
2019-20: $3,666,667
2020-21: $3,666,667
2021-22: $666,667
2022-23: $666,667
2023-24: $666,667
2024-25: $666,667
2025-26: $666,667

If Ehrhoff is bought out (normal) following the the 2016-17 season, the buyout cost to the sabres will be as follows:

2017-18: $1,500,000
2018-19: $3,500,000
2019-20: $3,500,000
2020-21: $3,500,000
2021-22: $500,000
2022-23: $500,000
2023-24: $500,000
2024-25: $500,000

If Ehrhoff is bought out (normal) following the the 2017-18 season, the buyout cost to the sabres will be as follows:

2018-19: $3,333,333
2019-20: $3,333,333
2020-21: $3,333,333
2021-22: $333,333
2022-23: $333,333
2023-24: $333,333

If Ehrhoff is bought out (normal) following the the 2018-19 season, the buyout cost to the sabres will be as follows:

2019-20: $3,333,333
2020-21: $3,333,333
2021-22: $333,333
2022-23: $333,333

If Ehrhoff is bought out (normal) following the the 2019-20 season, the buyout cost to the sabres will be as follows:

2020-21: $3,333,333
2021-22: $333,333

You will notice, in no given season is it better for the sabres to buy Ehrhoff out using a Normal Course buyout vs. Letting him retire, if he remains a life-long sabre. In each comparable case, the buyout is more expensive than the recapture in terms of cap hit amount and length of obligation, as well as actual salary paid.

Compliance Buyouts

Quote:
Originally Posted by Capgeek FAQ
During the ordinary course buyout periods in June 2013 and June 2014, teams will be permitted two compliance buyouts. Compliance buyouts follow the same formula as ordinary-course buyouts but do not count against the cap. For one season following a compliance buyout, the player is prohibited from rejoining the team that bought him out. According to the New York Post on June 26, the NHL notified teams that "re-signing of a player following a trade and a subsequent (compliance) buyout" would be deemed cap circumvention. Per Transition Rule 53, a compliance buyout can only be executed on a contract entered into on or before Sept. 15, 2012.
Scenarios if Ehrhoff is traded during/after the 2013-14 season:

Retirement/Defections

If Ehrhoff Retires following the the 2013-14 season, the sabres will be assessed a recapture penalty as follows (the traded-to team will not receive recapture penalties nor credits):
Cap Benefit: $10,000,000
Years Remaining: 7
Penalty per season: $1,428,571 assessed 7 years from 2014-15 through 2020-21)

If Ehrhoff Retires following the the 2014-15 season, the sabres will be assessed a recapture penalty as follows (the traded-to team will not receive recapture penalties nor credits):
Cap Benefit: $10,000,000
Years Remaining: 6
Penalty per season: $1,666,667 assessed 6 years from 2015-16 through 2020-21)

If Ehrhoff Retires following the the 2015-16 season, the sabres will be assessed a recapture penalty as follows (the traded-to team will not receive recapture penalties nor credits):
Cap Benefit: $10,000,000
Years Remaining: 5
Penalty per season: $2,000,000 assessed 5 years from 2016-17 through 2020-21)

If Ehrhoff Retires following the the 2016-17 season, the sabres will be assessed a recapture penalty as follows (the traded-to team will not receive recapture penalties nor credits):
Cap Benefit: $10,000,000
Years Remaining: 4
Penalty per season: $2,500,000 assessed 4 years from 2017-18 through 2020-21)

If Ehrhoff Retires following the the 2017-18 season, the sabres will be assessed a recapture penalty as follows (the traded-to team will not receive recapture penalties nor credits):
Cap Benefit: $10,000,000
Years Remaining: 3
Penalty per season: $3,333,333 assessed 3 years from 2018-19 through 2020-21)

If Ehrhoff Retires following the the 2018-19 season, the sabres will be assessed a recapture penalty as follows (the traded-to team will not receive recapture penalties nor credits):
Cap Benefit: $10,000,000
Years Remaining: 2
Penalty per season: $5,000,000 assessed 2 years from 2019-20 through 2020-21)

If Ehrhoff Retires following the the 2019-20 season, the sabres will be assessed a recapture penalty as follows (the traded-to team will not receive recapture penalties nor credits):
Cap Benefit: $10,000,000
Years Remaining: 1
Penalty per season: $10,000,000 assessed 1 years in 2020-21)

(the Recapture penalty is not reduced for the Sabres because Ehrhoff will not have played for the Sabres during years where his cap hit is less than his salary.)

