A Dash of Chaos: MLS Introduces “Targeted Allocation” Roster Rule

Major League Soccer has carried on for the last eight years under varying forms of the Designated Player Rule, a system that allows teams to sign a player above the league’s maximum single player budget charge and, frequently, above the team’s salary cap. The aim of the Designated Player Rule is clear: to allow MLS to bring in stars whose price tags would not otherwise fit under the league’s salary cap.

This morning, MLS announced its newest roster wrinkle, a new rule that also aims to improve the quality of the league by bringing in or retaining players with higher price tags.  But unlike the Designated Player Rule, the league’s new rule will target players who, while warranting a higher salary than the league’s cap structure might allow, generally are not marquee names. That new rule is the “Targeted Allocation Money (TAM) Rule.”

How the TAM Rule Works

If you’ve ever tried to understand MLS’s roster rules, you’ve likely found them to be complex and confusing. The TAM Rule is no different, and that fact may provide the cleverer teams with a competitive advantage.

Under the TAM Rule, each team will be allocated $500,000 ($100,000 per year) for use over the next five years. This money can be used to sign new players or retain current players, and teams can use TAM as a trade asset. A team may use all or part of its $500,000 of TAM immediately, or it may space its TAM out over the next five years. However, teams cannot easily stockpile their TAM for later use; while teams are not required to spend their full $100,000 allocation each year, any TAM not used must be used or traded during the following year. TAM can be used to reduce the budget charges of up to three of a team’s players at a time.

Importantly, TAM can be used to buy down the budget charge of a designated player to a level at or below the league’s maximum budget charge. This has the effect of converting the designated player into a non-designated player.  If a team uses its TAM in this way to free up a designated player slot, the team must simultaneously sign a new designated player at, in the league’s language, “an investment equal to or greater than the player he is replacing.” This provision has the effect of preventing a team owner from shifting to the league the responsibility to pay for a designated player’s salary above the league maximum budget charge.

Importantly, TAM cannot be combined with regular allocation money in the same season to buy down a designated player’s budget charge.

So What?

The direct effect of the TAM Rule is to immediately allow teams to invest up to $936,250 in a player without using regular allocation money and without making that player a designated player.

But the indirect effects are more important. Teams can use TAM to convert their designated players into non-designated players, freeing up designated player slots for bigger-name acquisitions. For example, this rule may open a window for the LA Galaxy’s acquisition of Giovani Dos Santos by allowing the team to buy down the budget charge of current designated player Omar Gonzalez.  In practical terms, it might allow the Galaxy to sign a fourth designated player with a seven-figure price tag.

Other teams also stand to benefit from the rule. Depending on the cap space available, Real Salt Lake–a team with three relatively low-priced designated players–theoretically could add up to three new designated players by buying down the budget charges of their current designated players, Kyle Beckerman, Sebastian Jaime, and Joao Plata.

Without doubt, we will see in the coming weeks and months what kind of weapon this new rule will be in the hands of MLS’s general managers.

Heath Waddingham

About Heath Waddingham

SLC-raised and BYU-educated. RSLTID.