Scherzer On Signing With The Nationals

Nationals pitcher Max Scherzer bet on himself when he rejected the Tigers $144MM extension offer last spring, reports Ken Rosenthal of FOX Sports. The ace discussed the Tigers’ offer, the resultant insurance policy he took out, and his current contract with Rosenthal. Below are the specifics from that article, although it also contains a number of great quotes from Scherzer not included here.

Of interest, Scherzer’s insurance policy would have paid $40MM if an injury forced him to take an offer below the $144MM offered by Detroit. The policy cost $750K and covered every type of injury including elbow and shoulder ailments. Said Scherzer, “once you took the injury-risk factor out of it, and you can just go play baseball and not have to worry about anything . . . I was set.”

Ultimately, Scherzer did not need to call upon the policy. He inked a seven-year, $210MM deal with the Nationals in January. Half of the total is deferred until 2022-2028 and will be paid in $15MM yearly installments. The players’ union values the contract at $191.4MM due to the deferrals.

The structure of the deal is actually beneficial to both Scherzer and the Nationals. The signing bonus and deferrals won’t be subject to state income taxes. Washington D.C. doesn’t have an income tax for non-residents. Scherzer has set up residency in Florida, which also does not have an income tax. The deferrals will be paid to him there.

As you might expect, Scherzer wasn’t hoodwinked when taking the deferred money. Nor was another club pushed out of the bidding by the Nationals. “I know finance. I know deferral money. I get all that. But this was the best offer. If another team wanted to make a better offer without a deferment, we never received it. This was the best offer.”

In my view, Scherzer’s use of insurance could have implications for other players. Earlier today, we learned about the confidence Andrew McCutchen received from his team friendly contract extension. It’s intuitive, a player who doesn’t have to worry about his financial future can focus on playing his best. Insurance could offer an alternative to an early career contract extension for some athletes – especially those who want to test free agency at the earliest opportunity.