Normal Course Buyouts

If Ehrhoff is bought out (normal) following the the 2013-14 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2014-15: $857,143
2015-16: $857,143
2016-17: $857,143
2017-18: $1,857,143
2018-19: $3,857,143
2019-20: $3,857,143
2020-21: $3,857,143
2021-22: $857,143
2022-23: $857,143
2023-24: $857,143
2024-25: $857,143
2025-26: $857,143
2026-27: $857,143
2027-28: $857,143

If Ehrhoff is bought out (normal) following the the 2014-15 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2015-16: $777,778
2016-17: $777,778
2017-18: $1,777,778
2018-19: $3,777,778
2019-20: $3,777,778
2020-21: $3,777,778
2021-22: $777,778
2022-23: $777,778
2023-24: $777,778
2024-25: $777,778
2025-26: $777,778
2026-27: $777,778

If Ehrhoff is bought out (normal) following the the 2015-16 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2016-17: $666,667
2017-18: $1,666,667
2018-19: $3,666,667
2019-20: $3,666,667
2020-21: $3,666,667
2021-22: $666,667
2022-23: $666,667
2023-24: $666,667
2024-25: $666,667
2025-26: $666,667

If Ehrhoff is bought out (normal) following the the 2016-17 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2017-18: $1,500,000
2018-19: $3,500,000
2019-20: $3,500,000
2020-21: $3,500,000
2021-22: $500,000
2022-23: $500,000
2023-24: $500,000
2024-25: $500,000

If Ehrhoff is bought out (normal) following the the 2017-18 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2018-19: $3,333,333
2019-20: $3,333,333
2020-21: $3,333,333
2021-22: $333,333
2022-23: $333,333
2023-24: $333,333

If Ehrhoff is bought out (normal) following the the 2018-19 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2019-20: $3,333,333
2020-21: $3,333,333
2021-22: $333,333
2022-23: $333,333

If Ehrhoff is bought out (normal) following the the 2019-20 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2020-21: $3,333,333
2021-22: $333,333


You will notice, the trade-to team will pay exactly the same buyout costs that the Sabres would pay to use a normal course buyout on Ehrhoff. By buying out the contract, the trade-to team assumes the buyout costs which includes the "buyout savings" part of the buyout - the "disparity between the actual player salary and the cap hit".


Unique Scenarios/FAQ's:

What if Ehrhoff is traded now, and then traded back to the sabres to retire with 1 year left rather than retire playing for the trade-to team. The Sabres will then only be charged the $3 million recapture rather than the $10 million recapture for the 2020-21 season, correct?

NO. The sabres will not have earned a reduction in the cap recapture because Ehrhoff did not play seasons for the sabres in which his actual salary was less than his contract.

OK then, what if we force the trade-to team to accept a buy-out condition as part of the trade. If the trade-to team buys Ehrhoff out in 2017, the recapture costs to the sabres will only be $2.5 million per year, which is more manageable. Eliminate the risk of getting hit with the full $10 million at once, yes?

NO. It states clearly in the CBA, sections 50.5 and 50.9 referenced above, that:

Quote:
the disparity between the actual Player Salary <snip> and the Averaged Amount included in the Club's Averaged Club Salary in such League Year(s) {Sabretooth insert: this is the cap hit} is accounted for in how the Buy-Out agreement is treated for purposes of averaging.
and
Quote:
If a Player's SPC has been terminated and bought out by a Club pursuant to the Ordinary Course Buy-Out provisions set forth in the SPC <snip>, the money due and owing to the Player pursuant to the Buy-Out shall be paid out in accordance with the terms of the SPC <snip>, and the amounts paid under such Buy-Out agreement shall be included in the Actual Club Salary and Averaged Club Salary (as set forth in this Article 50) of the Club that bought out the Player during any League Year in which the Buy-Out is paid, <snip>.
Which means that the trade-to team pays all the buyout costs as described in the scenarios above, and the Sabres are free and clear of any recapture obligations upon termination of the contract through normal course buyout by the trade-to team. This would be a wonderful situation for the Sabres, but it is unrealistic to expect any trade partner to accept such condition based on what it would cost them in cap hit to buy out Ehrhoff.

Oh I see what you mean. I didn't think it worked that way at all. Well then we can still trade Ehrhoff now, we just have to trade for him to return back to the Sabres before he retires and buy him out ourselves then, right?

yes, it appears that is an option. If Ehrhoff is traded now, and makes it known that he is interested in retiring while he has 1 or 2 years left on his contract, it may be possible for Buffalo to negotiate a trade to acquire Ehrhoff for the purpose of a Normal Course Buy Out, to save by paying the buyout costs rather than the recapture penalty. Important to note, however, that the other team will not have incentive to give Ehrhoff away for peanuts, so it will cost us assets to go this route. Also to note that if Ehrhoff wants to retire with 3 or more years left on his contract, it will make more sense in terms of cap hit to just let him retire rather than do the reacquire+buyout.

