New York Rangers: Retirement is an option

Suppose a New  York Rangers player under a longterm contract decides to retire.  How does that retirement affect the salary cap?

Once upon a time, there was a 14-year NHL veteran with the New York Rangers.   He played in a five All-Star games and was a first team All-Star three times.  He had won the Ted Lindsay Award.  He spent 12 years with his team and he held numerous club records. He was beloved by the fans.  He was Swedish.  His name was Markus Naslund.

At the tail end of his career, Naslund signed a lucrative two year $8 million dollar contract with the New York Rangers, after spending 12 years with the Vancouver Canucks. In his first season with the Rangers at age 35, he scored 24 goals and 46 points, his worst totals in a decade.

In May 2009, as soon as the Rangers were eliminated from the playoffs and with one year left on his contract and facing a buyout, Naslund announced his retirement and walked away from the Rangers, forfeiting his $3 million salary and a potential $2 million buyout payment.  He also saved the Rangers $3 million in cap space and any buyout penalty.

Naslund retired because he felt that he could no longer play at the level that he was accustomed to and he did in the most honorable way, on his own terms.

In a recent article, Nick Zararis raised the specter of a Henrik Lundqvist buyout.  With two outstanding young goaltenders in the organization and with Lundqvist facing the inevitable deterioration of his skills as he get older, as abhorrent as the idea of buying out a future Hall of Fame player is, the team has to consider it.

Lundqvist has two years left on his contract, paying him $8.5 million a year.  Alexandar Georgiev is a restricted free agent after next season.  Igor Shesterkin just signed a two-year entry level contract with a European out-clause.  If Shesterkin is assigned to Hartford, he has the right to return to the KHL.

That’s the sticky wicket. It’s very possible that by the 2020-21 season, the team will have three NHL worthy goaltenders, with the most experienced and highly paid of the trio the third on the depth chart.  The Rangers may have to make a tough choice if they are faced with losing Shesterkin to Europe if they keep Lundqvist on the roster.

Another option

It is possible that after this season, if Lundqvist is faced with losing his job to the two youngsters, he could agree to waive his No Movement Clause and ask for a trade.  Could the Rangers find a trade partner will to take on an $8.5 million salary and a player with an increasing deterioration of his skillset?

In an NHL with rookies like Jordan Binnington or middle of the pack veterans like Curtis McElhinney and Petr Mrazek backstopping their teams deep into the playoffs the answer is probably no.

Lundqvist has made it clear he wants to spend his entire career as a New York Ranger.  He could decide to forfeit the last year of his contract and retire after next season.  The key question is how that would work against the salary cap.

Retirement calculation

If anyone wants to read the rules, Article 50.5 of the Collective Bargaining Agreement deals with retirement.  I will include it at the end of this article.  In a nutshell, a team is liable for the difference between the full value of the contract minus the annual cap hit for however long the remainder of the term of the contract.

For Henrik Lundqvist, let’s assume he plays one more season.  The formula is you take the full value of his contract paid out in the first six years, a total of $54 million.  Then you calculate how much the annual cap hit was over those six years, a total of $51 million.  Subtract the cap hit from the value of the contract and you come up with the cap hit for the final year of the contract, a total of $3 million.

The bottom line on a Lundqvist retirement is that it would result in a cap hit in 2020-21 of $3 million and then he would be off the books.  That would be a savings of $5.5 million.

According to capfriendly.com, a buyout would result in a cap hit of $5.5 million in 2020-21 and $1.5 million in 2021-22.   A buyout would save the team $3 million in year one and cost the team $1.5 million in year two.

It’s up to him

I am not advocating a buyout of Henrik Lundqvist.  Recalling the Markus Naslund retirement, I wondered what the financial impact his retirement would be on the team cap situation and that is what this article is all about.

The rules have changed since the Naslund retirement.  They were put in place to stop contracts that circumvented the salary cap, such as Shea Weber‘s 14-year deal with the Nashville Predators.  Under the new rules, a Weber retirement would be a salary cap disaster for Nashville, the team that originally signed him.

Lundqvist could rebound and return to his prior level of excellence.  If he doesn’t, there is a scenario that could arise after the 2019-20 season when  it is possible that the Rangers could be facing a situation where a Shesterkin/Georgiev tandem is the best for the team.   If, like Markus Naslund,  Lundqvist feels he cannot play to the level he is accustomed to, will he decide to pack it in and finish his career on a high note, knowing that it would be to the benefit of the Rangers?  Only time will tell.

The Collective Bargaining Agreement (SPC stands for Standard Player Contract)

Article 50.5  -Upon that Player’s failure to play in the League by reason of retirement, “defection” from the NHL or otherwise (but not death) (such that he is not playing and is not receiving Salary pursuant to his Long-Term Contract) (assuming it is prior to the conclusion of the Long-Term Contract), the difference between the sum of the Actual Salary and Bonuses received by that Player under that  SPC and the sum of the Averaged Amounts charged against the Club’s Averaged Club Salary under that SPC shall be calculated as follows: 

(i) First, calculate the total Actual Salary and Bonuses paid to that Player under that SPC (“Total Payment”) until the date of such retirement, defection or otherwise (but not death); 

(ii) Second, calculate the total Averaged Amount charged against the Club’s Averaged Club Salary for the Player under that SPC (“Total Cap Charge”) until the date of such retirement, defection or otherwise (but not death);

(iii) Subtract Total Cap Charge from Total Payment. That number shall be referred to as the “Cap Advantage Recapture.” 

(iv) The Cap Advantage Recapture shall be charged against the Club’s Averaged Club Salary in equal proportions in each League Year over the remaining term of the SPC (i.e., the yearly charge shall be calculated by dividing the Cap Advantage Recapture by the number of seasons remaining under that SPC).