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Wait For It: Deferred Money Enters the Rink

Writer's picture: Juhi PatelJuhi Patel
14 minutes ago5 min read

(A Look at the Anaheim Ducks Frank Vatrano Contract)

 

Earlier this month, 30-year-old forward Frank Vatrano celebrated signing a contract extension with the National Hockey League’s (“NHL”) Anaheim Ducks (“Ducks”) by scoring two goals to secure a win.[2] Rather than entering the summer as an unrestricted free agent, Vatrano signed a three-year, $18 million contract with the Ducks.[3] While most would expect this to mean the average annual value (“AAV”) would be split evenly at $6 million a season, the Ducks presented Vatrano with a unique proposition instead.[4]

 

The “Ohtani” of Hockey: Deferred Pay

 

The Ducks’ Vice President of Hockey Operations and Assistant General Manager, Jeff Solomon, presented the idea of structuring Vatrano’s contract similar to Shohei Ohtani’s infamous contract with the Los Angeles Dodgers.[5] While the face value of Ohtani’s 10-year contract was $700 million, rather than having a $70 million AAV, Ohtani will only contribute $2 million against the Dodgers’ salary cap.[6] Even though his contract ends in 2033, the Dodgers will continue to pay Ohtani $68 million annually from 2034 to 2043.[7] Comparably, Vatrano will be paid $3 million in each of the following three seasons while carrying an AAV and salary cap of $4.57 million.[8] Ultimately, over half the contract will be paid out starting in 2035, with the remaining $9 million distributed in $900,000 installments over the next ten years.[9]

 

The Ducks have struggled to become relevant in the spring season, having failed to make it back to playoffs after an early sweep out in 2018.[10] This contract allows the veteran forward Vatrano to be fairly compensated now as well as prepare for retirement.[11] However, the low salary cap also allows a team like the Ducks with numerous young talents, including four top five draft picks, to prepare for upcoming contract extensions while retaining their veteran players.[12] With seven upcoming free agents, including restricted free agents like Mason McTavish and Leo Carlsson, the lower AAV will be essential to building up this Ducks’ roster.[13]  As the Ducks attempt to make themselves a playoff contender once again, the mix of veterans and young talents will be critical to their success.[14] Vatrano’s contract only reinforces the Ducks’ forward-thinking mindset, built upon a well-rounded and deep roster.[15]

 

Moving On, Moving Away: State Income Taxes

 

This contract is structured to not only help the team’s salary cap situation but benefit Vatrano as well. The large state income taxes in California were a motivating factor for Vatrano to take on a deferred salary, allowing himself to benefit from much lower, or potentially no taxes, if he were to move out of state post-retirement.[16] While one may question the decision to take on less money at the outset, the tax benefits of a deferred contract truly shine on the backend. Vatrano could move to a state like Florida or Texas that has no state tax for retirement when collecting the largest sum of his compensation. When asked about the arrangement, Vatrano himself shared he thinks “more guys should do it, especially with taxes in California and other cities in the NHL.”[17]

 

Along with California organizations, New York teams have been vocal about the impact taxes have had on their players’ contracts. Earlier this season, Buffalo Sabres General Manager Kevyn Adams discussed how the team struggles to entice players to Buffalo because “[w]e don’t have palm trees, we have taxes in New York.”[18] Lacking this allure, the Sabres have instead traded away players like Jack Eichel to the Las Vegas Knights and Sam Reinhart to the Florida Panthers.[19]Neither Nevada nor Florida has individual state income tax, and both teams would go on to win a Stanley Cup in 2023 and 2024 respectively.[20]

 

Vatrano’s contract presents an interesting proposal for veteran players planning their futures beyond the league, particularly those playing in Canada and American states synonymous with high income tax.[21] Vatrano himself reinforced this notion, telling The Athletic, “[w]hen I turn 40 to 50 years old, it’ll be nice to see some paychecks. I’ll be residing in another sunny city.”[22]

 

Impact on Free Agency: CBA Negotiations on the Horizon

 

Earlier this season, the NHL expressed their concerns regarding deferred payments after two Carolina Hurricanes (“Hurricanes”) players signed long-term deals with deferrals built in.[23] Hurricanes’ Jaccob Slavin deferred his $4.55 million signing bonus to be paid on the day after the contract expires, reducing his salary cap hit from $6.461 million to $6.396 million throughout his contract.[24] Similarly, Hurricanes’ Seth Jarvis agreed to defer money every year, reducing his salary cap from $7.9 million to $7.42 million per season in exchange for a lump sum payment at the end of his contract.[25]