Scenarios:

3 years remaining:
Season - Recapture - Reacquire/Buyout
2018-19 - $3,333,333 - $3,333,333
2019-20 - $3,333,333 - $3,333,333
2020-21 - $3,333,333 - $3,333,333
2021-22 - $0 - $333,333
2022-23 - $0 - $333,333
2023-24 - $0 - $333,333

2 years remaining:
Season - Recapture - Reacquire/Buyout
2019-20 - $5,000,000 - $3,333,333
2020-21 - $5,000,000 - $3,333,333
2021-22 - $0 - $333,333
2022-23 - $0 - $333,333

1 year remaining:
Season - Recapture - Reacquire/Buyout
2020-21 - $10,000,000 - $3,333,333
2021-22 - $0 - $333,333

Are you sure? Is that all? What about other scenarios? What makes you an expert?

Look, I'm just a fan frustrated with all the confusion about the ramifications of Ehrhoff's recapture penalty. Blame Gary Bettman. This post is simply my interpretation of what the actual language in the CBA seems to say. I had help from others here and there coming to this understanding and this is where I'm at today. If you have other what-if's just ask. If I seem to be wrong about something, politely correct me and I'll look into it and change my post if necessary.

OK this post is great and all but I'm still not sure why recapture doesn't apply if there is a buyout. Are you sure that makes sense?

The simplest explanation based on the CBA verbiage is that a player who is bought out is still receiving salary pursuant to his contract, and therefore recapture would not apply. But these guys chipped in and explained it better than I:
Quote:
Originally Posted by GrigsAndGirgs View Post
The buyout formula was designed to make sure teams that frontloaded deals would have to pay up on the cap savings they got earlier. Even if a player on a frontloaded deal was traded, the buyout would charge the new team the first team's original cap savings as part of the formula.

The recapture is basically intended to do the same, but close the retirement loophole. So if the player is bought out, those initial cap savings were worked into the buyout formula, and charging the recapture penalty would be like double taxing.
Quote:
Originally Posted by hatterson View Post
Recapture is intended to rectify the difference between Salary paid and cap hit charged for a given player, due to the way buyouts work that discrepancy is already taken care of

In Ehrhoff's case, if he were bought out following the 2016-2017 season the Sabres would have paid him $10 million more in salary than they were charged in cap hit until that point.

He would have $6 million remaining on his contract over 4 years so the buyout would cost the Sabres $4 million over 8 years, or $500,000 per year in real dollars. However, due to the rules of buyouts, the cap cost would be 1.5, 3.5, 3.5, 3.5 for the duration of his original contract and then 500k for the last 4 years.

What that means is from 2011/12-2016/17 the Sabres would have paid him $38 million and been charged $28 million on the cap. From 2017/18 until 2024/25 they would pay him $4 million but be charged a total of $14 million on the cap. That means total compensation would equal total cap hit ($42 million) and thus there's nothing to recapture.
So great info dump, but what's the conclusion here? Can we trade Ehrhoff or not? What exactly is the risk of trading Ehrhoff?

Strictly looking at recapture, the risk is the difference in recapture costs if he retired after trading him vs. if he retired as a Sabre at the same point in time. There's a table below summarizing the "risk". Also, keeping Ehrhoff has risks of its own. We have to keep paying his salary and cap hit while he's under contract, and that could end up way worse than the $10 million recapture if he declines to healthy scratch level towards the end of his contract. See here for my complete thoughts on the real risk: http://hfboards.hockeysfuture.com/sh...1&postcount=47

Recapture "risk" as the difference between retiring after trade vs. retiring as a sabre:


Last edited by Sabretooth: 03-03-2014 at 12:44 PM. Reason: adding section on recapture risk
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Old
01-28-2014, 01:43 PM
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Stop Winnin
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He's playing like he wants out of Buffalo if you ask me.

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01-28-2014, 01:46 PM
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haseoke39
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Go get a job with the Sabres. Go! Now!

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01-28-2014, 02:09 PM
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Rob Paxon
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Great work, now go to the main board and link this on every Sabres trade thread

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01-28-2014, 02:10 PM
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Rob Paxon
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Quote:
Originally Posted by Stop Winnin View Post
He's playing like he wants out of Buffalo if you ask me.
Last night was a major exception imo, best he's looked in a while right up to the end where he got mad at everyone for not backchecking on the empty netter.

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01-28-2014, 02:11 PM
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Jame
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I think you are wrong about the recapture, after player is traded and bought out.

The amounts paid under the buyout have nothing to do with the amounts that need to be recaptured.

but i dont know what im talking about either...

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01-28-2014, 02:16 PM
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What about the scenarios where he is traded at a future date? The numbers would change once you get past the 2017-18. The post is incomplete dammit!

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01-28-2014, 02:21 PM
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Seems like we will have a ton of cap circumvention via trade/buyouts...

