Take a couple gulps of your morning coffee. We are going to get into the weeds of MLS roster rules.
Through roster updates from this weekend, Nashville SC indicated that winger Rodrigo Piñeiro will be the club’s first U22 Initiative player. Nashville purchased Piñeiro, 21, this offseason for a reported $1.7 million. Piñeiro made his Nashville debut this past Sunday against Inter Miami, making a brief cameo for Randall Leal in second half stoppage time.
When the roster compliance deadline passed just prior to the start of the season, Nashville listed Piñeiro as a Young Designated Player. However, the club has now switched Piñeiro’s roster designation from Young DP to U22 Initiative.
Based on the differences between the U22 Initiative and Young Designated Player rules, there are three principal reasons why Nashville slotted Piñeiro into the U22 Initiative.
The U22 Initiative, also known as the “Young Money” rule, is a new roster mechanism that MLS introduced this year. The U22 Initiative allows clubs acquire up to three players under 22 years old for a significantly reduced budget charge. The U22 Initiative is set up to encourage MLS teams to sign talented youngsters, develop them, and sell them outside MLS for a profit.
If you would like a more thorough breakdown of the U22 Initiative or feel in need of a refresher on other MLS roster rules, check out my colleague Ben Wright’s excellent piece from earlier in the year.
Based on Piñeiro’s age and reported transfer fee, there are three principal benefits Nashville SC gains by classifying Piñeiro under the new U22 Initiative.
1. If Piñeiro is ever sold for a profit, Nashville could convert a portion of the revenue into GAM
In prior seasons, a certain percentage of excess profits from the sale of a Young Designated Player could be converted into General Allocation Money (GAM) by the selling club. Beginning this year, that is no longer the case. No excess profits from Designated Player sales can be converted into allocation money.
Instead, the rule has shifted to the U22 Initiative. A percentage of the excess profit above out-of-pocket expenses spent on the U22 Initiative player (salary + original transfer fee) can be converted to GAM by the selling club.
Let’s put this in real terms to make it easier to understand.
For the sake of this example, assume that reports were correct, and that Nashville spent $1.7 million to acquire Piñeiro. While we don’t have Piñeiro’s salary information yet, let’s say that he is earning $500,000 per year.
In our hypothetical, Piñeiro plays well and develops interest overseas. After the 2022 season concludes, Nashville receives an offer of $5 million from a European club for Piñeiro. Based on that sale, Nashville could convert a percentage of $2.2 million, the excess profit after out-of-pocket expenses, into GAM.
Sale Price – [Transfer fee + Two Years’ Salary] = excess profit
$5 million – [$1.8 million + ($500k + $500k)] = $2.2 million
Nashville could convert a maximum of $1.1 million of that $2.2 million excess into additional GAM. The amount of the excess profit that is convertible to GAM is based on a sliding scale. The convertible share is based on the original acquisition cost of the player and phases out completely if the original transfer fee was above $5 million. So high-priced U22 Initiative players cannot be used to generate additional GAM.
The $1.1 million GAM Nashville could generate from a future Piñeiro sale provides a significant advantage to listing Piñeiro as a U22 Initiative player rather than a Young Designated Player since DP sales can no longer be converted into GAM. The increased GAM could be used to increase roster spend or make a big intraleague trade, like Nashville did a year ago with Walker Zimmerman.
2. Piñeiro would carry a reduced budget charge of $200,000 for up to two extra years
This reason is relatively straight forward.
Both U22 Initiative and Young Designated Players carry a reduced budget charge of $200,000 rather than the maximum budget charge of $612,500 for senior Designated Players. The difference between the two is how long the reduced charge lasts.
A U22 Initiative player is eligible to occupy one of the U22 slots through their age 25 season. But a Young Designated Player slot only lasts through the player’s age-23 season. After a Young Designated Player ages out, he is classified as a senior Designated Player and carries the full $612,500 budget charge.
As such, the U22 Initiative provides a significant advantage in terms of cap relief during those age 24 and 25 seasons.
Piñeiro, 21, is eligible to occupy a U22 Initiative slot through the 2025 season so long as his salary remains below the maximum budget charge. By classifying Piñeiro as a U22 Initiative Player, Nashville could save over $400,000 against the cap each year in 2024 and 2025. These savings could help Nashville acquire additional talent to add to the roster that would not have been available if Piñeiro was made a Young Designated Player.
3. The third Designated Player slot is left open for a higher-earning acquisition
The U22 Initiative provides significant advantages to the Young Designated Player rule. But the U22 Initiative only applies to a certain level of player. A U22 Initiative player cannot earn more than the maximum budget charge, $612,500 per year.
By contrast, there is no salary restriction on Young Designated Players.
Leaving the Designated Player slot open gives Nashville the opportunity to acquire an elite-level talent who commands a salary above the maximum budget charge. They could sign a Young DP of the likes of Atlanta’s Ezequiel Barco, FC Cincinnati’s Brenner, or LAFC’s Diego Rossi. Young players with salaries well north of $612,500.
Nashville could also sign a third “true DP”. They already have Hany Mukhtar and Jhonder Cádiz in DP slots, and theoretically have the option to sign a third. However, signing a true DP instead of a Young DP would limit them to just one U22 Initiative slot, which Piñeiro already occupies.
Also, was able to confirm that current plan is to limit the number of Young Money players based on DP situations.
— Sam Stejskal (@samstejskal) February 19, 2021
Teams with 3 DPs over age 23 who cannot be bought down with TAM will be limited to 1 Young Money player. Everyone else can sign up to 3. https://t.co/Hpmjru8yDT
Toronto FC just signed Yeferson Soteldo, a third true DP, instead of a Young DP, which limits them to just one U22 slot. This makes sense for Toronto, who is chasing silverware with an aging roster. Their window is closing. For Nashville, maintaining roster flexibility ahead of a major stadium opening makes more sense.
Whether or not Nashville seizes on the opportunity to sign another DP is a question for another day. But making Piñeiro a U22 Initiative Player rather than a Young DP leaves open that possibility.
Based on the three advantages outlined, Nashville’s front office has made the right call in making Piñeiro its first U22 Initiative player.
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