NFL Network reported Allen, 30, met with general manager Tom Telesco to iron out details of the deal. Telesco was adamant rumors of a potential trade or a release of Allen weren't options for the Chargers.
Before the restructure, Allen had a $21.7 million cap charge. Fellow wide receiver Mike Williams also agreed to restructure his contract, saving $5.46 million, NFL Network reported.
Telesco said last week that Allen "isn't going anywhere," and repeated his desire to keep "all of our good players."
"He's our Andre Reed. He's our Charlie Joiner," Telesco said.
A third-round pick in 2013, Allen is entering his 11th NFL season.