FACT SHEET: RESERVE SYSTEM PROPOSAL

Glen Caplin, Major League Baseball Special Assistant, Baseball Operations released the following statement today regarding Collective Bargaining:

"The biggest issue baseball fans want solved to strengthen the game is fixing the payroll disparity that leaves too many fans without hope of their team competing for a World Series title. Every other major U.S. sport has tackled this problem, and every year more small market teams in those leagues have a chance to win. The salary cap and floor proposal levels the playing field, allowing us greater flexibility to address longstanding player priorities while sharing baseball revenue with the players 50/50. Today, in addition to proposing the largest ever increase in the minimum salary, earned by over half of MLB players, we accepted two landmark changes to free agency that have been in place for 50 years. We agreed to both the MLBPA’s proposal to provide earlier access to free agency, and their proposal to eliminate the qualifying offer system, a provision players view as a drag on free agency. We also proposed to eliminate deferred compensation and to create a new “Cornerstone Player” provision similar to the NBA’s “Bird Rights” to give every team a fair shot at retaining their fans’ favorite star players. We will continue working with the MLBPA during the bargaining process to improve the game for teams, players and fans.”

Key Highlights of MLB’s Reserve System Proposal

Earlier Access to Free Agency

• MLB will accept the MLBPA’s opening proposal to reduce the period of reserve to 5 years for 30-year-old players, decreasing the period of reserve below 6 years for the first time since the reserve system was introduced in 1976.

• 48% of players with 5 years of Major League Service during the current CBA would have reached free agency a year earlier had this rule been in effect.

• 354 players on current Major League rosters (as of June 25) are projected to reach free agency a year earlier based on this provision.

• Under the MLBPA’s proposal, a Club could re-sign such a 5 MLS player to a one-year contract with a salary equal to the average of the 125-highest paid players ($22.025m in 2026). Only 5 of the 136 players that would have reached free agency earlier under this provision following the 2022-2025 offseasons (34 per year) ultimately signed for an AAV at or above the tender figure that would have applied in their 5 MLS season when they reached free agency.

• This change to free agency eligibility would take effect beginning with the offseason following the 2027 season (i.e., the first offseason fully covered by the new Basic Agreement). There would be no phase-in period.

Historic Increase to the Minimum Salary

• The minimum salary will increase by 28% from $780,000 in 2026 to $1 million in 2027 for players with at least 2 years of service. Any player with zero or 1+ years of service will receive $1 million if they receive a full year of service ($900,000 minimum salary plus automatic $100,000 service bonus from the Pre-Arbitration Bonus Pool).

• The increase from $780k to $1 million is the largest year-over-year increase in the minimum salary in Baseball history by nearly $100,000.

• 57% of players on Opening Day 40-Man rosters in 2026 (711 players in total) would have benefited from this proposal.

• Minimum salaries will grow with the Salary Cap and Floor in future years.

• Minimum salaries will not be subject to negotiation for any pre-arbitration player (i.e., for pre-arbitration players, the minimum salaries shall operate as fixed salaries).

30% Increase in the Pre-Arbitration Bonus Pool

• The Pre-Arbitration Bonus Pool will increase from $50 million to $65 million in 2027 (a 30% increase) and grow to $75 million by the end of the term.

• MLB is proposing to add a new phase into the Pre-Arbitration Bonus Program that would provide a $100,000 bonus to any player starting the year with fewer than 2 years of Major League service who receives a full year of service (with less than 50% of the year on the Injured List). This pool is paid centrally by MLB.

• As a result of this new provision, all pre-arbitration players who are in the Major Leagues all season will earn at least $1 million. In 2025, 178 players with less than 2 years of service would have received a distribution of at least $100,000 from the Pre-Arbitration Pool (99 would have received the $100,000 service bonus and 79 would have received more than $100,000 based on WAR and/or award consideration ¹).

Elimination of the Qualifying Offer System

• MLB will accept the MLBPA’s opening proposal to eliminate the Qualifying Offer System, and all associated draft pick penalties, removing draft pick compensation for the first time since it was implemented in 1976.

• This was a previous work stoppage issue in 1981, and the MLBPA has proposed to eliminate or significantly curtail draft pick compensation in each CBA negotiation since.

• The Qualifying Offer system has proven to be a drag on the markets for certain free agents.

• During the 2025-26 offseason, 13 players received a Qualifying Offer. Four accepted the Qualifying Offer (in lieu of pursuing a potentially more lucrative multi-year contract), and one other player ultimately re-signed on a one-year contract.

