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.
Take the Saints and star Michael Thomas for example. The Saints are currently slated to have him at a 2022 cap number of $24.7MM. If they were to release or trade him, they’d be left with $22.7MM in dead money. But, with a post-June 1 designation, they’d have a milder $15.8MM dead money charge. The same applies to defensive end Cameron Jordan and more of their high-paid stars, so it’s safe to say that the Saints will take full advantage of the rule as they dig themselves out of a major salary cap hole.
Of course, teams won’t always opt for the dead money deferral. For example, when the Panthers dropped Kawann Short’s contract last year, they swallowed a $11MM cap hit, rather than having it linger into 2022. That gave them a cleaner long-term slate, propelling them to ~$24MM in cap room for this offseason.
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