PFR Glossary News & Rumors

2014’s free agent period doesn’t officially get underway for another month, but NFL teams have announced new roster additions nearly every day as of late. Players signing contracts now are inking deals that are known as reserve or futures deals. What exactly does that mean? Here’s a quick breakdown:

Reserve/futures contracts essentially function like regular free agent deals, except that only players who didn’t finish the previous season on an NFL team’s active roster can sign them. So a player on a practice squad could ink a futures contract, and many have in recent weeks. After the Super Bowl, for instance, we saw the Broncos and Seahawks lock up each and every player on their respective practice squads, allowing those teams to continue working with those players leading up to the 2014 season.

These deals are known as “futures” contracts because they don’t technically go into effect until the 2014 league year begins on March 11. So signing a player to a futures contract now will not have an impact on a team’s 2013 cap. As for the 2014 books, players on reserve/futures deals are counted toward a club’s cap if they’re among the top 51 highest-paid players on the roster. Often, that’s not the case though, and those players simply count toward a team’s 90-man offseason roster limit.

Players on futures contracts don’t frequently rank among a team’s 51 highest-paid contracts because they’re generally on minimum salaries. There’s no rule that says futures deals can only be worth the minimum or can’t include signing bonuses, but because these players weren’t previously on NFL rosters, they generally don’t have a ton of leverage. As Brian McIntyre notes (via Twitter), only 19 of 374 futures contracts signed since the regular season ended include any sort of guaranteed money, with former CFLer Henoc Muamba receiving the largest guarantee — $107K from the Colts.

We’re only a few more weeks away from 2014’s full free agent class hitting the open market, but in the meantime, we’ll likely see plenty more futures contracts inked. Nick Mensio of Rotoworld.com has been staying on top of these deals throughout the offseason, so to track the players currently on reserve/futures deals, be sure to check out his complete list.

Note: This is a PFR Glossary entry. Our glossary posts will explain specific rules relating to free agency, trades, or other aspects of the NFL’s Collective Bargaining Agreement. Information from Joel Corry, Steeler Addicts, and Bleacher Report was used in the creation of this post.

When an NFL team finds itself short on cap flexibility and in need of some space, one of the most effective short-term fixes is to restructure a player’s long-term contract. While cutting or trading players can often be solutions as well, a contract restructure allows the team to keep its roster intact while also providing immediate cap relief.

The base salaries of NFL contracts typically aren’t guaranteed, but players can receive guaranteed money in the form of signing bonuses. While those bonuses are considered to be up-front payments, for cap purposes they can be spread out over up to five years of the contract. For instance, if a player were to sign a four-year deal with a $12MM signing bonus, that figure would prorate equally over the four years of the contract, amounting to a $3MM cap hit per year. If a team were to release that player one season into the deal, the club could avoid paying most of the player’s annual base salaries, but would still be on the hook for the remaining bonus money, along with the cap total for that money.

As such, the most common form of contract restructuring involves converting a portion of a player’s base salary for a given year into a new signing bonus. That bonus can then be spread out over several years, moving it away from the current season. This is exactly the sort of agreement the Cardinals and Larry Fitzgerald reached this week. Here’s a breakdown of what the rest of Fitzgerald’s contract looked like before the two sides agreed to restructure it (click to enlarge):

Taking into account his $12.75MM base salary along with $5.25MM in bonuses, Fitzgerald’s cap number for 2014 was $18MM, an untenable figure for the Cardinals. However, by significantly reducing his base salary for the coming season, Fitzgerald was able to assure himself a spot on the roster, as well as assuring that nearly all of that base salary became guaranteed.

It’s not 100% clear whether Fitzgerald reduced his base salary all the way down to the veteran’s minimum of $955K, but various reports have suggested he bumped that 2014 salary down to $1MM, which is close enough. That would work out to a new $11.75MM bonus, and those are the figures we’ll use to determine his new contract structure, which should look something like this (click to enlarge):

As the final column in that chart shows, restructuring a contract by converting base salary to a signing bonus creates immediate relief ($9.4MM in this case), but also creates problems in future years. A year from now, it seems likely that the Cardinals will have to make another move with Fitzgerald, either cutting him or restructuring his deal again to reduce a $23.6MM cap number for 2015.

There are ways a player can remain under contract with a team while also helping to create or maintain both short-term and long-term cap flexibility. A player agreeing to take a pay cut, for instance, could allow a team to reduce his current cap number without necessarily moving that money further down the line in the contract. However, that generally happens in situations in which the team’s leverage outweighs the player’s leverage.

In most cases then, a restructured contract that sees base salary converted into bonus money is the simplest short-term fix for a club. The bill will come due eventually, but restructuring a deal allows a team to put off a more significant decision for at least one more year.

Note: This is a PFR Glossary entry. Our glossary posts will explain specific rules relating to free agency, trades, or other aspects of the NFL’s Collective Bargaining Agreement. Information from Joel Corry and Over the Cap was used in the creation of this post.