SALARY LIMITATION ON GRANTS AND CONTRACTS NIH GUIDE, Volume 24, Number 2, January 20, 1995 P.T. 34 Keywords: Grants Administration/Policy+ 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 contained in Vol. 23, No. 7, February 18, 1994. In addition, this notice reiterates the way that NIH Institutes and Centers (ICs) are treating salaries in excess of the limit for any FUTURE years in competing grant awards. Fiscal Year (FY) 95 is the sixth consecutive year for which there is a legislatively mandated provision for the limitation of salary. Specifically, the Department of Health and Human Services (HHS) Appropriations Act for FY 95, Public Law 103-333, restricts the amount of direct salary of an individual under a grant or cooperative agreement (hereafter referred to as grant) or applicable contract to a RATE of $125,000 per year. Direct salary is exclusive of fringe benefits and indirect costs/general and administrative expenses. The salary limit of $125,000 has not increased from the FY 94 level. NIH will continue to apply the limitation to all grant and applicable contract awards, and to all funding amendments to existing awards, made with FY 95 funds. Therefore, NIH grant and applicable contract awards for applications/ proposals that request direct salaries of individuals in excess of a RATE of $125,000 per year will be adjusted in accordance with the legislative salary limitation and will include a notification such as the following. According to the HHS Appropriations Act, "None of the funds appropriated in this title 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 $125,000 per year." 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. The following are examples of the adjustments that NIH will make when salaries exceed the limitation: EXAMPLE 1. INDIVIDUAL WITH FULL-TIME APPOINTMENT. Individual's institutional base salary for a FULL-TIME (twelve month) appointment $150,000 Research effort requested in application/proposal 50% Direct Salary requested $75,000 Fringe benefits requested (25% of salary) $18,750 Subtotal $93,750 Applicant organization's indirect costs at a rate of 45% of subtotal $42,188 Amount requested - salary plus fringe benefits plus associated indirect costs $135,938 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 $125,000 multiplied by effort (50%) to be devoted to project $62,500 Fringe benefits (25% of allowable salary) $15,625 Subtotal $78,125 Associated indirect costs at 45% of subtotal $35,156 Total amount to be awarded due to salary limitation $113,281 Amount of reduction due to salary limitation ($135,938 requested minus $113,281 awarded) $22,657 EXAMPLE 2. INDIVIDUAL WITH HALF-TIME APPOINTMENT. Individual's institutional base salary for a HALF-TIME appointment (50% of a full-time twelve month appointment) $65,000 Research effort requested in application/proposal 30% Direct Salary requested $19,500 Fringe benefits requested (25% of salary) $4,875 Subtotal $24,375 Applicant organization's indirect costs at a rate of 45% of subtotal $10,969 Amount requested - salary plus fringe benefits plus associated indirect costs $35,344 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 $125,000 multiplied by 50% appointment by 30% effort to be devoted to project $18,750 Fringe benefits (25% of allowable salary) $4,688 Subtotal $23,438 Associated indirect costs at 45% of subtotal $10,547 Total amount to be awarded due to salary limitation $33,985 Amount of reduction due to salary limitation ($35,344 requested minus $33,985 awarded) $1,359 Other important points relating to both NIH grants and contracts are: o An individual's base salary, per se, is NOT constrained by the legislative provision for the limitation of salary. The rate limitation simply limits the amount that may be awarded and charged to NIH grant and applicable contract awards. 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. o The salary limitation provision DOES apply to those subawards/subcontracts for substantive work under an NIH grant or contract. In addition, the following three paragraphs apply to GRANT applications/awards only: o COMPETING grant applications submitted to the NIH may continue to request funding at the regular/actual rates of pay of all individuals for whom reimbursement is requested, even when these rates exceed the salary limitation. NIH staff will make necessary adjustments to requested salaries prior to award. o There was a change in the way that NIH ICs treated salaries in excess of the limit for any FUTURE years beginning with COMPETING grant awards funded with FY 94 funds. NIH competing awards issued in FY 95 will reflect adjustments to all years of a project, including future years, so that no funds are awarded or committed for salaries over the limitation. o NON-COMPETING continuation grant applications submitted to NIH should request funds for salaries at rates of pay that DO NOT exceed the salary limitation. If the current committed level includes funds for salaries at a rate that exceeds the salary limitation, the excess may not be rebudgeted for any other purpose and NIH staff will delete it from the award. INQUIRIES Questions concerning this notice or other policies relating to grants or contracts should be directed to the grants management or contracts management offices in the NIH institutes or centers. .
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