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01-28-2014, 02:24 PM
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Wow.... Impressive. As long as it's 100% accurate. Otherwise it just causes even more head scratching

Good work

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01-28-2014, 02:26 PM
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all the buyout information from cap geek would appear to be correct... but the interpretation of the recapture via the CBA language appears incorrect...

I don't see how any of this eliminates the recapture...

Quote:
the disparity between the actual Player Salary <snip> and the Averaged Amount included in the Club's Averaged Club Salary in such League Year(s) {Sabretooth insert: this is the cap hit} is accounted for in how the Buy-Out agreement is treated for purposes of averaging.
and
Quote:
If a Player's SPC has been terminated and bought out by a Club pursuant to the Ordinary Course Buy-Out provisions set forth in the SPC <snip>, the money due and owing to the Player pursuant to the Buy-Out shall be paid out in accordance with the terms of the SPC <snip>, and the amounts paid under such Buy-Out agreement shall be included in the Actual Club Salary and Averaged Club Salary (as set forth in this Article 50) of the Club that bought out the Player during any League Year in which the Buy-Out is paid, <snip>.

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01-28-2014, 02:33 PM
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Quote:
Originally Posted by Jame View Post
I think you are wrong about the recapture, after player is traded and bought out.

The amounts paid under the buyout have nothing to do with the amounts that need to be recaptured.

but i dont know what im talking about either...
When a buyout occurs, there is no recapture at all, in my understanding.

The justification for that belief comes in the wording of the CBA in 50.5(B):
Quote:
For any period during which the Player under a Long-Term
Contract is no longer playing in the League during the term of that
Long-Term Contract by reason of retirement, "defection" from the
NHL or otherwise (but not death) (such that he is not playing and
is not receiving Salary pursuant to that Long-Term Contract)
Specifically, defection or retirement are listed, which clearly a buyout does not fall under. The question is, does a buyout fall in the vague "otherwise" category. Well the definition for "otherwise" given is "such that he is not playing and is not receiving Salary pursuant to that Long-Term Contract" - when a contract is bought out, not only is the contract terminated, but also he receives his salary pursuant to that long-term contract anyways, so a buyout would not fall under the "otherwise" category for which a buyout applies.

Later on, in 50.5(B)(1):
Quote:
Upon that Player's failure to play in the League by reason
of retirement, "defection" from the NHL or otherwise (but
not death) (such that he is not playing and is not receiving
Salary pursuant to his Long-Term Contract) (assuming it is
prior to the conclusion of the Long-Term Contract)
The verbage "assuming it is prior to the conclusion of the Long-Term Contract" is added - Ehrhoff would be playing up until he was bought out, and he would not be playing after the buyout, which would conclude/terminate the long-term contract, and thus Ehrhoff would not satisfy "failure to play prior to the conclusion of the Long-Term Contract".

So unless I'm really misreading this, it sure seems to say that if a player is bought out, regardless of which team actually does the buying out, there is no recapture penalty assessed.

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01-28-2014, 02:35 PM
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^ so what was the purpose of creating the recapture penalty, If a team could simply avoid it by buying out a player who planned to retire?

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01-28-2014, 02:52 PM
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Quote:
Originally Posted by Jame View Post
^ so what was the purpose of creating the recapture penalty, If a team could simply avoid it by buying out a player who planned to retire?
Well if you ignore all the trade scenarios that confuse the situation and just assume that Ehrhoff remains a Sabre and wants to retire with 1 year left on his contract.

If he retires, the recapture penalty is $3 million cap hit in 2020-21.

If the team bought him out instead, the buy out cost is $3.33 million in 2020-21, plus $0.33 million in 2021-22. So the buyout cost is actually more than the recapture.

If you go season by season and compare buy out vs. recapture, the buyout option always costs more than the recapture option in total, due to actually having to pay the player and account for his salary in the cap (2/3 of the total spread over twice the remaining years). So in that case, the buyout is not really avoiding the recapture by buying out a player that planned to retire. While its calculated differently and represents a slightly different thing, the same total amount as the recapture is included in the buyout cost, just amortized a different way.


As for when a player is traded, I can't really say, only speculate. What if a player didn't want to retire, but a team we traded Ehrhoff to bought him out with 1 year left anyways just to stick us with the recapture penalty? I suspect it has to do with the fact that the recapture exists to prevent teams from signing players to front loaded contracts longer than they are physically able to play to get a lower cap hit and then let the player retire or go play in a different league. If a team buys out its own player, the buy out costs have its own way of doing to cap accounting to make sure there are no unfair cap advantages. Once a player is traded, if a buyout is used, it kinda assumes that the player is able and willing to continue to play in the league and finish out his contract. It is the team doing the buying out that is choosing to terminate the arrangement, not the player, thus no recapture would be assessed to the original team.

I mentioned elsewhere that trading a player about to retire back to an original team solely to buy them out may be something the league eventually concludes is a form of cap circumvention and would not allow such a scenario to occur, but as of now there doesn't seem to be any sort of statement prohibiting it.

