If an owner doesn't renew for the next year, the AI will sign any players who are in the last year of their contract. Like you, the AI doesn't know whether a player will retire; however, if an owner does not renew and has a whole bunch of players in the last year of the contract, the team is going to be decimated when the season rolls over. This only happens when an owner doesn't renew, and its purpose is to protect teams from losing all of their players at the end of the season after having an owner who is not sticking around. Even in the case you describe, I think this is the preferable outcome... ideally you would have renewed before the end of the season in which case you would have been in control of that situation.