The most common method over-the-cap teams use to sign free agents from other teams is the mid-level exception, but it’s not the only tool those clubs have to squeeze an extra player onto the payroll. The biannual exception is a way to sign a player who commands more than the minimum salary and less than the mid-level.
As its name suggests, the biannual exception can only be used every other year. Even if a team uses only a portion of the exception, it’s off-limits the following year.
The biannual is available only to limited number of clubs, even among those that didn’t use the biannual the season before. Teams that open cap room forfeit the biannual and all but the smallest version of the mid-level. Additionally, teams lose access to the biannual exception when they go more than $4MM over the tax threshold, exceeding what’s known as the tax apron. So, only teams over the cap but under the tax apron can use the biannual exception.
If a team uses all or part of the biannual exception, it triggers a hard cap for that season. Clubs that sign a player using the biannual can later go under the cap but can’t go over the tax apron at any time during the season once the contract is signed.
The biannual exception provides for a starting salary of $2.203MM in 2016/17. That’s approximately 3% greater than the starting salary in a biannual deal in 2015/16, but with the salary cap projected to rise by more than 30%, the relative value of the biannual will be much lower. The league and the players determined the amount that the biannual exception would be worth each season when they negotiated the collective bargaining agreement in 2011, but the salary cap is tied to year-to-year fluctuations in revenue.
A biannual contract can be for either one or two seasons, with a raise of 4.5% for the second season. Thus, a player who signs in the 2016/17 season can receive a contract worth a total of up to $4,505,135 via the exception. Teams also have the option of splitting the biannual among multiple players, though that happens much less frequently than it does with the mid-level exception, since a split biannual deal wouldn’t entail much more than the minimum salary. The biannual exception starts to prorate on January 10th, decreasing in value by 1/170th each day until the end of the regular season.
Only two teams used the biannual exception in the 2015/16 season, thanks in large measure to the legion of clubs that dipped below the cap. The Hornets signed Jeremy Lin to a two-year deal for the full value of the biannual, with a player option on year two. The Wizards gave their full biannual to Gary Neal, though he signed only a one-year deal. The results couldn’t have been more different, with Lin flourishing as a sixth man while Neal endured injuries, ultimately hitting waivers in March. Lin seems like a cinch to opt out, given the way he upped his market value, and Neal is already off the Wizards roster, but neither team will have access to the biannual this summer.
It’s unlikely that many teams will use the biannual in 2016/17, since so many are once more poised to go under the cap and thus forfeit access to the exception. Still, it could prove a valuable tool for the handful of teams that will be capped out as they seek someone who can do for them what Lin did for the Hornets.
Earlier versions of this post appeared in 2012, 2013, 2014 and 2015.
Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA’s Collective Bargaining Agreement. Larry Coon’s Salary Cap FAQ and the Basketball Insiders salary pages were used in the creation of this post.