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01-28-2014, 03:08 PM
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Quote:
Originally Posted by Sabretooth View Post
As for when a player is traded, I can't really say, only speculate. What if a player didn't want to retire, but a team we traded Ehrhoff to bought him out with 1 year left anyways just to stick us with the recapture penalty? I suspect it has to do with the fact that the recapture exists to prevent teams from signing players to front loaded contracts longer than they are physically able to play to get a lower cap hit and then let the player retire or go play in a different league. If a team buys out its own player, the buy out costs have its own way of doing to cap accounting to make sure there are no unfair cap advantages.
i thought you said that doesn't happen????

Quote:
Once a player is traded, if a buyout is used, it kinda assumes that the player is able and willing to continue to play in the league and finish out his contract. It is the team doing the buying out that is choosing to terminate the arrangement, not the player, thus no recapture would be assessed to the original team.
So to avoid dead cap space, you can trade bad contracts to teams that need to reach the cap floor... those teams can buy them out, and we've now avoided the recapture on the contract.

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01-28-2014, 03:31 PM
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It wouldn't make sense for there to be recapture after a buyout.

The buyout formula was designed to make sure teams that frontloaded deals would have to pay up on the cap savings they got earlier. Even if a player on a frontloaded deal was traded, the buyout would charge the new team the first team's original cap savings as part of the formula.

The recapture is basically intended to do the same, but close the retirement loophole. So if the player is bought out, those initial cap savings were worked into the buyout formula, and charging the recapture penalty would be like double taxing.

I'm sure someone can exploit a loophole somewhere in it, but that can pretty much true of every rule they come up with, except the simplest: cap hit = salary paid.

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01-28-2014, 03:40 PM
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Quote:
Originally Posted by GrigsAndGirgs View Post
It wouldn't make sense for there to be recapture after a buyout.

The buyout formula was designed to make sure teams that frontloaded deals would have to pay up on the cap savings they got earlier. Even if a player on a frontloaded deal was traded, the buyout would charge the new team the first team's original cap savings as part of the formula.
This is what I am starting to understand... playing around with the capgeek buyout calculator... things are starting to make sense.

(and thanks for explaining it in simple "idiot proof" terms)

so, did the buyout formula change in the new CBA? Why did I think it was simply 2/3 remaining salary, spread over twice remaining years = buyout cap hit?

Quote:
The recapture is basically intended to do the same, but close the retirement loophole. So if the player is bought out, those initial cap savings were worked into the buyout formula, and charging the recapture penalty would be like double taxing.
yay more idiot proof explanations... this is good.

i get it...
(but i probably don't)

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01-28-2014, 03:50 PM
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Quote:
Originally Posted by Jame View Post
^ so what was the purpose of creating the recapture penalty, If a team could simply avoid it by buying out a player who planned to retire?
Recapture is intended to rectify the difference between Salary paid and cap hit charged for a given player, due to the way buyouts work that discrepancy is already taken care of

In Ehrhoff's case, if he were bought out following the 2016-2017 season the Sabres would have paid him $10 million more in salary than they were charged in cap hit until that point.

He would have $6 million remaining on his contract over 4 years so the buyout would cost the Sabres $4 million over 8 years, or $500,000 per year in real dollars. However, due to the rules of buyouts, the cap cost would be 1.5, 3.5, 3.5, 3.5 for the duration of his original contract and then 500k for the last 4 years.

What that means is from 2011/12-2016/17 the Sabres would have paid him $38 million and been charged $28 million on the cap. From 2017/18 until 2024/25 they would pay him $4 million but be charged a total of $14 million on the cap. That means total compensation would equal total cap hit ($42 million) and thus there's nothing to recapture.


Now, the question may be relevant if the team he's sent to buys him out and the recapture penalty still applies, however I agree with Sabretooth earlier in this thread when he said that it shouldn't apply to a contract that is bought out.

However that does bring up the possibility of abuse. The Sabres could trade Ehrhoff to a team looking to get to the cap floor with the understanding that he'd be bought out. The acquiring team would basically gain $10 million in "free" charges to their cap and the Sabres wouldn't be punished with a recap penalty.

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01-28-2014, 03:52 PM
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Quote:
Originally Posted by Sabretooth View Post
Later on, in 50.5(B)(1):

The verbage "assuming it is prior to the conclusion of the Long-Term Contract" is added - Ehrhoff would be playing up until he was bought out, and he would not be playing after the buyout, which would conclude/terminate the long-term contract, and thus Ehrhoff would not satisfy "failure to play prior to the conclusion of the Long-Term Contract".

