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NHL CBA - The Luongo Rule (Cap Hit Recapture) & What it Means for the Red Wings

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Will the Red Wings get burned by a new CBA Rule?


I wanted to wait until more details came out about the Cap Hit Recapture stipulation of the upcoming CBA before doing this analysis, but looking at the numbers itself can help lead to ready-made conclusions already being prepared once those details emerge, and it's more fun that way.

Shut up, sometimes math can be fun.

For starters, Elliotte Friedman got the ball rolling on Monday with an article about Roberto Luongo and how the system might affect his trade value. Friedman himself admits that he's not 100 percent versed on the rule (nor is anybody else who has been willing to talk about it so far, it seems).

The basics are as such: When there's a difference between a player's actual salary and his cap hit, that difference goes into a pot that is then charged against the team's cap in the event he doesn't play out his full contract. The money is split evenly among all years remaining on the contract (much like AAV is calculated now). Friedman also goes into how a players' cap hit recapture dollars remain with the team for whom he was playing over the specific salary years he played. That brings up a supremely interesting pair of questions:

1. While it's assumed that years where a player's salary is higher than his cap hit that the recapture pool will increase, does it then decrease in years following the wave-break when his cap hit exceeds his actual salary?

2. If the answer to question 1 is "yes", then would those positive differences carry over all years or belong solely to the team who bothered holding a player's contract during years where his cap hit was higher than his salary?

It does make sense to minimize the punishment as the player honors those years of his deal, but it also doesn't make sense to create a loophole where a team could somehow trade in wasted cap space during rebuilding years for extra cap space when the team is ready to start spending.

Regardless, the Wings have three players who are on deals which could see cap hit recapture dollars come to bear. Henrik Zetterberg's was one of the league's first long-term deals, followed by Johan Franzen and most recently, Niklas Kronwall. While there are plenty of ways this could work out, I'm going to create six charts which show the cap hit recapture for the Wings if all three retire, beginning in the summer of 2015 (Zetterberg and Kronwall will be 35 and Franzen will be 36).

Without the biggest question answered, I'm going to assume that later-career calculations where cap hit exceeds salary will benefit the team and they will see the amount of cap hit to be recaptured lowered by the difference between those two numbers each season.

As a disclaimer: All of these figures are done with the assumption that the entirety of the 2012-13 salary & cap hit is used for this calculation. In short, there's almost no way these numbers will be accurate when the final CBA is ratified.

Table 1: retire summer 2015 - Cap Hit Recapture amounts

Player Total Recapture Pool 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Henrik Zetterberg $9,150,002 $1,525,000 $1,525,000 $1,525,000 $1,525,000 $1,525,000 $1,525,000
Johan Franzen $7,272,730 $1,454,546 $1,454,546 $1,454,546 $1,454,546 $1,454,546 $0
Niklas Kronwall $2,250,000 $562,500 $562,500 $562,500 $562,500 $0 $0
Total Cap Penalty $18,672,732 $3,542,046 $3,542,046 $3,542,046 $3,542,046 $2,979,546 $1,525,000

Table 2: retire summer 2016

Player Total Recapture Pool 2016-17 2017-18 2018-19 2019-20 2020-21
Henrik Zetterberg $10,566,669 $2,113,334 $2,113,334 $2,113,334 $2,113,334 $2,113,334
Johan Franzen $8,318,185 $2,079,546 $2,079,546 $2,079,546 $2,079,546 $0
Niklas Kronwall $3,500,000 $1,166,667 $1,166,667 $1,166,667 $0 $0
Total Cap Penalty $22,384,854 $5,359,547 $5,359,547 $5,359,547 $4,192,880 $2,113,334

Table 3: retire summer 2017

Player Total Recapture Pool 2017-18 2018-19 2019-20 2020-21
Henrik Zetterberg $11,983,336 $2,995,834 $2,995,834 $2,995,834 $2,995,834
Johan Franzen $7,863,640 $2,621,213 $2,621,213 $2,621,213 $0
Niklas Kronwall $4,250,000 $2,125,000 $2,125,000 $0 $0
Total Cap Penalty $24,096,976 $7,742,047 $7,742,047 $5,617,047 $2,995,834

Table 4: retire summer 2018

Player Total Recapture Pool 2018-19 2019-20 2020-21
Henrik Zetterberg $12,900,003 $4,300,001 $4,300,001 $4,300,001
Johan Franzen $5,909,095 $2,954,548 $2,954,548 $0
Niklas Kronwall $3,000,000 $3,000,000 $0 $0
Total Cap Penalty $21,809,098 $10,254,549 $7,254,549 $4,300,001

Table 5: retire summer 2019

Player Total Recapture Pool 2019-20 2020-21
Henrik Zetterberg $10,166,670 $5,083,335 $5,083,335
Johan Franzen $2,954,550 $2,954,550 $0
Niklas Kronwall $0 (Contract Expired) $0 $0
Total Cap Penalty $13,121,220 $8,037,885 $5,083,335

Table 6: retire summer 2020

Player Total Recapture Pool 2020-21
Henrik Zetterberg $5,083,337 $5,083,337
Johan Franzen $0 (Contract Expired) $0
Niklas Kronwall $0 (Contract Expired) $0
Total Cap Penalty $5,083.337 $5,083,337

The numbers get pretty severe as you approach the 2017-18 season, but there could also be something of a saving grace in there, depending on how well the league rebounds from any actual lockout damages. Let's pretend that the 2013-14 cap of $64.3M inflates by 5% every year and look at what those hits would be comparative to cap size. By the time we start the analysis, the cap has already exceeded the $70.2M threshold from which it will drop after this season.

Table 7: Recapture Penalties expressed as percentage of total salary cap

Retirement Summer Salary Cap 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
2015 $70.89M 5.00% 4.76% 4.53% 4.32% 3.46% 1.69%
2016 $74.44M 7.20% 6.86% 6.53% 4.87% 2.34%
2017 $78.16M 9.91% 9.43% 6.52% 3.31%
2018 $82.06M 12.50% 8.42% 4.75%
2019 $86.17M 9.33% 5.62%
2020 $90.48M 5.62%

So even with a decent amount of inflation lowering the effective hit of the Cap Hit Recapture stipulation, the damage can be pretty severe in the event that all three of these guys decide to call it quits in a few years. It will be partially mitigated by the nearly $14.8M current cap hit for the three players coming off, but all that really does is mean that the money to replace them won't be there. Two seasons of having 10% of the maximum cap eaten up by nothingness could really cripple a Red Wings squad that should be looking at having to start paying out some hefty salaries to their next generation of core players by the time these penalties come to bear.

We'll have to wait and see exactly how this process works when the CBA is finalized, but this could very well play into Ken Holland's buyout decisions in the coming months.