Advantages for Clubs Attempting to Re-Sign A “Cornerstone Player”

• To address the goal of teams being able to retain their superstars, MLB proposed a “Cornerstone Player” advantage for the current team to provide them the ability to offer the largest contract (similar to the NBA’s “Bird Rights”).
• Teams signing a free agent will be restricted to a contract that covers a maximum of 5 seasons and a maximum first-year salary of 15% of the Cap ($202 million total guarantee for a deal starting in 2027). However, a team re-signing its own player may offer a contract covering up to 6 free agent years with a maximum first-year salary of 16% of the Cap (for a total of $265 million for a deal starting in 2027). ²
  • Maximum contract length applies to free agent years only (as projected at the time of signing), so players under reserve would still be permitted to agree to longer-term deals (e.g., Konnor Griffin, Kevin McGonigle, Roman Anthony, etc.) with the maximum total guarantee determined based on the player’s service. For example, assuming the contract begins in 2027:

• Maximum salary will be set at 15% of the Salary Cap ($36.8 million in 2027) if signing a player from another club or 16% if re-signing own player ($39.2 million in 2027). Salaries in every subsequent year of a contract can rise by up to 5%.³
• Only 7 players have a 2026 salary in excess of the proposed maximum - 98% of free agent contracts would have been unaffected.

• Maximum contract length and salary provisions are intended to:
  • Provide an incentive for star players to re-sign with their current teams and help establish long-term bonds between players and local fanbases;
  • Prevent circumvention of the Salary Cap (e.g., by adding years to lower the AAV of a contract);
  • Address player concerns that in a cap system a disproportionate share of compensation will accrue to the highest-paid players; and
  • Improve the correlation between pay and performance (an underperforming player on a lengthy contract would likely earn less under this framework, while a productive player could secure multiple max contracts – likely at higher AAVs than their existing contracts).
• Restrictions on max contract length are comparable to other leagues:
  • NBA – Maximum of 4 years (5 if re-signing own player)
  • NFL – Signing bonuses prorated over a maximum of 5 seasons
  • NHL – Maximum of 6 years (7 if re-signing own player)

Elimination of Deferred Compensation – no new contract would be permitted to include deferrals. Current contracts that include deferred compensation would be unaffected.

Other Provisions

• Salary Arbitration – Despite concerns with the current system, given the MLBPA’s desire to retain salary arbitration, MLB proposed to maintain the status quo (i.e., no modifications to eligibility or criteria). However, MLB is open to discussing changes to increase compensation for arbitration-eligible players under a new framework that addresses MLB’s concerns with the existing arbitration system.
  • If the MLBPA had accepted MLB’s proposal in 2021 to replace salary arbitration with a formulaic system that would grow with revenue, arbitration-eligible players would have earned $370 million more in total compensation over the term of the current Basic Agreement.
• Standardize the Uniform Player’s Contract (“UPC”) to simplify negotiations with a list of permitted and pre-approved special covenants.
• Expand the Prospect Promotion Incentives (“PPI”) program so that PPI-eligible players could yield up to two Draft selections for their Club (one in the Domestic Draft and one in the proposed International Draft). Clubs will receive a PPI Selection following the first round of the International Draft if an Eligible Prospect finishes 2nd or 3rd in Rookie of the Year voting or 4th or 5th in Cy Young or MVP voting.
• Exclude Foreign Professionals when determining whether an eligible prospect will receive a full year of service for finishing first or second in Rookie of the Year voting.
• Limit year-to-year salary variability to 5% of the Base Salary in the first Free Agent year of each contract to prevent circumvention of the Salary Cap and Floor. ⁴
• Implement a standard awards bonus package into every Major League UPC that covers all major awards.

_{1 A player who receives a larger distribution from the Pre-Arbitration Bonus Pool based on WAR or award consideration would not be eligible for the $100,000 service bonus.}

_{2 In future years, salaries may increase by up to 5% of the salary in the first year of the contract, meaning a team signing a free agent from another team could make a maximum offer of 5 years and $202 million, while a team attempting to re-sign its own free agent could make a maximum offer of 6 years and $265 million.}

_{3 Provided the first free agent year covered by the contract (and any preceding year) comply with the max salary.}

_{4 Salary Variability rules would not apply to pre-Free Agent years or between the final Pre-Free Agent Year and first Free Agent year in any UPC.}