So unless I'm really misreading this, it sure seems to say that if a player is bought out, regardless of which team actually does the buying out, there is no recapture penalty assessed.
In my opinion, you can also interpret "such that he is not playing and is not receiving Salary pursuant to his Long-Term Contract" as nullifying recapture on buyouts.
Even players bought out are technically receiving salary pursuant to their contract, as buyout terms are agreed to in each contract.

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01-28-2014, 03:54 PM
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Quote:
Originally Posted by Jame View Post
so, did the buyout formula change in the new CBA? Why did I think it was simply 2/3 remaining salary, spread over twice remaining years = buyout cap hit?
No, it didn't. However the idea of a buyout happened so rarely, and so infrequently to players with front or back loaded deals, that it didn't matter much.

Even now a large majority of the league is on a level contract, so just assuming that 2/3 the salary over twice the years = 1/3 the salary per year in cap hit is generally a safe assumption.

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01-28-2014, 03:56 PM
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Quote:
Originally Posted by hatterson View Post
No, it didn't. However the idea of a buyout happened so rarely, and so infrequently to players with front or back loaded deals, that it didn't matter much.

Even now a large majority of the league is on a level contract, so just assuming that 2/3 the salary over twice the years = 1/3 the salary per year in cap hit is generally a safe assumption.
that makes sense too

it only looks weird in Ehrhoff case because of the dive in salary on the back end of the deal, and thus the buyout rules serve the same purpose as the recapture for retirement


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01-28-2014, 03:57 PM
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so what you are basically saying is that he's untradeable because the risk of a severe penalty down the road is really great!

well we will need a veteran or two to help our very young but scarily talented backend of Myers, McCabe, Risto and Zhardov.

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01-28-2014, 04:03 PM
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Quote:
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so what you are basically saying is that he's untradeable because the risk of a severe penalty down the road is really great!

well we will need a veteran or two to help our very young but scarily talented backend of Myers, McCabe, Risto and Zhardov.
Yes and no.

The risk caps out at $2.5 million per year for four years or $3 million for 1-3 years depending on if you want to consider total amount of per year amount.

Either way that wouldn't kick in until 2017 or later (if it's earlier the hit is smaller). At that point, even assuming "modest" 5 percent growth in the cap you're looking at a cap of ~82 million at the low end and possibly upwards of 100 million by the last year of the penalty.

That's hardly a crippling amount of loose cap hit to have lying around, especially when you consider the alternative is to have him play the entire thing at a cap hit of $4 million.

Edit:

Assuming Ehrhoff is traded from the Sabres prior to 2017-2018 here are the cap hits, in percentages, of the penalties. This assumes the same "modest" 5% growth which is lower than the historical cap increase

YearEstimated Cap% hit if retires in 14/15% if 15/16% if 16/17% if 17/18% if 18/19% is 19/20% if 20/21
2014-201571.002.01%       
2015-201674.551.92%2.24%      
2016-201778.281.83%2.13%2.56%     
2017-201882.191.74%2.03%2.43%3.04%    
2018-201986.301.66%1.93%2.32%2.90%3.48%   
2019-202090.621.58%1.84%2.21%2.76%3.31%3.31%  
2020-202195.151.50%1.75%2.10%2.63%3.15%3.15%3.15%

As you can see the percentage never goes about 3.5% which would be equivalent to having a ~2.25 million dollar contract on the books this year. Certainly not ideal, but hardly crippling, especially if you're getting a return.


Last edited by hatterson: 01-28-2014 at 04:14 PM.
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01-28-2014, 04:29 PM
  #23
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Posts #15 and #17 are spot on. I'll add those to the OP since they are much clearer explanations than I was able to make.

Quote:
Originally Posted by Jame View Post
i thought you said that doesn't happen????
Yeah sorry I wasn't real clear there that was an example of abuse that could happen if there was recapture to the original team after a buyout. Yes, I was saying that doesn't happen.

Quote:
Originally Posted by Jame View Post
So to avoid dead cap space, you can trade bad contracts to teams that need to reach the cap floor... those teams can buy them out, and we've now avoided the recapture on the contract.
Not necessarily, but I guess it could happen. If we traded Ehrhoff, the other team could use his $4 million cap hit to reach the floor if he played, but his cap hit would be something less than that annually if he was bought out (except for the smaller part of the buyout costs that continues for twice the remaining term.

For example, if a team neaded to reach the cap floor now and traded for Ehrhoff for that purpose, he'd give them $4 million towards the cap if he played every year until 2021, but if he was immediately bought out, every year between now and 2021 would carry a cap hit less than the $4 million, so the only help they'd have reaching the cap buy buying him out vs. playing him wouldn't occur until 2021-22 though 2027-28, when that team would carry a cap hit of just $857,143 in dead space for those years. Or in absolute terms, Ehrhoffs total cap added together would be $28,000,000 over the next 7 years if he plays, or $22,000,000 over the next 14 years if he doesn't play.

