Deferred Compensation

Deferred Compensation is included in a Player’s Salary for the Salary Cap Year encompassing the Season in which it was earned, not in the year it was paid.

The Contract shall identify the specific Season in which any Deferred Compensation is earned to allow for proper allocation in such Season.

The “Over 38 Rule”

General Rule

The Over 38 Rule is designed to frontload the Cap hit for a Team when an aging Player is signed to a multi-year Contract.

It’s meant to avoid a situation where a Player signs a multi-year deal, retires early, and gets paid not to play while the Team benefits from spreading the Cap Hit across more Seasons.

If you don’t want to work through the math behind the rule, you can use the Over 38 Calculator.

Roadmap of the Rule

The below subsections go into detail in applying the rule in the following steps:

Step 1 – Is there an Over 38 Contract triggering the rule?

Step 2 – Determine which years are Over 38 Years and Non-Over 38 Years.

Step 3 – Reallocate Salary at the beginning of the Contract.

Step 4 – Reattribute Salary throughout each Season of the Contract.

Determining When the Rule Applies

Is it an “Over 38 Contract”?

Generally, an Over 38 Contract is:

1. A Contract, Extension or Renegotiation that is for 4+ Seasons at the time of Signing; and
2. The Player is 38 as of October 1st for at least one of those Seasons.

Age Caveat

You’ll notice that all ages are based on the Player’s age as of October 1st of each Season, irrespective of when the Player is signed. There is one caveat:

If (i) a Player’s birthday is during the Moratorium Period, and (ii) signs the Over 38 Contract within 5 days after the Moratorium ends, then his age at the time of signing is deemed his age as of the prior June 30th (i.e. prior to his birthday).

Contract Length Breakdown

The length of the Contract is a key factor in determining if it’s an Over 38 Contract, but it is based upon the Player’s age and Bird Rights status.

Are there “Over 38 Years”?

Determining what Salaries to take and reallocate depends on whether the Player signed as a Full Bird Free Agent with his prior team or not.

If not a Full Bird Free Agent

If the Player is not a Full Bird Free Agent, then you take all the Salaries starting from the later of (i) the 4th Salary Cap Year of the Over 38 Contract or (ii) the first Year the Player is 38 as of October 1st.

These are the Over 38 Years and any years prior the Non-Over 38 Years.

Full Bird Free Agents

If a (i) Full Bird Free Agent signs with his Prior Team (ii) will be 35 or 36 at the time of signing and (iii) is not signed via Sign-and-Trade, then the following rules apply (note that if the age requirement is not reached, then apply the rule for Non Full Bird Free Agents above).

1. 4-Year Contract – If it is a 4-year contract, then do not reallocate any Salaries.
2. 5-Year Contract – If it is a 5-year contract, then only reallocate the Salary from the 5th Year.

Reallocating Salary

Reallocation At the Time of Signing

If there’s an Over 38 Contract with at least one Over 38 Year, then reallocate the Salary from the Over 38 Years across the Non-Over 38 Years at the time of signing.

To do so, you take the total Salary from the Over 38 Years, and redistribute it in proportion to the percentage of Salary of the Non-Over 38 Years.

“Reattribution” through the Life of the Contract

When Does Reattribution Occur? – The Timing

The Reallocation above is not a fixed amount for the life of the Contract.

The remaining Salary will continue to be Reattributed if the Contract remains active throughout the life of the Contract.

However, Reattribution does not automatically occur each Season. Instead, you apply the following rule: Reattribution occurs on a July 1st if (i) the Over 38 Contract remains active and (ii) an Over 38 Year is within 2 years of such July 1st.

How Does Reattribution Occur? – The Math

If on July 1st, Reattribution is to occur, then the remaining Salary is aggregated in equal shares to each of the three or fewer Salary Cap Years.

The ‘Over 38 Calculator’

Use the Over 38 Calculator to do the math for you.

Signing Bonuses

Allocation Over Future Seasons

Despite being paid upon the signing of the Contract, the total amount of the Signing Bonus is prorated over the amount of years contained in the Contract (other than ETO’s) in proportion to the amount of guaranteed Salary each Season.

To the extent all future years are non-guaranteed, the entire Signing Bonus shall apply in the first applicable Salary Cap Year.

Signing Bonus Math

Below are the steps to take, particularly if you are dealing with partial non-guaranteed Seasons and require proration of the Signing Bonus.

It may be easier to see a visual of the step-by-step process by reviewing Example 3 below and clicking the figure that breaks down the math.

Trade Bonuses

If a Trade Bonus was triggered when a Player was traded, then the Trade Bonus is added to his Salary.

Visit the Trade Bonus page to determine how to calculate Trade Bonuses.

One-Year Minimum Contracts

Minimum Salary increases based on a Player’s Years of Service. To deter Teams from signing younger Players to save money and Team Salary, the CBA created a subsidy.

A Player who signs a 1-Year, Ten-Day or Rest-of-Season Contract for the Minimum Salary, the Player’s Salary is lowered to the Minimum Salary for a Player with 2 Years of Service, unless the Player has less than 2 Years of Service, at which point you just apply his applicable Minimum Salary.

The remaining portion of the Player’s Salary is then reimbursed out of the “League-wide benefits fund.”

Note that when a subsidized Minimum Contract is waived mid-season, the subsidy is removed when calculating his Dead Salary. Visit the Team Salary page for details.

Minimum Exception vs. Minimum Salary Subsidy

Note the different requirements between the subsidy for 1-year Minimum Contracts and the 2-year Minimum Exception. Not all Players that fall into the Minimum Exception will have their Salary subsidized to that of a Player with 2 Years of Service.

RFA – The “Arenas Provision”

A Player’s Salary may be adjusted in Restricted Free Agency under what is now known as the Gilbert Arenas Provision.

If the Gilbert Arenas Provision applies to a Restricted Free Agent, then Salary is attributed in the following ways:

1. New Team – If the Offering Team (i.e. the Prior Team does not match), then the average of all seasons is applied to the Team’s Salary Cap across all Seasons.
2. Prior Team – If the Player remains on the same Team (i.e. Prior Team Matches Offer Sheet), then you apply each year to the Team’s Salary Cap as-is.
   • Exception – If the Prior Team’s Team Salary and the average of the aggregate Salaries of the Player is under the Salary Cap, the Prior Team can elect to instead apply the average across all seasons.
     • This election must be made at the time of Matching.

Excluded International Player Payment Amounts (EIPPA)

EIPPA Generally

As part of an International Buyout, an NBA Team can pay a Non-NBA Team, organization, representative or person for the purpose of securing the right to enter into a Player Contract with a player who is participating in basketball professionally outside of the United States.

The CBA designates a certain amount a Team can pay that will not count as Salary. These designated amounts are the “Excluded International Player Payment Amounts” or EIPPA.

EIPPA and Salary

Any amount that exceeds the EIPPA is counted as Player Salary in the form a Signing Bonus.

If the amount does not exceed the EIPPA, then the payment is not considered Salary and therefore not added to Team Salary.

Incentive Compensation

All Incentive Compensation other than Unlikely Bonuses is included in Salary.

Suspensions

Salary that is not paid to a Player due to suspension does not reduce the Team’s Salary in any way.

Loans

If a Team provides a Loan to a Player, the difference between the interest rate of the Loan and the market interest rate shall be considered additional Salary.