Question about new CBA, Possible Loop Hole?

Discussion in 'Fugu's Business of Hockey Forum' started by Remax, Jul 7, 2005.

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  1. Remax

    Remax Registered User

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    According to the LA times

    "The salary cap will be $37 million and won't include medical and dental benefits and pension payments, the Times reported. "

    Does this mean that the teams could set up rediculus benefit accounts for the players where the money that they don't use during the year will turn into cash in their hand?

    For example at the place that I work at I have $1000 in medical coverage which can be used for anything from prescriptions to appointment fees to massages. At the end of the year whatever I do not use of this $1000 is gone. I don't know if the company recycles it into next years funds or what? All I know is that I don't see any of it.

    Would it be possible for a team to sign someone like Teemu Selanne and sign him to a $1 mil/year deal and then set up a benefit account in his name for $2.5 mil where at the end of the year or at the end of his contract he gets whatever is left over in that account?
     
  2. fan mao rong

    fan mao rong Registered User

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    I doubt it"s all that. Most of the previous offers included around 2.2 million in benefits of that sort to be included in the cap number. Now that money is not included but extra, if you believe the article.
     
  3. Resolute

    Resolute Registered User

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    Benefits are mostly standard these days.

    Team pays $x per diem allowance.

    Insurance Premiums are beyond their control.

    Pension contributions are standard.

    etc.
     
  4. Do people think their ideas through before posting them? This one is a pip. What if a team were to set up a special acount for player x and he gets paid secretly with an money not spent!!! Yeah, that's a great idea!!! Oh wait, what about registration of contracts with the league office? What about the audit performed at the end of the year to define the revenues and expenditures? How is this secret account explained and the hidden money? Think people, think.

    :shakehead
     
  5. Boltsfan2029

    Boltsfan2029 Registered User

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    This sounds like you’re talking about a Flexible Spending Account (a/k/a Flex Pay). The way it works here is the employees opt to have money from their salaries placed into Flex Pay – the employer does not contribute. (I don’t know if an employer can make a direct contribution to an employee’s Flex Pay account.) This money can be used strictly for covered items – OTC medications, medical procedures not covered by insurance, contact lenses, etc. Claim forms with receipts have to be submitted for the employee to receive reimbursement from Flex Pay. You can’t just call up and say you’ve just spent $52,537 on baby aspirin.

    What’s left in the account at the end of the year is lost – the employee does not get it back. The employee cannot “withdraw†funds from the FlexPay account. Once it’s in, it’s use it or lose it.

    Consequently, if it worked like ours, this wouldn’t work to circumvent the cap because the funds would have to come from the player’s salary, so that would count against the cap. Even if the funds could come straight from the team w/o counting against the player’s salary/cap, the player wouldn’t be able to get the money once it was in the account.
     
  6. blitzkriegs

    blitzkriegs Registered User

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    Yes, loopholes are discovered by reading newspaper articles, NOT the actual language of the agreement. :shakehead

    I would love to walk into a meeting citing a newspaper article over the actual agreement to explain what I think is a 'loophole.' :biglaugh:

    Are these idiotic threads ever going to end? :help:
     