That doesn't take into account that the other team would then have to go out and find a roster player to replace the bought out player increasing the cap even more, but I'd argue if teams wanted to buy out players to reach the cap floor, they could already be doing it now.

Quote:
Originally Posted by jfb392 View Post
In my opinion, you can also interpret "such that he is not playing and is not receiving Salary pursuant to his Long-Term Contract" as nullifying recapture on buyouts.
Even players bought out are technically receiving salary pursuant to their contract, as buyout terms are agreed to in each contract.
Yup, I did say that actually just a bit above where you started quoting :
Quote:
Originally Posted by Sabretooth View Post
Specifically, defection or retirement are listed, which clearly a buyout does not fall under. The question is, does a buyout fall in the vague "otherwise" category. Well the definition for "otherwise" given is "such that he is not playing and is not receiving Salary pursuant to that Long-Term Contract" - when a contract is bought out, not only is the contract terminated, but also he receives his salary pursuant to that long-term contract anyways, so a buyout would not fall under the "otherwise" category for which a buyout applies.

Later on, in 50.5(B)(1):

The verbage "assuming it is prior to the conclusion of the Long-Term Contract" is added - Ehrhoff would be playing up until he was bought out, and he would not be playing after the buyout, which would conclude/terminate the long-term contract, and thus Ehrhoff would not satisfy "failure to play prior to the conclusion of the Long-Term Contract".

So unless I'm really misreading this, it sure seems to say that if a player is bought out, regardless of which team actually does the buying out, there is no recapture penalty assessed.

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01-28-2014, 04:54 PM
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As you can see the percentage never goes about 3.5% which would be equivalent to having a ~2.25 million dollar contract on the books this year. Certainly not ideal, but hardly crippling, especially if you're getting a return.
You're table actually uses the recapture costs the sabres would be charged if Ehrhoff stays/retires a sabre though.

The %'s get higher at the end in the case when he's traded, right?

YearEstimated Cap% hit if retires in 14/15% if 15/16% if 16/17% if 17/18% if 18/19% is 19/20% if 20/21
2014-201571.002.01%       
2015-201674.551.92%2.24%      
2016-201778.281.83%2.13%2.56%     
2017-201882.191.74%2.03%2.43%3.04%    
2018-201986.301.66%1.93%2.32%2.90%3.86%   
2019-202090.621.58%1.84%2.21%2.76%3.68%5.52%  
2020-202195.151.50%1.75%2.10%2.63%3.50%5.25%10.51%

The bolded are the different values, if Ehrhoff is traded then retires. The difference between your table and mine would be the risk, no?

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01-28-2014, 05:01 PM
  #25
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Originally Posted by Sabretooth View Post



Normal Course Buyouts

If Ehrhoff is bought out (normal) following the the 2013-14 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2014-15: $857,143
2015-16: $857,143
2016-17: $857,143
2017-18: $1,857,143
2018-19: $3,857,143
2019-20: $3,857,143
2020-21: $3,857,143
2021-22: $857,143
2022-23: $857,143
2023-24: $857,143
2024-25: $857,143
2025-26: $857,143
2026-27: $857,143
2027-28: $857,143

If Ehrhoff is bought out (normal) following the the 2014-15 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2015-16: $777,778
2016-17: $777,778
2017-18: $1,777,778
2018-19: $3,777,778
2019-20: $3,777,778
2020-21: $3,777,778
2021-22: $777,778
2022-23: $777,778
2023-24: $777,778
2024-25: $777,778
2025-26: $777,778
2026-27: $777,778

If Ehrhoff is bought out (normal) following the the 2015-16 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2016-17: $666,667
2017-18: $1,666,667
2018-19: $3,666,667
2019-20: $3,666,667
2020-21: $3,666,667
2021-22: $666,667
2022-23: $666,667
2023-24: $666,667
2024-25: $666,667
2025-26: $666,667

If Ehrhoff is bought out (normal) following the the 2016-17 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2017-18: $1,500,000
2018-19: $3,500,000
2019-20: $3,500,000
2020-21: $3,500,000
2021-22: $500,000
2022-23: $500,000
2023-24: $500,000
2024-25: $500,000

If Ehrhoff is bought out (normal) following the the 2017-18 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2018-19: $3,333,333
2019-20: $3,333,333
2020-21: $3,333,333
2021-22: $333,333
2022-23: $333,333
2023-24: $333,333

If Ehrhoff is bought out (normal) following the the 2018-19 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2019-20: $3,333,333
2020-21: $3,333,333
2021-22: $333,333
2022-23: $333,333

If Ehrhoff is bought out (normal) following the the 2019-20 season by the trade-to, the buyout cost to the TRADE-TO team will be as follows (the sabres are not assessed recapture when the trade-to team performs the buy out persuant to 50.9 of the CBA referenced above):

2020-21: $3,333,333
2021-22: $333,333


You will notice, the trade-to team will pay exactly the same buyout costs that the Sabres would pay to use a normal course buyout on Ehrhoff. By buying out the contract, the trade-to team assumes the buyout costs which includes the "buyout savings" part of the buyout - the "disparity between the actual player salary and the cap hit".


