SALARY LIMITATION ON GRANTS, COOPERATIVE AGREEMENTS AND CONTRACTS
Release Date: January 11, 2001
NOTICE: NOT-OD-01-013
National Institutes of Health
The purpose of this notice is to provide updated information regarding
the salary limitation as it relates to NIH grant and cooperative
agreement awards. This information also applies to extramural research
and development contract awards. The last notice in the NIH Guide for
Grants and Contracts regarding the salary limitation was published
January 6, 2000.
Fiscal Year (FY) 2001 is the twelfth consecutive year for which there
is a legislatively mandated provision for the limitation of salary.
Specifically, the Department of Health and Human Services (HHS)
Appropriation Act for FY 2001, Public Law 106-554, restricts the amount
of direct salary of an individual under an NIH grant or cooperative
agreement (hereafter referred to as a grant) or applicable contract to
Executive Level I of the Federal Executive Pay scale. The Executive
Level I annual salary rate is $157,000 for the period October 1 through
December 31, 2000. Effective January 1, 2001, the Executive Level I
salary level increased to $161,200.
Direct salary is exclusive of fringe benefits and facilities and
administrative (F&A) expenses, also referred to as indirect costs. 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 FY 2001 HHS Appropriations Act, "None of the funds
appropriated in this Act for the National Institutes of Health 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.
The term "salary" means "direct salary" which is exclusive of fringe
benefits and F&A expenses. "Direct salary" has the same meaning as the
term "institutional base salary." 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 duties to the applicant organization.
In summary, the following reflects the time frames associated with the
existing salary caps:
FY 1999 Awards (Executive Level III)
o October 1, 1998 through December 31, 1999 $125,900
o January 1, 2000 and beyond $130,200
FY 2000 Awards (Executive Level II)
o October 1, 1999 through December 31, 1999 $136,700
o January 1, 2000 and beyond $141,300
FY 2001 Awards (Executive Level I)
o October 1, 2000 through December 31, 2000 $157,000
o January 1, 2001 and beyond $161,200
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, 2001 with a $161,200 salary limitation)
Individual"s institutional base salary for a FULL-TIME (twelve month)
appointment $175,000
Research effort requested in application/proposal - 50%
Direct Salary requested $ 87,500
Fringe benefits requested (25% of salary) $ 21,875
Subtotal $109,375
Applicant organization"s F&A (indirect) costs at a
rate of 45% of subtotal $ 49,219
Amount requested - salary plus fringe benefits
plus associated F&A (indirect) costs $158,594
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 $161,200
multiplied by effort (50%) to be devoted to project $ 80,600
Fringe benefits (25% of allowable salary) $ 20,150
Subtotal $100,750
Associated F&A (indirect) costs at 45% of subtotal $ 45,338
Total amount to be awarded due to salary limitation $146,088
Amount of reduction due to salary limitation ($158,594
requested minus $146,088 awarded) $ 12,506
EXAMPLE 2. INDIVIDUAL WITH HALF-TIME APPOINTMENT (based on a grant
award/contract issued after January 1, 2001 with a $161,200 salary limitation)
Individual"s institutional base salary for a HALF-TIME
appointment (50% of a full-time twelve month appointment) $ 87,500
Research effort requested in application/proposal 30%
Direct Salary requested $ 26,250
Fringe benefits requested (25% of salary) $ 6,563
Subtotal $ 32,813
Applicant organization"s F&A (indirect) costs at a
rate of 45% of subtotal $ 14,766
Amount requested - salary plus fringe benefits
plus associated F&A (indirect) costs $ 47,579
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 $161,200
multiplied by 50% appointment by 30% effort
to be devoted to project $ 24,180
Fringe benefits (25% of allowable salary) $ 6,045
Subtotal $ 30,225
Associated F&A (indirect) cost at 45% of subtotal $ 13,601
Total amount to be awarded due to salary limitation $ 43,826
Amount of reduction due to salary limitation
$47,579 requested minus $43,826 awarded) $ 3,753
EXAMPLE 3. INDIVIDUAL WITH NINE MONTH APPOINTMENT (based on a
contract award/grant issued after January 1, 2001 with a $161,200
salary limitation)
Individual"s institutional base salary WITH NINE MONTH
appointment $131,250
Research effort requested in application/proposal 50%
Direct Salary requested $ 65,625
Fringe benefits requested (25% of salary) $ 16,406
Subtotal $ 82,031
Applicant organization"s F&A (indirect) costs at a rate
of 45% of subtotal $ 36,914
Amount requested - salary plus fringe benefits
plus associated F&A (indirect) costs $118,945
If a contract/grant 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 $161,200 (annual rate) divided
by 12 months
multiplied by 9 months by 50% effort
to be devoted to project $ 60,450
Fringe benefits (25% of allowable salary) $ 15,112
Subtotal $ 75,562
Associated F&A (indirect) cost at 45% of subtotal $ 34,003
Total amount to be awarded due to salary limitation $109,565
Amount of reduction due to salary limitation
($118,945 requested minus $109,565 awarded) $ 9,380
NOTE: If a faculty member with a 9 month appointment works during
his/her off months, the monthly salary rate limitation is $13,433
($161,200 divided by 12 months) multiplied by the proposed percent of
effort during those months.
Implementation of new salary limitation:
o No adjustments will be made to modular grant applications/awards or
to previously established commitment levels for non-competing grant
awards issued with FY 2001 funds.
o NIH competing grant awards with categorical budgets reflecting salary
levels at or above the new cap(s) issued in FY 2001 will reflect
adjustments to the current and all future years so that no funds are
awarded or committed for salaries over the limitation.
o Awards issued with FY 2000 funds are still restricted to the
Executive Level II. From the period October 1, 1999 through December
31, 1999, the level is $136,700. Effective January 1, 2000, Executive
Level II is limited to $141,300. If adequate funds are available in
active FY 2000 awards, and if the salary cap increase is consistent
with the institutional base salary, grantees may rebudget to
accommodate these salary levels and contractors may bill at the higher
level. However, no additional funds will be provided to the FY 2000
grant award and the total estimated cost of the contract will not be
modified.
o An individual"s base salary, per se, is NOT constrained by the
legislative provision for a limitation of salary. The rate limitation
simply limits the amount that may be awarded and charged to NIH grants
and contracts. An institution may supplement an individual"s salary
with non-federal funds.
o The salary limitation does NOT apply to payments made to consultants
under an NIH grant or contract although, as with all costs, such
payments must meet the test of reasonableness and be consistent with
institutional policy.
o The salary limitation provision DOES apply to subawards/subcontracts
for substantive work under an NIH grant or contract.
o 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. Can I rebudget grant funds or bill contracts issued with FY 2001
funds to allow for the increase? Yes, provided funds are available
and the increase is warranted. Prorated figures should be used for
the applicable months, i.e., the $161,200 level is effective
beginning January 1, 2001.
2. If a grant award (competing or non-competing) has already been
issued in FY 2001, will an adjustment be made? No adjustments will
be made, however, rebudgeting is allowable.
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 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 2001). As
the cap is linked to Federal Executive Levels, can
grantees/contractors with ongoing awards rebudget/bill up to the
various salary caps, based on the fiscal year of the award and the
time of the salary expense? Yes, salary may be charged in
accordance with the prevailing FY cap(s), as long as the levels are
consistent with the individual’s institutional base pay.
5. Will grantees be permitted to submit revised budgets reflecting
higher base salaries? Not as a general rule. NIH policy 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 salary cap based on
information available at the time of award.
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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