  7. Remax

    Remax Registered User

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    I think that you simply don't understand much about the legal system or the way contracts/CBA's work. I'm not saying that this would work for sure but if the newspaper articles are correct then depending on the wording of the actual CBA then this or other things like this COULD possible work. For starters there is absolutely no way that the league can govern all of the revenues and expenditures for each team. There has to be some areas that are not covered or counted in the new CBA, such as apparel. When you have a team like Toronto, Philly, Montreal or Detroit who have every players name and number on a jersey in not only their concessions at the arena but also at local team sponsored/owned sporting goods stores, and then a team like Columbus or Anaheim who only have a hand full of players on apparel and might not even have their own stores outside of the arena or city, then you cannot count something like that against the team. Not only would it be unfair but with separate businesses within one organization, it is impossible to audit everything. As for saying that they would set up a special account (Notice the spelling? Take notes.) for player x and he gets paid secretly with (No "an" here, it just doesn't make sense. Think people, Think!) money not spent, I didn't say that, but what I was getting at was that a player would be more inclined to play for a team who will pay them $1.5 million/year and then set up a benefits account for them on top of that as apposed to playing for a team that pays them $1.5 million/year and then immediately deducts $x from that $1.5 million to put into a benefit account for them. Therefore it would not be hidden money and it would obviously only work if something such as benefits were not included in the new CBA as an expenditure. "What about the audit performed at the end of the year to define the revenues and expenditures?" What about it? The definition of revenues and expenditures will have to be defined in the CBA, they will not be able to sit down with each team at the end of the year and say, "Ok, this is and expenditure, this is too, this isn't. This is going to be counted as a revenue and so is this, but this one wont be this year." It can't happen this way, there are way too many legal issues that they would have with teams complaining about being treated unfairly.

    As for the Flex Pay accounts, there are ones that are contributed to by the employer. Where I work now like I said in my first post, the employer gives us $1000 for our medical coverage, and that is on top of my salary. They also give us $x that we can put into either medical coverage or retirement plans. Currently at the end of the year anything from the original $1000 is lost and the company just recycles it into the next years funds, and anything left of the $x that you put into the medical coverage is rolled over for 1 year and then lost the next year. With the restructuring of our company and with the problems that they are having keep new hires to stay they are thinking about implementing a feature where at the end of the year, whatever is left of the original $1000 can be taken by the employee in cash or it can be rolled over to the next year, and anything left from the $x that was put into the medical funds can either be rolled over to the next year or transferred to the employee's retirement fund. So I don't see what the argument is with that.
     
  8. Nomad

    Nomad Registered User

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    I have never heard anything about Flex Spending Accounts being used in this way. I thought the whole point was that it was a salary deduction pre-tax. Even if you got it back at the end, it would just be money you would have been paid anyway, it just gets taxed at that point.

    If they were going to try to circumvent it, why not just do something simpler, like hiring a player's spouse as an employee of the team at some ridiculous salary?
     
  9. Chili

    Chili Registered User

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    We had a gm try to draft a player 3 days early by factoring in leap years. They will be looking for loopholes so this could be an interesting question once the final draft of the cba is available.

    Benefits themselves are an another interesting point. Our company has seen the cost of benefits sky rocket over the years. I could see them becoming more of an issue in future cba's, depending on the success of the new cba/cap.
     
  10. Timmy

    Timmy Registered User

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    There will, if the owners have any brains at all, be a "spirit" clause which will allow the league to, if they find out about a particular scheme designed to circumvent the CBA through an unthought-of loophole, declare the scheme toast and/or impose fines, etc.

    I think they're going to crack down on crap like this, and when the first owner tries it and gets burned for five first rounders, it'll be the last.
     
  11. Buffaloed

    Buffaloed webmaster

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    This doesn't differ any from the benefits package negotiated in the previous CBA. That didn't count towards a cap either, and they didn't leave a loophole there.
     
  12. Ouch! Where do I start? There's just so much to jump on. Well, we'll start at the begining. Here are some gems from your post.

    There has to be some areas that are not covered or counted in the new CBA, such as apparel.

    Let's see, that was covered in the last CBA and the CBA before that (ever hear of the term licensing?) so I'm pretty sure it will be covered here as well.

    When you have a team like Toronto, Philly, Montreal or Detroit who have every players name and number on a jersey in not only their concessions at the arena but also at local team sponsored/owned sporting goods stores, and then a team like Columbus or Anaheim who only have a hand full of players on apparel and might not even have their own stores outside of the arena or city, then you cannot count something like that against the team.

    Uh yes, this is included and also falls under the licensing arrangement from the point above. A CBA expert like youself should certanly be able to understand something as basic, and long standing, as product licensing and the funds that are generated as such?

    Not only would it be unfair but with separate businesses within one organization, it is impossible to audit everything.

    And that is why this negotiation has taken the time it has. Both sides had to agree with what hockey revenue was and what could be included in those audits. It's been decided already, so your point is moot.

