Red Wings Cap Recapture Strategy: LTIR Loophole has its Limits
There's only so much dead cap space you can put on LTIR and there are certain drawbacks to choosing that method.
When last we wrote about the Red Wings' long-term contracts, we discussed the buyout punishment and also the potential Cap Recapture ramifications of the early retirements of Henrik Zetterberg, Niklas Kronwall, or Johan Franzen. One of the obvious questions which came out of that discussion was why should we bother even worrying about Johan Franzen's Cap Recapture penalty, knowing that Franzen is going to spend the rest of his career on Long Term Injured Reserve to open up both cap and roster space for the Red Wings in his absence.
It's a good point, as the end of Franzen's career seems to have been all but officially announced this season, as he played only two games for the Red Wings in early October before being sidelined indefinitely with concussion symptoms even now he's saying he still suffers from every few days. Johan Franzen and his $3.9M cap hit is likely destined to be "Prongered" until the summer of 2020 when it expires.
What is LTIRetirement?
The term generally known as "Prongering" refers to a player who is too injured to continue playing, but who also falls under a rule in the CBA that makes the player just retiring something that would be disadvantageous. In Pronger's case, the fact was that his deal was considered an over-35 contract that he played past the first year. This would have meant his retirement would have kept his full cap hit on the books through 2016-17 despite his retirement. For others (like Franzen), Prongering happens as a result of Cap Recapture.
Whichever the case, the better choice for both team and player is to put the player on the injured reserve list and use the long-term injury exception to make both a roster space and free up some cap space while the player is hurt/ill. Since there is no limit to how long a player can stay on LTIR, the player remains there until his contract expires. There's also added benefit to the player in that he's still paid his NHL salary and given access to the team's medical staff.
Great, so Let's LTIRetire Franzen, Kronwall, and Zetterberg!
The problem with this plan is that there's kind of a limit to how much cap relief a team can get via the LTIR Exception, and that limit falls well below the combined $14.78M combined cap hit for those three players. Essentially you have to have room to make room.
The LTIR Exception doesn't clear space from a team's register. Instead, it gives the team flexibility to exceed the cap to replace an injured player. While the rules don't explicitly state you can't replace $14M in cap hits, it's essentially impossible to do that without getting in trouble for circumvention a different way. The Red Wings could carry all three players on their roster (with their full cap hits) throughout the summer and fill the roster as full as it could go, but during the summer, you're only allowed to exceed the cap by 10%. If the cap goes up to $74M, then that gives them only $7.4M to work with during the summer to replace those salaries. Then, once the season starts, you can put two of them on LTIR, but that's it for both of those players. Regardless if you put the combined hits of Zetterberg & Kronwall ($10.8M) or the Kronwall/Franzen hits ($8.7M), the act of putting them on LTIR at the same time means you're already replacing the entire salary of both of them per CBA rules.
Another option would be to stagger putting them on LTIR (meaning you wouldn't be able to end the summer over the cap by more than Zetterberg's $6.083M hit to do it this way). Then the next day you could LTIR Kronwall and replace his salary. Finally you should be able to replace Franzen's salary with a LTIR transaction the third day.
The problem with this plan is that I'm sure you'll have a fun time going back through the salary cap era and finding teams who add a player with a $4.75M cap hit the day after the season starts and then another $4M cap hit the next day.
Put simply, it doesn't happen. Players aren't lining up to sign big contracts in early October and GMs aren't going to just hold trades until then to do you a favor cheating the cap. There's also the problem that as soon as the season ends, if you still have those replacement players around AND your LTIRetired players, you'll very likely be over the 10% summer cap cushion as soon as LTIR resets and that advantage goes away (July 1st).
It's not technically impossible to do, but it is functionally impossible.
Additional Problems with LTIR
The problem with filling your LTIR replacements to the brim is that you're also putting a large crimp on your flexibility throughout the season. We saw that this season when Ken Holland told the press that LTIR timing gave him a $66M cap to work with. While the whole truth of what that meant still hasn't been revealed, it's true that the Wings using the absolute maximum room for LTIR makes it that much more difficult to call players up or add new players, especially at the trade deadline.
We may not have to worry about the Wings being a buyer at the deadline for the next few years, but one of the things we see each year is a team adding a player with a relatively high cap late in the season. Think Eric Staal and his $8.25M cap hit joining the Rangers at the deadline this year. This was possible because a player's cap charge and a team's cap space is calculated daily. Staal only counted for half of his hit and the Rangers had been able to save enough space every day to be able to afford the lowered amount.
The problem with LTIR here is that using it to exceed the cap means a team won't be able to save any of that space to add to the roster later. You're already spending over the amount you're supposed to be, so you can't make room other than by adding more people to LTIR.
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Regardless of how to do it, the Red Wings are going to have trouble with their long-term contracts as the players signed to them continue to lose effectiveness. It's possible to continue getting some relief via the LTIR exemption, but that method has its limits. If all three players are going to end their careers on the injured reserve list, the saving grace may be that the contracts don't all end at the same time. However, it may mean that one or two of them might have to end it on some other team's LTIR, even if it involves both the risk of their retirement and the unfortunate cost of having to pay a team to take a contract off your books for you.