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How do retained salary transactions work?

Teams can retain a percentage of a contract’s remaining cap hit, salary and bonuses — including signing bonuses — in trades. The following basic stipulations apply:

  • No more than 50 per cent of the salary/cap hit can be retained
  • The retained percentage must be the same for both salary and cap hit
  • The retained percentage cannot be altered from year to year
  • Salary/cap hit cannot be retained on more than three contracts per team in one season
  • The aggregate cap hits retained cannot exceed 15 per cent of the upper limit
  • A contract can be traded only twice where salary/cap hit is retained

In the event salary is retained a second time on the same contract, the percentage of salary/cap hit retained is applied to the full salary/cap hit and cannot alter the terms of the first retained salary transaction. Example: Devan Dubnyk was traded from Edmonton to Nashville on Jan. 15, 2014. Dubnyk's cap hit was $3.5M and the Oilers retained 50 per cent of it ($1.75M). Later that season, Nashville dealt Dubnyk to Montreal on March 5, 2014, retaining 25 percent of Dubnyk's contract. The percentage applied to Dubnyk's full cap hit of $3.5M, meaning the Oilers continued to retain 50 percent of it ($1.75M) while the Predators picked up 25 percent of it ($875K) and the Canadiens — if Dubnyk had been on their roster — handled the remaining 25 percent ($875K).

Regardless of whether a player with retained salary is on the acquiring team's NHL roster or loaned elsewhere (ie. the minor leagues), he continues to count against the cap of team(s) retaining his salary/cap hit. This stipulation prevents teams from circumventing the "Wade Redden Rule" for buried contracts, where without it, a team could halve a player's cap hit and potentially eliminate any cap cost while the player is "buried" in the minors. Example: Using the Dubnyk case above, the Canadiens assigned him to their AHL affiliate in Hamilton immediately after acquiring him on March 5. Although he did not count against Montreal's cap, his retained portions continued to count for Nashville (25 percent) and Edmonton (50 percent).

A team cannot reacquire a player within one calendar year of a retained salary transaction unless the player's contract expires during that time. A team also cannot reacquire in a retained salary transaction a player who was on its reserve list within the past calendar year, meaning a team can't trade a player simply to reacquire him at a reduced rate.

In the event a contract involved in a retained salary transaction is bought out, the buyout obligations — salary and cap hit — are divided between the two teams at the same percentage. For details on how retained salary transactions are treated in the event of cap advantage recapture, see the separate FAQ entry: How does cap advantage recapture work?

— By Matthew Wuest – CapGeek.com