Unique Scenarios/FAQ's:

What if Ehrhoff is traded now, and then traded back to the sabres to retire with 1 year left rather than retire playing for the trade-to team. The Sabres will then only be charged the $3 million recapture rather than the $10 million recapture for the 2020-21 season, correct?

NO. The sabres will not have earned a reduction in the cap recapture because Ehrhoff did not play seasons for the sabres in which his actual salary was less than his contract.

OK then, what if we force the trade-to team to accept a buy-out condition as part of the trade. If the trade-to team buys Ehrhoff out in 2017, the recapture costs to the sabres will only be $2.5 million per year, which is more manageable. Eliminate the risk of getting hit with the full $10 million at once, yes?

NO. It states clearly in the CBA, sections 50.5 and 50.9 referenced above, that:




NOT TRUE !!!!!!!!! There are special rules for long term contracts of 7 years or longer.

see section 50.5 page 267

http://cdn.agilitycms.com/nhlpacom/P...A_2013_CBA.pdf

In illistration 3 shows it.

Illustration #3: Assume that a Player signed a seven-year SPC beginning
in the 2010-11 League Year with an Averaged Amount of $5 million and
Actual Salary and Bonuses of the following amounts:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
$7,600,000 $7,600,000 $7,200,000 $7,000,000 $4,000,000 $1,000,000 $600,000


Assume that the Player retires after Year 5. The Total Payment equals the
total Actual Salary and Bonuses paid to the Player through Year 5, which
is $33.4 million (i.e., $7.6 million plus $7.6 million plus $7.2 million plus
$7 million plus $4 million).

The Total Cap Charge equals the total
Averaged Club Salary for the Player through Year 5, which is $25 million
(i.e., $5 million times five years). Therefore, the Cap Advantage
Recapture for this SPC is $33.4 million minus $25 million, or $8.4
million. That amount will be recaptured by charging $4.2 million against
the Club's Averaged Club Salary in the subsequent League Year (Year 6)
and charging $4.2 million against the Club's Averaged Club Salary in the
next League Year (Year 7).


(2) Notwithstanding the provisions of Sections 50.5(d)(ii)(A)
and (B), in the event that any such Long-Term Contract is
Assigned during its term, each Club for which the Player
plays under the terms of that Long-Term Contract shall be
subject to being charged with any and all "Cap Advantage
Recapture" amounts it receives pursuant to that Long-Term
Contract
, provided, however, that if a Club Traded a Long-
Term Contract prior to the execution of this Agreement
(including any binding Memorandum of Understanding)
under which it gained a "cap advantage," the "Cap
Advantage Recapture" shall not apply to that Club for that
Long-Term Contract. For purposes of clarity, the Club to
whom such Long-Term Contract was Assigned after the
execution of this Agreement (including any binding.

Memorandum of Understanding) shall be subject to the Cap
Advantage Recapture (if any).


Illustration #4: Using the example above, assume the Player is Traded from Club X to Club Y on July 1, 2012 (after Year 2), and then retires
after Year 4. In each of Years 5, 6 and 7, Club Y would be charged $1.4
million for a total Cap Advantage Recapture of $4.2 million (i.e., the total
"Cap Advantage" over Years 3 and 4 of the SPC -- $2.2 million in Year 3
and $2 million in Year 4). Even though Club X received a "Cap
Advantage" in Years 1 and 2, because it Traded the SPC before the
execution of this Agreement, it shall not be subject to any Cap Advantage
Recapture for that SPC.



What does this mean????

Ehrhoff is a poor example of it---use Luongo or Brad Richards because say Buffalo was to acquire either of those two players this offseason their salaries for 14/15, 15/16 and 16/17 are all > cap hoit So Buffalo is sunject to the recapture penalty from having them on the roster in 14/15 , 15/16 and 16/17. Say the players retire in 2017. Buffalo will be subject to recapture for each of those players because slary for those years with them was higher than cap hit. For the Canaucks/Rangers they also have to deal with recapture from the prior years of the contact where salary> cap hiit.

You have to remember

TOTAL = RECAPTURE (if there is any) + BUY OUT AMOUNT (accounted based on salary and cap hits for each season)


With Leino there is no recapture amount because his contract was only 6 years long. To give him an ordinary buyout this offseason means Buffalo would pay him only based on 2/3 of the amount due on his contract.

He is owed $11M over the final 3 years so the buyout amount is $7.33M over 6 years=$1.22M per year. Its $1.22M in non contract years but its accounted for differently during contract years spreby adjusting for cap hit and actual salary.

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