The Mystery On The 3rd/4th Round Compensatory Pick Cutoff Has Been Solved

When I published my annual compensatory picks update after the draft on Monday, I still expressed some doubt about how the NFL Management Council calculated the cutoff between the 3rd and 4th round for 2024, even after Bills GM Brandon Beane provided some useful hints in explaining why the his team and the 49ers did not get the 3rd rounders they (and I) expected.

Thankfully, that doubt is now gone. Per a source that OTC considers reliable, we were informed that the NFLMC calculates contracts that were restructured as entirely new contracts. These contracts are calculated as beginning on the season of the restructure, and include all cap dollars from that season onward–including cap dollars in void seasons. The nature of these calculations make the APY of these restructured contracts much larger than they are in actual cash payment.

To illustrate, let’s use the player that I believe Beane was referring to on the 49ers at the time, Arik Armstead. He originally signed a five year, $85 million extension, for a real APY of $17 million. That contract had a $17.5 million signing bonus prorated over all five seasons at $3.5 million each. However, the 49ers then did maximum restructures on Armstead’s 2022 and 2023 bases salaries, adding more void years in the process. A simple view of the contract before and after the restructures as of 2023 looked like this:

What the NFLMC did for compensatory formula purposes was to take the contract on the right, but only consider the cap numbers for all seasons during and after the restructure, including void years–but for contract length, it ignored void years. What was counted has been highlighted in green and marked with asterisks. After taking out some of the simplicity I have illustrated here, Armstead’s compensatory APY came out to be just a shade over $28 million. (I am guessing that Beane slightly misspoke when he said $26 million).

Once this adjustment was made to OTC’s compensatory formula, it’s amazing how it put everything in proper place, with a proper 3rd/4th round cutoff consisting of the top 5% of the league, around the top 94 players:

As we can see, the contracts of Mike McGlinchey (San Francisco) and Tremaine Edmunds (Buffalo) fell just below the cutoff, as Beane said. We also see Jimmy Garoppolo’s contract above it, but the 49ers did not get a 3rd round comp pick for his departure because they also signed Javon Hargrave, also above the cutoff. This also explains the NFLMC’s mistake in not initially awarding the Bengals a 3rd round comp pick. As it admitted, it omitted Jessie Bates’s Pro Bowl honors, and subtracting those 20 points would have put his contract below the cutoff, and cancelled out by the 4th round signing of Orlando Brown, Jr. It also explains why the 3rd round comp pick for Cincinnati came above the same for Philadelphia, from the departure of Hargrave to the Bay Area.

Although we now have the answer, I do still agree with Beane’s assessment that the Bills and 49ers got a “raw deal” due to counting “numbers that are not really numbers”. Returning to the Armstead example, at no point was he actually getting paid $28 million per season. His maximum compensation was always going to be $85 million over five seasons, thus his APY should have always been judged to be $17 million. I would advise the NFLMC to not calculate restructured contracts in the manner that they did.

With this solved, this change has also been placed in the 2025 compensatory picks projection. Currently, it has not resulted in any changes in that projection from Monday. However, Dolphins fans and observers should show a little bit of caution for the projection of Robert Hunt’s contract, as it is just barely over the 3rd/4th round cutoff in the compensatory formula. But the program is currently using a snap count average over the past four seasons for Hunt that should end up higher if he plays almost all the snaps for the Panthers, as starting offensive linemen tend to do. And also, although at this point it will not matter, I am more convinced that Jonathan Greenard’s contract will likely be valued in the 4th round and not the 3rd– and if so, it would mean that his contract would have not cancelled out Danielle Hunter’s 3rd round valued contract had the Vikings had a net loss of compensatory free agents of greater than 2–instead of the 1 they have now, resulting in only one comp pick for Kirk Cousins going to Atlanta.