    As for saying that they would set up a special account (Notice the spelling? Take notes.) for player x and he gets paid secretly with (No "an" here, it just doesn't make sense. Think people, Think!) money not spent, I didn't say that, but what I was getting at was that a player would be more inclined to play for a team who will pay them $1.5 million/year and then set up a benefits account for them on top of that as apposed to playing for a team that pays them $1.5 million/year and then immediately deducts $x from that $1.5 million to put into a benefit account for them.

    Ahhh, already resorting to the old "typo" defense, which proves your post is indefensible (did I spell that right?). What part of player salary negotiations where the phrase "including benefits" was used, did you miss? Benefits are included. Oh, and for the paying the money into a special account after the fact, that money is fully traceable and will be ****ed toward the cap there genius. And what happens when said team is actually a few dollars over the cap because of this "secret payment"? Nothing major. Just a multi-million dollar fine and a loss of draft picks. Yeah, its worth the risk, isn't it.

    "What about the audit performed at the end of the year to define the revenues and expenditures?" What about it? The definition of revenues and expenditures will have to be defined in the CBA, they will not be able to sit down with each team at the end of the year and say, "Ok, this is and expenditure, this is too, this isn't. This is going to be counted as a revenue and so is this, but this one wont be this year." It can't happen this way, there are way too many legal issues that they would have with teams complaining about being treated unfairly.

    What is your point here? Trying to cloud the fact that any money paid out better be accounted for from one of the accounts earmarked as hockey revenues? Are you forgetting that accounting is a dual entry system, and that when one payment is made from one account it is reflected in another? You don't think that obvious things like this would be caught? Man, this is too easy.

    As for the Flex Pay accounts, there are ones that are contributed to by the employer.

    Well, thank you for pointing that out and stating the obvious. The point originally is that these "flex accounts" ARE benefits, and those benefits have been laid out under the CBA and any other payment made above and beyond the benefits outlined in said CBA will be constituted as player compensation. You know, that's what he's getting for playing. That is what counts toward the team cap. ANY payment made to a player, in ANY fashion, will be counted toward the salary cap. Not counting that payment is an infraction and is subject to penalties of fines and loss of draft picks.

    Where I work now like I said in my first post, the employer gives us $1000 for our medical coverage, and that is on top of my salary.

    Wow, McDonalds is really going that extra mile in looking after their people. Do you know what that money is called? That would be classified as a taxable BENEFIT. So do you know where that will end up under the CBA??? BENEFITS.

    They also give us $x that we can put into either medical coverage or retirement plans. Currently at the end of the year anything from the original $1000 is lost and the company just recycles it into the next years funds, and anything left of the $x that you put into the medical coverage is rolled over for 1 year and then lost the next year.

    Again, do you know what that money is called? That would be classified as a taxable BENEFIT. So do you know where that will end up under the CBA??? BENEFITS.


    With the restructuring of our company and with the problems that they are having keep new hires to stay they are thinking about implementing a feature where at the end of the year, whatever is left of the original $1000 can be taken by the employee in cash or it can be rolled over to the next year, and anything left from the $x that was put into the medical funds can either be rolled over to the next year or transferred to the employee's retirement fund. So I don't see what the argument is with that

    There is no argument because you have no point and no legs to stand on. What you are talking about would have to be outlined in a contract that outlined the payment structure. Its either compensation, or ts benefits, both of which are covered by the CBA. What you suggest is an impossibility because of the rules the CBA will most obviously have. This 600+ page document is not a door stop. It will outine everything including the color of napkins the players get during team functions. Something as basic as "flex pay" or "flex benefits" are not going to be loop holes that are over looked. The lawyers behind this did not fall out of the lawyer tree last night. They've been at this for a while.
     
  13. gerbilanium

    gerbilanium Registered User

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    Hey, I have flexible benefits with a health spending account, why the hell isn't my company depositing extra money in there to hide revenues. Oh ya, breaking the law to give me more money for the hell of it is flabbergastingly ******ed.
     
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