NFL teams will often use contract bonuses as a way to spread out a cap hit that might otherwise be exorbitant. For example, if a player’s four-year deal includes a $8MM signing bonus, that money can be paid immediately but spread out over four years for cap purposes. This way, the cap charge for the bonus amounts to $2MM per year for cap purposes, rather than $8MM in year one.
There’s an obvious benefit to kicking the can down the road, but it can also hurt teams if they want to terminate that deal. If the club in the above scenario wanted to release the player in the second year of his contract, it would still have to account for that remaining prorated bonus money. Rather than counting on the cap as $2MM per year for two seasons, that dead money “accelerates,” and applies to the cap for the league year in which the player is released. In other words, the remaining $4MM in prorated bonus money immediately counts against the cap.
Although these rules apply to many cuts, a different set of rules is in place for players released after June 1. In that case, a team can spread the cap hit across two seasons rather than one — for the current season, the prorated bonus figure stays at its original amount, with the remaining bonus balance accelerating onto the following season. Referring again to the above scenario, that means the player would count against the cap for $2MM in the league year in which he was cut, with the remaining $4MM applying to the following league year.
The guidelines for pre-June 1 and post-June 1 cuts are fairly straightforward, but things become a little more complicated when we take into account that teams are allowed to designate up to two players as post-June 1 cuts even if those players are released before June. Last offseason, we players like Trey Burton (Bears), Desmond Trufant (Falcons), Trumaine Johnson (Jets), and Todd Gurley (Rams) designated as post-June 1 cuts well before the actual date.
In the case of Johnson, the Jets were initially slated to pay him $11MM in base salary. Under typical circumstances, the release would have left Gang Green with a $12MM dead money obligation for 2020. However, through the post-June 1 designation, they unlocked $11MM in cap space with just $4MM in dead money. This year, they’ll wrangle with the remaining $8MM charge.
Of course, teams won’t always opt for the dead money deferral. For example, the Panthers just recently terminated Kawann Short’s contract, which left $11MM lingering on the cap. Rather than spreading it out, the Panthers chose to take it all on the current cap for a cleaner long-term slate. And, even if the team doesn’t use that cap space for summer free agents, it can come in handy for signing draft picks.
Photo courtesy of USA Today Sports Images.
Can a trade be designated as post June 1 as well? Would that even make sense? Just thinking with all these expensive QBs on the market and cap hits to teams
No, trades can’t be. It’s whenever the trade is executed is when it counts
Thanks for the answer
‘For example, if a player’s four-year deal includes a $8MM signing bonus, that money can be paid immediately but spread out over four years for cap purposes. This way, the cap charge for the bonus amounts to $2MM per year for cap purposes, rather than $8MM in year one.”
So if you’re cap rich team like the Jets or Jags this year, why not just throw the $8m on ’21’s cap? Both teams have space right?