The Fifth-Year Option

Over the next several weeks, we’ll be passing along a number of reports relating to the fifth-year option, which a team can exercise on a first-round pick who is currently in the fourth year of his rookie contract. Because this feature was introduced in the 2011 CBA, 2011’s draftees represent the first group of players whose teams will hold these fifth-year options, which apply to the 2015 season. In the last few weeks, for instance, we’ve heard that the Cardinals will exercise their option on Patrick Peterson, while the Lions won’t pick up their option on Nick Fairley.

So what exactly is the fifth-year option? Essentially, it’s a way to extend a player’s rookie contract by an extra year, at the club’s discretion. Players don’t have any say in whether or not these options are picked up, though players and teams are still free to negotiate longer-term contracts that would render the fifth-year option unnecessary. Otherwise though, the decision is in the hands of the team, and must be made by May 3 in the player’s fourth season. So, barring multiyear extensions, 2011 first-rounders like Cam Newton, A.J. Green, and Von Miller will see their options for 2015 declined or – more likely – exercised within the next three and a half weeks.

For top-10 picks, the amount of each player’s 2015 option has already been determined. The fifth-year salary for a top-10 pick is equal to the transition tender at the player’s position during his fourth season. So, because the transition tag amount for quarterbacks this year was $14.666MM, we already know that Newton’s fifth-year option will be worth that amount.

For first-rounders picked outside the top 10, the calculation is a little more complicated. These players’ fifth-year option also relies on the previous year’s salaries at the player’s position, but it’s determined by the average of the third through 25th top salaries at that position. So we could come up with estimates for the 2015 option salary for players like J.J. Watt, Muhammad Wilkerson, and Mike Pouncey, but they’re not set in stone quite yet.

Fifth-year options are guaranteed for injury only between May 3 and the start of the following league year. As such, they’re not entirely risk-free, but as long as the player remains healthy, a team could exercise his fifth-year option, then cut him before his option year gets underway without being on the hook for his salary. When the league year begins, the player’s fifth-year salary becomes guaranteed for skill and cap purposes, as well as injury.

Essentially, the fifth-year option gives the teams the option to add a year to a player’s rookie contract, keeping him under team control for an additional season. For some players, this won’t significantly affect their earnings, but for others, like Newton, it figures to delay a larger payday — $14.666MM is a nice one-year salary for a player coming off a rookie deal, but it’s still a bargain for the Panthers compared to what they’d be paying Newton in 2015 if he were eligible for free agency.

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.

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