What you need to know about Shohei Ohtani’s bizarre contract
Former Los Angeles Angels pitcher and designated hitter Shohei Ohtani’s blockbuster 10-year $700 million contract he signed with the Los Angeles Dodgers Monday was eye-catching enough.
But the deal became more mind-boggling when it was reported that Ohtani is deferring $680 million of his contract.
How much will Shohei Ohtani make?
Ohtani will only make $2 million each season and defer the rest of his $70 million annual salary, The Athletic reported. The remainder of his salary will be paid out interest-free from 2034-2043, upon the conclusion of his contract with the Dodgers.
This means that when he’s in his 40s, a retired Ohtani will be making $68 million annually.
While $2 million will be quite the pay cut from the $30 million Ohtani made in 2023, the two-way player makes $50 million in endorsements each year, according to The Athletic.
If Ohtani wasn’t deferring, his annual salary would be more than the 2024 total payroll for seven MLB teams: the Kansas City Royals, Miami Marlins, Milwaukee Brewers, Cincinnati Reds, Pittsburgh Pirates, Baltimore Orioles and Oakland Athletics, according to Spotrac.
According to USA Today, Ohtani’s contract also includes:
A no-trade clause.
A hotel suite for road game trips.
A luxury suite at Dodgers stadium.
A full-time interpreter.
Why would Shohei Ohtani defer his contract?
Where did the idea for the large deferrals come from? Ohtani himself suggested the deferrals, The Athletic reported.
The move will allow the Dodgers to continue to build around Ohtani and the team’s other stars while making another World Series run.
The deferrals will also benefit Ohtani financially. The pitcher will likely no longer be living in California after finishing his contract, meaning he won’t have to pay the state’s top income tax rate of 13.3% on most of the money, according to USA Today.
How do deferred contracts work in the MLB?
Deferred salaries are not new to the MLB, and Ohtani’s contract is not an exception to the MLB’s collective bargaining rules regarding deferred compensation.
“There shall be no limitations on either the amount of deferred compensation or the percentage of total compensation attributable to deferred compensation for which a Uniform Player’s Contract may provide,” the CBA states.
Do other MLB players have deferrals in their contracts?
Ohtani isn’t the first MLB player to include deferrals in his contract. Two of his new teammates, Mookie Betts and Freddie Freeman, have deferrals in their contracts with the Dodgers.
Betts will receive his $115 million deferred salary over the course of 12 years starting in 2033, and Freeman will receive $57 million starting in 2028 and through 2040, according to Spotrac.
The Dodgers will be paying over $850 million in deferred compensation between the three players from 2033 to 2044, USA Today reported.
Pitcher Max Scherzer’s 2015 contract with the Nationals also included significant deferrals with Scherzer deferring half of his annual salary, according to CBS Sports.
