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NFL

What happens when an NFL player retires under contract? Does he still get paid?

What you need to know about cuts and retirements, and how they affect a player’s contract in the NFL

What you need to know about cuts and retirements, and how they affect a player’s contract in the NFL
Stan SzetoUSA TODAY Sports via Reuters Con

In the realm of NFL contracts, everything appears perfectly logical—provided the player stays with the contract until the end.

On the surface, the notion of following through with the contract seems straightforward. After all, the player is being compensated for playing a game.

Regrettably, it’s a rarity for a contract to reach its natural end without undergoing alterations by the financial strategists within front offices. Occasionally, a player never witnesses the conclusion of their contract.

Cuts

Circumstances Leading to Cuts Instances arise when a player fails to find synergy within a particular team’s system. Sometimes, a team took a chance on a player who didn’t exhibit the anticipated skill level. Alternatively, it might make more sense financially for a team to release a player with a high salary but immense talent, as the decrease in performance compared to a more affordable replacement outweighs the money saved. Irrespective of the rationale, the Collective Bargaining Agreement provides teams the latitude to sever contracts for any reason (with the notable exception being that a player cannot be released while they’re on the team’s injury report unless an injury settlement is reached).

So, what happens with a player’s salary cap impact if they’re cut? This largely depends on the timing of the cut.

Should a player be released between the beginning of a league year and June 1 of that same year, it’s classified as a pre-June 1st cut. Contrarily, if the player is released after June 1, they are labeled a post-June 1st cut. This distinction is pivotal as it dictates the treatment of any remaining prorated bonus funds.

For players released before June 1, all residual, prorated bonus funds are expedited and counted within the current year’s calculations. For instance, consider a player signing a five-year contract with a $10 million signing bonus. Now, envision the player being released after completing two years of the contract. Despite $6 million in bonus funds ($2 million annually) remaining unallocated, they must be incorporated into the current year’s salary cap due to the pre-June 1st cut, instead of being distributed over the remaining three years.

However, for post-June 1st cuts, the accounting dynamics change. In this scenario, solely the bonus funds for the present year are considered in the current-year salary cap calculation. Any remaining bonus money after the ongoing year—using our example, the final $4 million—is shifted onto the subsequent year’s cap. Consequently, the team would allocate $2 million for the current year and $4 million for the following year.

Yet, there’s a caveat to the June 1 rule: a player can be released at any time before June 1 and still be given this designation. Its impact doesn’t alter the team’s financial recordkeeping; instead, it treats the player as if they were cut after June 1, if designated as such. What this does is allow the player to sign elsewhere at any point. The player remains unaffected by this designation, while the team is merely precluded from utilizing the money saved from the June 1 designation until after that date.

Regardless of the timing of a player’s release, the team still realizes cost savings. This often stems from the fact that the team is absolved of paying the player’s salary for the ongoing and subsequent years of the contract. Additionally, the team can evade specific bonuses depending on when the cut happens. If a player is cut before the new league year commences, the team avoids shelling out roster or workout bonuses for the ensuing years. And, any yet-to-commence option bonuses are nullified.

Retirements

Just like teams can end contracts, players can also decide to do this, but in their case, it’s called retiring. When a player retires, it’s similar to being cut by the team, and the same rule about June 1 applies here too.

For example, if the player we talked about earlier chose to retire instead of being cut, the money would be treated the same way as if the team cut him. If he officially retires on or after June 1, the money is counted as if he was cut on or after June 1.

There are two “buts” for this rule as well, though, just like in many things in the NFL. If a player retires with time left on their contract and then decides to return to the league later, they don’t become a free agent. Contracts usually count based on a player’s seasons, not just the calendar years. So if the player doesn’t play, they don’t add a season to their contract. This means they would still be under the same team’s control if they decide to return unless that team chooses to cut them.

Additionally, when a player retires, the team can ask for part of the signing bonus back, equal to the parts of the contract that the player didn’t play. This money doesn’t count against the salary cap anymore. An arbitrator usually decides on this. It’s known as the “Barry Sanders Rule” because that’s what happened in his case – he had to give back part of his bonus. The difference now is that there are clear rules written in the CBA to handle this kind of situation.