Salary Limitation on Grants, Cooperative Agreements, and Contracts

Notice Number: NOT-OD-05-024

Key Dates
Release Date: January 7, 2005

Issued by
National Institutes of Health (NIH), (http://www.nih.gov/)

This notice provides updated information regarding the salary limitation for NIH grant and cooperative agreement awards and extramural research and development contract awards. On February 13, 2004, the Fiscal Year (FY) 2004 information on the salary limitation was published in the NIH Guide for Grants and Contracts.

For sixteen consecutive years, Congress has legislatively mandated a provision for the limitation of salary. For FY 2005, the Consolidated Appropriations Act, Public Law 108-447, which includes appropriations for the Department of Health and Human Services, restricts the amount of direct salary of an individual under an NIH grant or cooperative agreement (referred to here as a grant) or applicable contract to Executive Level I of the Federal Executive Pay scale. The Executive Level I annual salary rate was $175,700 for the period January 1 through December 31, 2004 (see NOT-OD-04-034, March 11, 2004). Effective January 1, 2005, the Executive Level I salary level increased to $180,100.

For the purposes of the salary limitation, the terms "direct salary," "salary," and "institutional base salary" have the same meaning and are exclusive of fringe benefits and facilities and administrative (F&A) expenses, also referred to as indirect costs. An individual's institutional base salary is the annual compensation that the applicant organization pays for an individual's appointment, whether that individual's time is spent on research, teaching, patient care, or other activities. Base salary excludes any income that an individual may be permitted to earn outside of the duties to the applicant organization.

NIH grant/contract awards for applications/proposals that request direct salaries of individuals in excess of the applicable RATE per year will be adjusted in accordance with the legislative salary limitation and will include a notification such as the following:

According to the Consolidated Appropriations Act 2005, "None of the funds appropriated in this Act for the National Institutes of Health, the Agency for Healthcare Research and Quality, and the Substance Abuse and Mental Health Services Administration shall be used to pay the salary of an individual, through a grant or other extramural mechanism, at a rate in excess of Executive Level I“ of the Federal Executive Pay Scale. This is the fifth year that the limitation has been linked to Executive Level I of the Federal Pay Scale.

Please see the salary cap summary and the time frames associated with existing salary caps at http://grants.nih.gov/grants/policy/salcap_summary.htm.

Implementation of new salary limitation:

COMPETING grant applications and contract proposals that include a categorical breakdown in the budget figures/business proposal should continue to reflect the actual institutional base salary of all individuals for whom reimbursement is requested. In lieu of actual base salary, however, applicants/offerors may elect to provide an explanation indicating that actual institutional base salary exceeds the current salary limitation. When this information is provided, NIH staff will make necessary adjustments to requested salaries prior to award.

Questions & Answers

1. If a grant award (competing or non-competing) has already been issued in FY 2005, will an adjustment be made? No adjustments will be made. However, rebudgeting is allowable.

2. Can I rebudget grant funds or charge contracts issued in those years restricted to Executive Level l (see Salary Cap Summary (FY 1990 – FY 2005) funds to allow for the 2005 salary cap increase? Yes, provided funds are available and the increase is warranted. Prorated figures should be used for the applicable months, i.e., the $180,100 level is effective beginning January 1, 2005.

3. If an application/proposal fails to provide needed salary information, will an adjustment be made based on the new rates? No adjustment will be made if an application fails to provide adequate information regarding the individual's actual salary level.

4. Does the NIH appropriation language link the salary cap to a Federal Executive Level or to a dollar level? The link is to the Federal Executive Level pay scale (i.e., Executive Level III for FY 1999 and Executive Level II for FY 2000 and Executive Level I for FYs 2001, 2002, 2003, 2004 and 2005).

5. As the cap is linked to Federal Executive Levels, can grantees/contractors with ongoing awards rebudget/charge up to the various salary caps, based on the fiscal year of the award and the time of the salary expense is incurred? Yes, salary may be charged in accordance with the FY cap(s), as long as the levels are consistent with the individual's institutional base pay. Please refer to the salary cap summary with times frames for existing salary caps, at http://grants.nih.gov/grants/policy/salcap_summary.htm.

6. Will grantees be permitted to submit revised categorical budgets reflecting higher base salaries? Not as a general rule. NIH policy for categorical budgets states that grantees should always reflect actual base salaries in the requested budgets or provide an explanation indicating that actual institutional base salary exceeds the current salary limitation. As a general rule, NIH will use the information available in the existing application and make adjustments for the salary cap based on information available at the time of award.

The following are examples of the adjustments that NIH will make when salaries exceed the current salary limitation:

Example 1. Individual with Full-Time Appointment (based on grant award/contract issued after January 1, 2005 with a $180,100 salary limitation)

Individual's institutional base salary for a FULL-TIME twelve month) appointment $ 195,000
   

Research effort requested in application/proposal - 50%

 
Direct Salary requested $   97,500
Fringe benefits requested (25% of salary) $   24,375
Subtotal $ 121,875
 
Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal $   54,844
   
Amount requested - salary plus fringe benefits plus associated F&A (indirect) costs $ 176,719
 

If a grant/contract is to be funded, the amount included for the above individual will be calculated as follows:

 
Direct salary - restricted to a RATE of $ 180,100
Multiplied by effort (50%) to be devoted to project $   90,050
Fringe benefits (25% of allowable salary) $   22,513
Subtotal $ 112,563
   
Associated F&A (indirect) costs at 45% of subtotal $   50,653
   
Total amount to be awarded due to salary limitation $ 163,216
   
Amount of reduction due to salary limitation
($176,719 requested minus $163,216 awarded) $   13,503

Example 2. Individual with Half-Time Appointment (based on a grant award/contract issued after January 1, 2005 with a $180,100 salary limitation)

Individual's institutional base salary for a HALF-TIME appointment (50% of a full-time twelve month appointment) $   97,500
 

Research effort requested in application/proposal 30%

 
Direct Salary requested $   29,250
Fringe benefits requested (25% of salary) $     7,313
Subtotal $   36,563
 
Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal $   16,453
 
Amount requested - salary plus fringe benefits  
plus associated F&A (indirect) costs $   53,016
 

If a grant/contract is to be funded, the amount included in the award for the above individual will be calculated as follows:

 
Direct salary - restricted to a RATE of $   90,050
For a 50% appointment multiplied by 30% effort $   27,015
Fringe benefits (25% of allowable salary) $     6,754
Subtotal $   33,769
 
Associated F&A (indirect) cost at 45% of subtotal $   15,196
 
Total amount to be awarded due to salary limitation $   48,965
 
Amount of reduction due to salary limitation  
($53,016 requested minus $48,965 awarded) $     4,051

Inquiries

Questions concerning this notice or other policies relating to grants or contracts should be directed to the grants management or contracts management office in the appropriate NIH Institute or Center.


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