Armstead will be on the roster after the deadline, according to Shanahan. General manager John Lynch, who like Shanahan, is in Indianapolis for the NFL Scouting Combine, confirmed that on Thursday.
"Arik was really important," Lynch told reporters. "We're going to exercise that fifth-year option with him. I think Arik really came into his own and there's always a process when you come in as a new staff with a new scheme, finding out exactly where and how people best fit. It's been kind of an evolution for Arik.
"We started him initially at the outside LEO spot, always knowing that he could move inside and rush. We played him at some big end, who plays over the tight end more. At the end of last year, he was playing the nose tackle, which we never thought he'd be.
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"You have to be around the player, and they have to be around you for you to find where that best fit is. What we found, he's a very disruptive player, and he's a really good football player. We think very highly of him, and so that was an easy decision for us to make. We're really excited to work with him."
The 49ers made Armstead, who played college football at Oregon, the No. 17 overall selection in 2015. He registered 48 combined tackles, and a career-high three sacks through 16 starts with the 49ers in 2018. Armstead has recorded 98 combined tackles, nine sacks, a pass defensed, and a forced fumble through four NFL seasons.
"We're not into losing good players, and he has played very well for us," Shanahan said of Armstead on Wednesday via NBC Sports Bay Area. "I think he can take it to a whole other level and I hope to see him do that this year. If he does, that will be very good for the Niners and very good for him because he's got the ability to do it."
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