How the NBA’s extension rules could screw the Sixers with De’Anthony Melton

While the Sixers’ offseason signings of P.J. Tucker and Danuel House Jr. haven’t panned out as hoped yet, their trade for De’Anthony Melton already looks like a slam dunk. Melton has made a convincing case to retain a starting spot permanently as the two-way connective tissue that the Sixers need alongside Joel Embiid and James Harden.

That sounds like the type of player whom the Sixers should seek to retain long term, but the NBA’s current extension rules will make it far more difficult for them to do so.

Melton signed a four-year, $34.6 million extension with the Memphis Grizzlies in November 2020 that descends in value every year. He’s earning $8.25 million this season and only $8 million next season, which is far below his likely free-agent market value. That’s an asset for the hard-capped Sixers now as they seek to stay below the luxury-tax apron, but it’ll be a liability for them if/when they begin extension talks with Melton next offseason.

Under the NBA’s current collective bargaining agreement, the starting salary of an extension can be no higher than 120 percent of the player’s previous salary or 120 percent of the league’s estimated average salary, whichever is greater. In Melton’s case, it will be the latter.

Since Melton is earning only $8 million in 2023-24, the Sixers would be limited to offering him no more than $9.6 million in the first year of his extension if they based it off his previous salary. He could get 8 percent annual raises from there, but the total value of his four-year extension would top out at roughly $43 million.

• 2024-25: $9,600,000
• 2025-26: $10,368,000
• 2026-27: $11,136,000
• 2027-28: $11,904,000
• Total: $43,008,000

That’s a lower annual average value than what Tucker received from the Sixers this past summer. Barring a career-threatening injury, there’s no reason for Melton to accept that. However, the Sixers should be able to offer Melton slightly more using the league’s estimated average salary as the basis for an extension.

The estimated average salary is defined as 104.5 percent of the league’s average salary from the previous season. The average salary in 2021-22 was $10.3 million, so the estimated average salary this year is nearly $10.8 million. That means the estimated average salary in 2024-25 should land around $11.8 million.

Using that figure as the jumping-off point, the Sixers could offer Melton up to roughly $14.1 million as the starting salary of his new extension. With 8 percent annual raises, the four-year total would land at nearly $63.2 million, which would be a similar AAV to the likes of Dejounte Murray, Kevin Huerter and Markelle Fultz.

• 2024-25: $14,100,000
• 2025-26: $15,228,000
• 2026-27: $16,350,000
• 2027-28: $17,484,000
• Total: $63,180,000

An extension based off the estimated average salary would be far more enticing than one based off Melton’s previous salary, but it still might not be enough to get him to sign on the dotted line.

This year’s salary cap landed at $123,655,000, but next year’s cap is currently projected to jump to $134.0 million. RealGM has $140.7 million as an early estimate for the 2024-25 cap—which is when Melton’s extension would kick in—although that’s still subject to change over the next 18 months. Regardless, Melton’s maximum starting salary on an extension will likely land at around 10 percent of the salary cap. As a free agent, he’d be eligible to receive up to 25 percent of the cap as his starting salary on a new contract.

This Melton extension headache is among the many reasons why Sixers fans should want either the NBA or the National Basketball Players Association to opt out of the current CBA by the Feb. 8 deadline. If either side does so, the CBA will expire following the 2022-23 season, which will give both sides a chance to renegotiate the current extension rules.

The Sixers aren’t the only ones who’ve been hampered by the extension rules in recent years. The Washington Wizards are currently confronting this same dilemma with Kyle Kuzma, who’s earning $13 million this year and has a $13 million player option for next season that he plans to decline. The league’s rules prohibit the Wizards from offering Kuzma more than $15.6 million as the starting salary of his extension, but rival executives expect him to command between $20-25 million annually in free agency, according to Shams Charania of The Athletic.

The problem might only get worse in the coming years, too. With the cap likely to soar in the mid-2020s once the league’s new national TV contracts kick in, players on below-max long-term deals might not be earning enough to receive adequate extension offers. Jaren Jackson Jr., Keldon Johnson and De’Andre Hunter are among the players who might find it more palatable to test free agency than to sign an extension with their respective teams.

The NBA could begin allowing teams to offer as much in extensions as they can in free agency, although it might be wary of cutting down on potential player movement. It could also increase the percentage of a player’s previous salary that teams can offer as the starting salary of an extension (perhaps 150 percent instead of 120 percent?). Either way, it’s difficult to imagine either teams or players being content with leaving the extension rules as is under the new CBA.

If they do, the Sixers likely won’t be able to sign Melton to an extension and will have to sweat out his free agency in 2024.

Unless otherwise noted, all stats via NBA.com, PBPStats, Cleaning the Glass or Basketball Reference. All salary information via Spotrac or RealGM.