If an RFA signs after the season starts, how is their cap hit calculated?
When a restricted free agent signs a contract after the NHL season has already begun, their cap hit for the first year is greater than the contracts annual average, and similarly the cap hit of the remaining years is less than that of the annual average.
A notable aspect of the following calculation is that the sum of the cap hit values is greater than if the contract was signed before season start (and used the normal AAV calculation; monetary value of the contract divided by the total years)
The cap hit of the years after the first year of the contract is calculated first:
Cap hit after the first year = (First year salary × season days remaining / total season days + contract value remaining) / contract years
The first years cap hit is then calculated:
First years cap hit = cap hit after the first year × total season days / season days remaining
Example:
Hampus Lindholm of the Anaheim Ducks signed a $31,500,000 contract on Oct 27, 2016 in the 2016-17 season. There were 164 days remaining in the season on this date. The contract break down was as follows:
2016-17: $3,000,000
2017-18: $6,000,000
2018-19: $6,750,000
2019-20: $5,250,000
2020-21: $3,750,000
2021-22: $6,750,000
Total: $31,500,000
Annual Average: $5,250,000
The cap hit values are calculated as follows:
Cap hit (2017-18 to 2021-2022) = ($3,000,000 × 164 / 180 + $28,500,000) / 6 = $5,205,556
Cap hit (2016-17) = $5,205,556 × 180 / 164 = $5,713,415
The cap hit breakdown is therefore as follows:
2016-17: $5,713,415
2017-18: $5,205,556
2018-19: $5,205,556
2019-20: $5,205,556
2020-21: $5,205,556
2021-22: $5,205,556
Total: $31,741,294
Average: $5,290,216