MLB Sends All Teams Warning About Trying to Skirt $20K Limit for UDFAs
By Scott Rogust
Major League Baseball went on with their annual draft this season, but in a vastly different format due to the coronavirus pandemic. In 2020, the event was limited to just five rounds as opposed to the usual 40, leaving room for plenty of undrafted free agent signings. Even that process has been altered by the league.
According to JJ Cooper of Baseball America, MLB sent out a memo to teams, warning them not to offer "exorbitant" amounts of money to the Continuing Education Scholarship Program (CEP) when trying to sign players, a clear effort to get around their $20K limit.
In reality, I can't figure out how a player could game the system with these deals--they can be big scholarship numbers, but no easy way to pocket that money. The payment is usually sent directly to school covering tuition and books (computers, etc. not covered).
— JJ Cooper (@jjcoop36) June 15, 2020
In years past, teams were allowed to sign players to a maximum $125,000 deal. But due to the financial implications of the global pandemic, prospects can be signed to a deal worth no more than $20,000 in bonuses this time around, a wholly unappealing prospect (but without a valid alternative).
The CEP gives players the option to have a full ride to a school (options limited) if they don't have a guaranteed spot on their respective teams. However, the proceeds are taxed, and the prospect must begin their schooling two years after being released. Additionally, the money is usually sent to the university to cover tuition and books for classes, so it's not like the funds from the program go directly into the pocket of the player anyway.
Other things to know about CEP.
— JJ Cooper (@jjcoop36) June 15, 2020
1. Proceeds are taxed, which takes out a chunk.
2. Must begin schooling 2 year after being released, retired or reserved at end of baseball career.
3. Living expenses provision expires 10 years after signing first pro contract.
This is just a case of MLB trying to ensure there are no "shady deals" on the open market. Clearly, a few were already happening.