 

Despite both the Hurricanes' contracts being approved, NHL Deputy Commissioner Bill Daly expressed the league’s hesitations towards teams’ creative use of deferred salaries.[26] However, the league isn’t the only party concerned. The comparison of the time value of money, impact of inflation, and tax benefits players may receive has sparked anxieties for both players and the NHL Players Association alike.[27] While the NHL approved Vatrano’s contract, this move solidified the league’s motivation to discuss eliminating this holdover provision from the pre-salary cap days in their upcoming collective bargaining agreement (”CBA”) negotiations.[28] Despite the excitement contracts like Vatrano’s generates, it is unlikely they will exist following the conclusion of the current CBA regulations governing the 2025-26 season.



JUHI PATEL (editor-in-chief) is a 2L at Villanova University Charles Widger School of Law. She self-identifies as an off-brand New York Sports fan rooting on the Islanders, Nets, and Bills. She is a part of the Soccer Negotiation Competition Team as well as the executive boards for the Labor and Employment Law Society and IP Law Society.



References:

[1] Photo by YIFEI CHEN on Unsplash

[2] Greg Beacham and Joe Reedy, Quite a Sunday: Frank Vatrano signs 3-year contract extension with Ducks, then scores 2 goals in win. Chron. (Jan. 5, 2025) https://www.chron.com/sports/article/anaheim-ducks-sign-forward-frank-vatrano-to-20016645.php

[3] Associated Press. Ducks, Frank Vatrano reach extension through 2027-28 season. ESPN. (Jan. 5, 2025) https://www.espn.com/nhl/story/_/id/43299139/ducks-frank-vatrano-reach-extension-2027-28-season

[4] Id.

[5] NHL.com, Vatrano signs 3-year, $18 million contract with Ducks. NHL. (Jan. 6, 2025) https://www.nhl.com/news/frank-vatrano-signs-3-year-contract-with-anaheim-ducks

[6] Teddy Ricketson, Shohei Ohtani contract, explained: Breaking down salary, length, and deferrals in Dodgers star’s unique $700M deal. The Sporting News. (Oct. 5, 2024) https://www.sportingnews.com/us/mlb/los-angeles-dodgers/news/shohei-ohtani-contract-salary-length-deferrals-dodgers/9215d71aaa6d05cd4345ddd4

[7] Id.

[8] See NHL.com, supra note 5.

[9] Id.

[10] Eric Stephens, How Ducks’ Frank Vatrano extension marks their latest step toward relevancy. The Athletic. (jan. 6, 2025) https://www.nytimes.com/athletic/6040938/2025/01/06/ducks-nhl-rebuild-vatrano-contract/

[11] See NHL.com, supra note 5.

[12] See Associated Press, supra note 3.

[13] See Stephens, supra note 10.

[14] Id.

[15] Id.

[16] See Associated Press, supra note 3.

[17] Abhishek Dilta, Frank Vatrano’s honest opinions on being called the ‘Shohei Ohtani of hockey’ with deferred money in new Anaheim Ducks deal. Sportskeeda. (Jan. 7, 2025) https://www.sportskeeda.com/us/nhl/news-frank-vatrano-s-honest-opinions-called-shohei-ohtani-hockey-deferred-money-new-anaheim-ducks-deal

[18] Mike Koreen, Sabres GM’s comments on ‘no palm trees’ and ‘taxes’ miss mark in Buffalo. Sportsnet. (Dec. 7, 2024) https://www.sportsnet.ca/nhl/article/sabres-gms-comments-on-no-palm-trees-and-taxes-miss-mark-in-buffalo/

[19] Id.

[20] Id.

[21] See Stephens, supra note 10.

[22] Id.

[23] Sportsnet Staff, NHL has concerns after Hurricanes defer salary on Jarvis, Slavin contracts. Sportsnet. (Sept. 11, 2024) https://www.sportsnet.ca/nhl/article/nhl-has-concerns-after-hurricanes-defer-salary-on-jarvis-slavin-contracts/

[24] Id.

[25] Id.

[26] Chris Johnston, Are payment deferrals the new big thing in NHL contracts? What execs, agents say. The Athletic. (Nov. 5, 2024) https://www.nytimes.com/athletic/5896325/2024/11/05/nhl-contract-deferrals-trend-executives-agents-skeptical/

[28] Elliotte Friedman, 32 Thoughts: What happened between Canucks, Rangers. Sportsnet. (Jan. 8, 2025) https://www.sportsnet.ca/nhl/article/32-thoughts-what-happened-between-canucks-rangers/

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