When an NBA player is waived, the guaranteed money owed to them remains on their team’s books for the duration of the contracted term. The stretch provision allows teams to waive a player and then spread that player’s cap hit over additional seasons at a lesser annual value.
Teams don’t have to use the stretch provision if they’d rather keep the player’s full cap hit and let the contract expire on schedule but sometimes it’s the preferred option as it allows teams cap relief sooner due the stretched annual value being so much lower than it would be otherwise.
How long are contracts stretched for?
Exactly how long contracts are stretched for depends on when the player is released and how many years are left on the player’s contract.
If the player is released before September 1, their current season can be stretched. If a player is released after September 1, the current season is paid out normally, and only the remaining seasons are stretched. For this reason, players on expiring deals can not be stretched after September 1.
The seasons to be stretched are stretched for twice their pre-stretched length plus one additional season. For example, a contract with two stretchable seasons remaining on it would be stretched for five seasons (eg; 2 x 2 = 4, 4 + 1 = 5), while a contract with one stretchable season remaining on it would be stretched for three (eg; 1 x 2 = 2, 2 + 1 = 3) .
How are the adjusted cap hits calculated?
The amount of money to be stretched can be negotiated by the team and player but without any additional agreements in place, only the guaranteed money owed to the player over the stretchable seasons is factored into the calculations.
The cumulative amount owed is then divided evenly across the length of the stretched contract.
If a player is owed $10 million over one remaining season but only $6 million of that is guaranteed, then that $6 million is what gets stretched out evenly over three seasons, with an annual cap hit of $2 million (eg; 6 / 3 = 2).
What happens if a player is signed after they’ve been stretched?
While teams can not sign a player that they themselves stretched and waived until the original contract expires, other teams can and often do sign players who’ve been released in this fashion. A player signing a new contract doesn’t absolve the waiving team of its financial commitment as a waiver claim would but it does decrease the cap hit slightly, through what is referred to as a set-off.
Can any player be stretched and waived?
Only players with at least one stretchable season, as outlined above, and at least $250,000 in guaranteed money can be waived using the stretch provision. Additionally, a player may not be stretched and waived if that will result in the team’s cumulative total of all waived contracts for that season equaling more than 15% of the salary cap for that season.
Can a team choose to stretch a waived player’s contract retroactively?
No. Teams must inform the league of their intent to stretch a waived player within one business day of the formal termination.