As Leafs fans rightfully celebrate not having to watch David Clarkson play hockey for 5 more years while taking up $5.25 million a season of their team’s cap space, here’s a basic reminder of how LTIR works now that the injured Nathan Horton is getting paid by the Leafs organization.

Placing a player on Long Term Injured Reserve does not remove a cap hit altogether. In cases of LTIR, the cap hit is still technically on the books and the team is granted an exemption that allows them to exceed the cap by upwards of the full amount of the injured player’s cap hit (this doesn’t necessarily mean the team’s new cap limit is the cap ceiling + the full amount of the injured player’s cap hit).

The basic formula:

Cap Hit of LTIR Player – Amount of Cap Space Available = Amount Team Can Exceed the Cap.

From Broad Street Hockey (from early this season) on the basics of how the cap works:

“The simplest example of this is to think about it from a yearly cap space perspective. If you have $1 million in cap space. Once you are 50% of the way through the season, you can acquire a $2 million player. You can afford their $2 million daily cap hit because you only have to pay it for 50% of the season, and you’ve been saving up a little bit of a time for that first half of the season.”

… A team like St. Louis has a very mild amount of salary cap space; only just over a million dollars. However, $1 million dollars effectively becomes over $5 million dollars at the trade deadline. So St. Louis can go out and acquire a really good player at the trade deadline if they want…all because they have $1 million in cap space today.

With a player on Long Term Injured Reserve, this same rule does not apply. Because it is an exemption and not actual cap space, there is no pocketing effect for unused ‘LTIR space’. It is not the same as having the cap hit removed altogether and having that unused cap space factored into the calculation each day.

Technically, the Leafs could have, say, a 21-man active roster that’s comfortably $5-6 million under the cap, but, because of Horton’s LTIR contract, they are actually right up tight against the cap and pocketing much less.

From Fear the Fin:

Think of it this way– a $2.0MM player was injured on a team that had $1.0MM in cap room. The cap hit of the injured player ($2.0MM) minus the amount of salary cap space ($1.0MM) equals the amount that team can exceed the upper limit by ($1.0MM).

The biggest decision with an LTIR contract comes at the beginning of the season when opening day rosters have to be set and teams must become cap compliant. This is when the Leafs will have a decision to make. From the now-defunct CapGeek:

OPTION 1: Build the injured player into their opening-day roster and have that roster fit as close to the upper limit as possible without exceeding it, then place the player on LTIR.
OPTION 2: Put the injured player on LTIR on the final day of training camp and, including the injured player’s annual average salary or cap hit, build a roster that exceeds the upper limit by an amount that is as close as possible to the injured player’s annual average salary.

As we explained, the LTIR contract is not added on top of any additional cap space the team has. If the Leafs have $3 million in cap space, they don’t have $8.3 million in space once Horton goes on LTIR. They are, however, allowed to exceed the cap by up to $2.3 million in that case. That is why, at the start of next season, the team would have two options to maximize the space availed by Horton’s LTIR status: One is to be right up against the cap (as tight as possible) with Horton on the roster, before placing him LTIR on day one of the season. Or, they can place him on LTIR before the first day of the season and build a roster that’s over the cap by as close to $5.3 million as possible to maximize their space.

YearBase SalaryCap Hit

This all assumes the Leafs are operating right up against the cap. For a team that is dealing with a decent amount of cushion, it’s not necessarily the boon to their cap space that it appears, but you’re less likely to need the relief in that case.

Anyway, the Leafs have former League capologist Brandon Pridham in their front office, who would know this stuff better than any of us in terms of how to maximize the space and manage the LTIR contract for the next five years. Unquestionably, the Leafs have smartly capitalized on a bad situation for a more payroll-conscious team in Columbus (Horton’s uninsured contract) and added some much needed cap flexibility to their rebuild going forward.