Salary Limitation on Grants, Cooperative Agreements, and Contracts

Notice Number: NOT-OD-10-041

Update: The following update relating to this announcement has been issued:

Related Notice: January 6, 2010 - See Notice NOT-OD-10-040. The intent of this Notice is to provide information on the statutory provisions that limit the use of funds on National Institutes of Health (NIH) grant, cooperative agreement, and contract awards for FY2010.

Key Dates
Release Date: January 6, 2010

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

This notice provides information regarding the salary limitation for NIH grant and cooperative agreement awards and extramural research and development contract awards (referred to here as grants). On March 19, 2009, NIH published Fiscal Year (FY) 2009 information on the salary limitation in the NIH Guide for Grants and Contracts (NOT-OD-09-069). 

Every year since 1990 Congress has legislatively mandated a provision limiting the direct salary that an individual may receive under an NIH grant.  For FY 2010, Public Law 111-117: Consolidated Appropriations Act, 2010 restricts the amount of direct salary to Executive Level I of the Federal Executive Pay scale. The Executive Level I annual salary rate was $196,700 for the period January 1 through December 31, 2009.  Effective January 1, 2010, the Executive Level I salary level increased to $199,700.   Guidance on other legislative mandates contained in the Consolidated Appropriation is referenced above.

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:   None of the funds in this award shall be used to pay the salary of an individual at a rate in excess of the current salary cap. 

This is the tenth 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 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 2010, 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 2010) funds to allow for the 2010 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 $199,700 level is effective beginning January 1, 2010.

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, Executive Level II for FY 2000, and Executive Level I for FYs 2001-2010).

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 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, 2010 with salary limitation of $199,700)


Individual's institutional base salary for a FULL-TIME calendar year appointment 

$ 200,000

 

 

Research effort requested in application/proposal - 6 months (50%)

 

Direct Salary requested

$  100,000

Fringe benefits requested (25% of salary)

$   25,000

Subtotal

$ 125,000

 

Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal

$   56,250

 

 

Amount requested - salary plus fringe benefits plus associated F&A (indirect) costs

$ 181,250

 

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

$ 199,700

Divided by 12 months multiplied by 6 months (50%)

$   99,850

Fringe benefits (25% of allowable salary)

$   24,962

Subtotal

$ 124,812

 

 

Associated F&A (indirect) costs at 45% of subtotal

$   56,165

 

 

Total amount to be awarded due to salary limitation

$ 180,977

 

 

Amount of reduction due to salary limitation

($181,250 requested minus $180,977 awarded)

$ 273

Example 2. Individual with Half-Time Appointment (based on a grant award/contract issued after January 1, 2010 with salary limitation of $199,700)


Individual's institutional base salary for a HALF-TIME calendar year appointment

$  100,000

 

Research effort requested in application/proposal - 1.8 months (30% of 6 months)

 

Direct Salary requested

$   30,000

Fringe benefits requested (25% of salary)

$    7,500

Subtotal

$   37,500

 

Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal

$   16,875

 

Amount requested - salary plus fringe benefits

 

plus associated F&A (indirect) costs

$   54,375

 

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

$   99,850

Divided by 6 months multiplied by 1.8 months (30%)

$   29,955

Fringe benefits (25% of allowable salary)

$     7,489

Subtotal

$   37,444

 

Associated F&A (indirect) cost at 45% of subtotal

$   16,850

 

Total amount to be awarded due to salary limitation

$   54,294

 

Amount of reduction due to salary limitation

 

($54,375 requested minus $54,294 awarded)

$        81

Example 3. Individual with a Nine-Month Appointment (based on a grant award/contract issued after January 1, 2010 with salary limitation of $199,700)


Individual's institutional base salary for a nine-month calendar year appointment

$   150,000

 

Research effort requested in application/proposal - 2.7 months (30% of 9 months)

 

Direct Salary requested

$   45,000

Fringe benefits requested (25% of salary)

$   11,250

Subtotal

$   56,250

 

Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal

$   25,313

 

Amount requested - salary plus fringe benefits

 

plus associated F&A (indirect) costs

$   81,563

 

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

$  149,775

Divided by 9 months multiplied by 2.7months (30%)

$   44,932

Fringe benefits (25% of allowable salary)

$   11,233

Subtotal

$   56,165

 

Associated F&A (indirect) cost at 45% of subtotal

$   25,274

 

Total amount to be awarded due to salary limitation

$   81,439

 

Amount of reduction due to salary limitation

 

($81,563 requested minus $81,439 awarded)

$       124

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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