Performance Bonuses Overage & 7.5% Cushion
Are performance bonuses (PB) for a given season counted against a team's cap for the season being played, or are they counted against the next season's cap?
- Are PB monies paid out following a season (the following offseason) counted in aggregate against a team's 10% "supercap" overage? Or are they just considered overages for the specific days that they are paid out on?
- Are teams granted a max cushion of penalty-free 7.5% cap overage, or are they not? (That 7.5% figure appears on this site under another response to a PB query)
Answer
Performance Bonuses are paid out following the season. The bonuses are added to the final cap hit for the year that was just concluded, and if that total including bonuses earned exceeds the salary cap, the excess is a bonus carryover overage that is a cap hit for the following year.
For the purposes of the off-season cap limit, any bonus carryover overage that is going to apply to the upcoming year counts towards the off-season cap total, regardless of the day the bonuses are paid out.
Here's an example. A team finishes 19-20 with $81.0M Cap Hit, and the Salary Cap is $81.5M. They have players that earned $2M in performance bonuses. Therefore, their bonus carryover overage is $81.0M + $2M - $81.5M = $1.5M. This $1.5M is a cap hit for the 20-21 season and is treated just like any other cap hit that's committed for the 20-21 season, including during the off-season.
The 7.5% performance bonus cushion is different from performance bonuses earned. As outlined above, during the year, potential performance bonuses for the current year don't count against the cap until the end of the year when actual bonuses earned are determined. The exception to that is that a team can only have up to 7.5% of the salary cap of potential performance bonuses. When a team has more than that ($6,112,500), the excess is a cap charge towards that year's cap hit. However, once the season is over, the final cap hit # to determine the bonus overage is based on actual bonuses earned, not any excess of potential bonuses over the bonus cushion.
