Ilya Kovalchuk: A (Brief) Guide to Cap Recapture Penalties
Ilya Kovalchuk retired from the NHL Thursday in shocking fashion. Adding salt to the wound will be the cap benefit recapture penalties the team now faces. (Photo by Bruce Bennett/Getty Images)
By Tyler J. Altemose (@TJamesAltemose)
Ilya Kovalchuk shocked the hockey world Thursday afternoon when he formally announced his retirement from the NHL. The 30-year-old Russian winger signed a massive 15-year, $100-million deal with the New Jersey Devils on September 4, 2010 after much sparring between the NHL and NHLPA regarding what the league believed was an attempt toward circumvention of the salary cap. He leaves $77-million and twelve years on the table.
Due in part to the size of Kovalchuk’s contract and the prevalence of large, multi-year contracts thereafter, the NHL and NHLPA restructured the guidelines surrounding the term and size of contracts allowed under the NHL’s collective bargaining agreement.
One of the more interesting new developments for the 2012 CBA is the introduction of the “Cap Benefit Recapture Formula”. This formula is the difference between a player’s salary and cap hit over the course of a contract. It applies to deals seven years in length or longer. The rule is designed to prevent teams from structuring contracts in a top-heavy fashion—by paying a large percentage of the total amount of the contract in the first few years of the deal while tacking on nominal salary amounts in the latter years.
With Kovalchuk’s retirement comes the first application of that rule. Below is a chart which details what cap benefit recapture penalties the Devils may have faced if Kovalchuk decided to retire at a later time. As the situation stands, the Devils benefited from the structure of Kovalchuk’s contract in the amount of $3-million—$23-million in salary as opposed to $20-million in combined cap hits paid from the 2010-11 season through the 2012-13 season. That $3-million in cap benefits will be split over the remaining twelve years of the deal. Therefore, the Devils will face an annual penalty of $250,000 from the 2013-14 season through the 2024-25 season.
The Devils are certainly facing a big loss in the wake of Kovalchuk’s retirement. But as the chart above indicates, the situation could have been much, much worse. The Devils will only face a nominal $250,000 in cap benefit recapture penalties over the next twelve years, which pales in comparison to literally every other retirement scenario.
Read the disclosure from the New Jersey Devils regarding Ilya Kovalchuk’s retirement here.