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TAM, GAM, DP? What Do All These Letters Mean?

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The MLS has some interesting salary cap rules, and I hope to bring some light to them.

MLS: MLS SuperDraft Kirby Lee-USA TODAY Sports

By this point in the transition period, you are probably asking yourself, “Self, what are all these strange letters in trades?” Major League Soccer like the NFL, NBA, and NHL has a salary cap for their teams (technically MLB does in the form of a luxury tax, but the other leagues salary caps are a bit more stringent). The salary cap (currently set at $3.85 Million) is supposed to, in theory, create parity in the league so that the richest teams do not win every year (see La Liga and the Bundesliga).

If, for example, a player from the Eredivisie in The Netherlands started to look at moving to a different club, all he would normally have to do is hope the two clubs agree to a transfer fee and then he would agree to a salary. As long as the owner approves the amount, the deal is done (for the most part). In MLS, however, if a player moves from team to team or comes from overseas, his contract must comply with the salary cap and league maximum salary of around $480,000. . .except when it doesn’t.

Now again you are probably asking yourself, “Self, I know that Frank Lampard was paid more than that... by a lot. This writer is full of it.” And, you are not wrong on either count. The MLS has designated roster slots to pay players much more than the league maximum salary as a way of being competitive in the global market. This has allowed MLS to grow and become appealing to big name players from around the World.

Now, I will hopefully bring some clarity to a subject that confuses many MLS fans:

The Designated Player Rule

2012 MLS Cup - Houston Dynamo v Los Angeles Galaxy Photo by Harry How/Getty Images

We will start with the biggest and easiest to understand rule in Major League Soccer roster building. The Designated Player Rule (or more accurately, the David Beckham Rule) was designed to get around the salary cap for a couple of players. In 2007, the salary cap in the league was set to $2.1 million. The L.A. Galaxy had signed David Beckham to a contract that would pay him $6.5 million annually. The Rule was not implemented because of Becks, but Becks was the first to benefit.

2016 MLS Cup - Seattle Sounders v Toronto FC

The original rule stated that a DP will have $400,000 count against the salary cap, but the rest of the player’s salary will not. This particular rule has been amended into age brackets:

  • DPs over the age of 23 will count against the league maximum salary unless the player joins in the middle of the season. Then that number will be adjusted to half of the league’s max salary
  • DPs between the ages of 21 and 23 will count against $200,000 of the salary cap
  • DPs under the age of 20 will count against $150,000 of the salary cap

Each club is allowed TWO designated player spots, with the possibility of adding a third by paying a luxury tax to the league of $150,000. That money is then redistributed to the other teams as allocation money (to be talked about later).

Allocation Money

When I was watching the SuperDraft, I noticed that most of the trades involved Allocation Money. Allocation Money comes in two forms: General and Targeted. Like the Designated Player Rule, TAM and GAM player salaries are ways to sign players to more lucrative contracts under the salary cap that can still be competitive on the world stage.

General Allocation Money

General Allocation money is used in multiple ways. It is used to reduce a non-DP’s salary to the league minimum salary of $65,000 against the salary cap. GAM can be used to reduce the cap hit from a DP to $150,000 rather than the hit of the league maximum salary.

GAM can and does get used to reduce the salary of DP so that it would open that DP slot back up. Remember that MNUFC has yet to sign anyone to a DP salary, but in the future, GAM (and TAM) can become very useful in roster building.

GAM can be traded. The Loons traded the 25th overall pick in this past SuperDraft to the Philadelphia Union for one of their 2nd round picks and $50,000 in GAM money for 2018.

Targeted Allocation Money

Soccer: 2016 Copa America Centenario-Colombia at Costa Rica
Francisco Calvo was a TAM Signing
Troy Taormina-USA TODAY Sports

Targeted Allocation Money is very similar to GAM. The biggest difference is that TAM has to be used for players that are intended to be making more than the league maximum salary when joining the MLS. In other words, when the Loons made the splash to sign Francisco Calvo away from Saprissa, the intention was that he would be making more than the league maximum salary (but was not going to be a Designated Player).

Like GAM, TAM can also be used to buy down a DP’s salary, but there is another caveat there. If the TAM is to be used in this manner, the team using it must then sign a new DP at an investment greater than or equal to the player losing the DP designation. (If that sentence sounds confusing...that is because it is. I recommend reading the MLSSoccer.com rules here or the Wikipedia guide here.)

Like GAM, TAM can be traded.

Hopefully that gives some sort of initial clarification on these crazy MLS Rules. Do you have any more insight or anything you’d like to add? Let us know below!