This has been a summer of firsts in the NHL. St. Louis became the first team to offer two players from the same team at the same time, ultimately inking Philip Broberg and Dylan Holloway away from Edmonton. Saturday, Carolina took advantage of an unused rule in the CBA regarding deferred salary, lowering the AAV on their long-term contract with Seth Jarvis.
Frank Seravalli had the original details of the deal:
Jarvis signed an eight-year, $63.2 million contract. The key is that the AAV is not just the $63.2 million divided by eight, but reduced by the deferment. Carolina is the first team to take advantage of what's allowed by the CBA, though no one else had used it.
>blockquote> No source was willing to divulge precisely how much money has been deferred, or in which year(s) of the deal the money is deferred (editor's note: see below from Puck Pedia), but there is a deferred signing bonus payment that is scheduled for July 1, 2032 – which is one day after the contract officially expires on June 30, 2032.
Because that payment is technically scheduled for Year 9 of the eight-year deal, there is no Year 9 cap charge for the Hurricanes, and the cap hit for the Hurricanes over the course of the eight-year deal is charged on what is actually paid out during that time.
PuckPedia reported the deferred annual salary:
Here are a few carve outs from Section 50.2 (a) (ii) of the CBA, which is Deferred Salary: The key component is illustration 1. While the CBA is from 2012, the extension signed in 2020 means the below is applicable. I have bolded and italicized the applicable aspect. The takeaway is that the deferred component, while payable AFTER the contract expires, reduces the AAV each year of the agreement. It does not, though, impact the cap the year in which the money is paid. In Jarvis' case then, the AAV is reduced during the eight years of the deal, but in year nine, the cap is not impacted.
"Deferred Salary" means any Paragraph 1 NHL Salary that is earned during the term of an SPC during which the services attributable to that Paragraph 1 NHL Salary are performed, but is not paid until after the expiration of such SPC. By definition, Deferred Salary that is earned during the term of such an SPC may not be paid until after the expiration of such SPC. Player Salary denominated as "Deferred" but payable within the term of the SPC shall be counted in the League Year in which the Player Salary is paid and shall not be treated as Deferred Salary. For purposes of 246 ARTICLE 50 50.2-50.2 calculating a Club's Upper Limit and Lower Limit, as well as the Players' Share, Deferred Salary shall be counted as Player Salary in the League Year in which the Player performs the services for which it is earned, at the Deferred Salary's present value at 1-Year LIBOR plus one and one-quarter (1.25) percent at the time the SPC is registered (unless the Deferred Salary is to be paid with interest, in which case it shall be counted in the League Year in which the Player performs the services for which it is earned, at the Deferred Salary's stated cash amount). Other than Deferred Salary or Deferred Bonuses as set forth below, any other compensation must be paid in the year that it is earned.
Illustration #1: A Player signs a two-year SPC for the 2013-14 and the2014-15 League Years. The SPC provides for Deferred Salary payableduring the 2015-16 League Year that is attributable to playing services forthe 2013-14 League Year. Such Deferred Salary shall be paid to thePlayer in the 2015-16 League Year, but for purposes of the Players' Share,the present value of such Deferred Salary (assuming it was not to beprovided with interest) shall be included in the 2013-14 League Year andshall not be included in the 2015-16 League Year. The present value ofsuch Deferred Salary (assuming it was not to be provided with interest)shall be included for purposes of calculating the Player's AveragedAmount (and thus the Club's Averaged Club Salary) for the 2013-14 and2014-15 League Years.
First, I am kind of shocked no one else has taken advantage of this (though, as Seravlalli noted, Carolina appears to have used a test case with their Jaccob Slavin deal, since there was a small reduction in the AAV. Second, the CBA has no restrictions on the number of deals that can be signed with a deferral. Third, and most important, how did anyone not think this was cap circumvention by the future payout, irrespective of how many years in the future should not be counted against the cap. As Seravalli reported, sources indicated the NHL’s Central Registry and the NHL Players’ Association have been briefed and signed off on the structure of the Jarvis deal before terms were agreed upon. But there are no restrictions baked into the CBA. That means, to a certain extent, a tractor trailer can be driven through this "loophole."
Second, based on the above, my guess is the bigger market teams will start to utilize this option. For purposes of this column, the team that inhabits MSG is one team that should have the engines on full thrust moving forward. James Dolan and Glen Sather, despite being "retired," have had no issues throwing money around. In this case, they would be taking advantage or what's allowed by lowering the AAV of two prominent players, Alexis Lafreniere and Igor Shesterkin.
If Laf has another big year, we know he could seek a Jarvis-type deal. Jarvis tallied 33 goals and 34 assists in year 3 in the NHL 20 of those 67 points coming on the PP. Laf potted 28 markers and 29 helpers with just six points on the man-advantage. At even strength, Jarvis notched 47 points, Lafreniere had 51. While Jarvis might be a more natural scorer, Laf has shown he is no slouch in that department. Using this contract as a touch point seems like a fair comparison.
What might be an even more important deferral applies to Igor. We know that the expected future contract will not be cheap. Igor appears unlikely to take a hometown discount, seeking north of $12 million annually. The larger the deferral, the greater the reduction in the AAV. Igor would have to be okay with receiving money later, rather than in the year of the contract. But if he is, Dolan could authorize Chris Drury to increase the contract AAV while deferring a large component of that amount to the future, thereby given Shesterkin the dollars he wants while saving cap space.
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