Evolution of Fifth-Year Options


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Evolution of Fifth-Year Options

On May 4, 2020, all 2017 first-round draft picks had their fifth-year option picked up or declined. Of the 32 first-round picks from 2017, 19 — over 59% — of them were IDPs. Before we delve into the decisions and how they might affect each IDP, we need to take a quick history lesson on the evolution of fifth-year options.

In 2011, the NFL sustained a 132-day lockout, from March 11 until July 25. Without getting into the nitty gritty, NFL owners did not approve of the 2006 Collective Bargaining Agreement (CBA) anymore and consequently staged the lockout in 2011. Prior to 2011, rookie first-round picks were free to negotiate deals — limited only by the salary cap itself — with teams that drafted them. Normally, the first overall pick set the bar of contract negotiations for every pick after them. The contract for each pick would usually be close to the contract negotiated for the player picked in the same slot the previous year.

In the owners’ eyes, some issues, like a QB taken #4 overall arguing that he should be paid more than an offensive tackle taken higher, were untenable. So rookies and their agents dug in their heels, negotiations took a long time to work out, and rookie signings took months and months to finish, with some rookies holding out into — and beyond — training camp (like JaMarcus Russell in 2007). In addition, owners felt rookie contracts were too expensive, eating up 5% or more of the NFL enforced salary cap. Veteran contracts were extremely difficult to work through when rookie contracts were eating up chunks of the salary cap. Not only did that anger the owners, but veteran players weren’t too happy with it either.

The Beginning of the Fifth-Year Options

All of that changed in July of 2011. The new CBA ran from 2011 through 2020 and it had a major effect on rookie contracts. To begin with, contracts are four years in length for every pick in every round. But contracts for first-round picks were required to include a team-controlled fifth-year option. Meanwhile, all undrafted rookies are only eligible for three-year contracts. Rookie contract values were now only 1.5% of a team’s salary cap under the new CBA. The minimum for rookie contracts were $480,000 (Year 1), $555,000 (Year 2), $630,000 (Year 3), and $705,000 (Year 4).

In addition to this minimum, each rookie could negotiate a signing bonus or incentive and there were two types of these signing bonuses. This is where the rookies could make their big bucks, though not as big as in previous years. There were the likely to be earned (LTBE) bonus and not likely to be earned (NLTBE) bonus. LTBEs counted towards the salary cap in the year they were scheduled during the rookie deal whereas NLTBEs did not count towards the cap. The difference between the two was whether or not the player reached incentive goals. This complicated the finances of rookie contracts and how they fit into team salary caps, but it allowed teams to backload bonuses to be more immediate cap friendly.

The fifth-year option for all top-10 draft picks was equal to the salary of the league’s transition tender during the player’s fourth season. The value is based on the 10 highest salaries at the player’s respective position during the previous season. The fifth-year option was non-negotiable and fully at the team’s discretion to exercise or decline. The salary value of players drafted 11-32 is the average of the third through 25th highest salaries at the player’s skill position.

If a team picks up the fifth-year option of a first-round pick, it was guaranteed for injury only, but became fully guaranteed at the start of the league year in the option season.

The New 2020 CBA

Along comes 2020 and a new CBA. This new CBA runs through 2030. The decision on fifth-year options has to be made by May 3 of the season after the third year of the contract. All 2017 rookie contracts extended in 2020 will follow the 2011 CBA. All 2018 and beyond rookie fifth-year options picked up become fully guaranteed for the fifth year. Starting with the class of 2018 next year, all 32 draft picks now get transition tag value to the fifth year of their rookie contract. If a player makes the Pro Bowl twice in his first three seasons, the value of the fifth-year option increases to franchise tag level. That’s a big change for first-round picks who outperform their rookie contracts.

Per the new CBA, a rookie contract is composed of the following: base salary ($510,000 in Year 1, $600,000 in Year 2, $690,000 in Year 3, and $705,000 in Year 4), base salary guarantees, signing bonus, off-season workout per diem (beginning in second season), permitted performance incentives, roster bonuses and reporting bonuses. Therefore, on average, first-round IDP draft picks make the following: DE $10-15M, DT: $8-13M, LB: $10-14M, CB: $10-14M, S: $7-10M.

For players taken in Rounds 2-7, there is a new proven performance escalator (PPE) which rewards players for performing above drafted expectations. There are three levels and a player can qualify for more than one level but only gets the highest PPE level (not all three). First-round picks and undrafted players do not qualify for PPE.

The Fifth-Year Options for 2017 Rookie IDPs

That brings us to May 4, 2020. Of the 32 first-round picks, 19 of them were IDPs. Of those 19, only 10 of them had their fifth-year option picked up (53%), and nine were declined. In comparison to the previous five seasons: 2015 had 65% picked up, 2016 had 50%, 2017 had 72%, 2018 and 2019 each had 71%.

The only season close to this year was the rookie class of 2013 (option choices in 2016) and that season had six major injuries and the trade of nine declined first-rounders. Only two options were declined due to poor performance. This brings us back to the class of 2017, in which nine were declined their fifth-year option. Of the nine declined options, less than half of them are likely related to injury. That makes five of them that either performed poorly in their first three years or don’t fit into the team’s future plans. Prior to this year, 25 of 29 IDPs declined their fifth-year option (86%) did NOT return to the declining team the following year. If this trend continues, then eight of the nine declined options this year will not be with their current team in 2021.

Here is a list of the nine IDPs that had their fifth-year option declined:

There are a few names here that raise an eyebrow, Jarrad Davis being one of them. In the case of Davis, we have to realize that he was not drafted by Matt Patricia and his staff. Therefore, they have no loyalty to Davis. The same can be said about Haason Reddick and Malik Hooker. The other six are either injury-related declines or poor performance/not in future plans. Overall, there is an outstanding chance that none of these nine players returns to the team they are currently with. On paper at this stage of the off-season, Solomon Thomas appears to be the starting 3-technique DT for the 49ers, but rookie Javon Kinlaw and Ronald Blair likely force Thomas to bench more often than not. McKinley likely starts his fourth season as a backup who sees playing time in sub packages as the replacement for DE Allen Bailey. Hooker likely starts at FS in Indy, but missing 29% of his first 48 games is probably the major reason his option was declined. Arizona signed De’Vondre Campbell and Devon Kennard plus they drafted Isaiah Simmons this off-season, which does not bode well for Reddick. The other four will struggle just to make an NFL roster.

A savvy veteran of fantasy football since 1990, Thomas specializes in IDP and Special Teams. When he is not delving into fantasy football, Thomas works as an instant or slow-motion replay technician for national and regional clients.