Notice on Salary Limitation on Grants, Cooperative Agreements, and Contracts

Notice Number: NOT-OD-16-045

Key Dates
Release Date: December 24, 2015

Related Announcements
NOT-OD-16-059
NOT-OD-16-062
NOT-OD-16-046
NOT-OD-16-047
NOT-OD-16-044

Issued by
National Institutes of Health (NIH)

Purpose

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). For FY 2016, the Consolidated Appropriations Act, 2016 (Public Law 114-113), signed into law on December 18, 2015, restricts the amount of direct salary to Executive Level II of the Federal Executive pay scale. The Executive Level II salary is currently set at $183,300, increasing to $185,100 effective January 10, 2016.

Background

Every year beginning 1990, Congress has legislatively mandated a provision limiting the direct salary that an individual may receive under an NIH grant. For FY 2015, the Consolidated Appropriations Act, 2015 (Public Law 113-235), signed into law on December 16, 2014, restricted the amount of direct salary to Executive Level II of the Federal Executive pay scale. The Executive Level II salary was $183,300. This information was published December 30, 2014 in the NIH Guide for Grants and Contracts (NOT-OD-15-049).

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 applicable salary cap. 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 salary limitation for NIH grant and cooperative agreement awards and extramural research and development contract awards:
No adjustments will be made to modular grant applications/awards or to previously established commitment levels for non-competing grant awards issued with FY 2016 funds.

NIH competing grant awards with categorical budgets reflecting salary levels at or above the new cap(s) that are issued on or after the January 10, 2016 effective date, will reflect adjustments to the current and all future years so that no funds are awarded or committed for salaries over the limitation. 

For awards issued in those years that were restricted to Executive Level II (see Salary Cap Summary, FY 1990 – FY 2016), including competing awards already issued in FY2016, if adequate funds are available in active awards, and if the salary cap increase is consistent with the institutional base salary, grantees may rebudget to accommodate the current Executive Level II salary level and contractors may charge at the higher level. However, no additional funds will be provided to these grant awards and the total estimated cost of the contract will not be modified.

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 pay an individual's salary amount in excess of the salary cap with non-federal funds.

The salary limitation does NOT apply to payments made to consultants under an NIH grant although, as with all costs, those payments must meet the test of reasonableness and be consistent with institutional policy.

The salary limitation provision DOES apply to subawards/subcontracts for substantive work under an NIH grant or contract.

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. Q: If a grant award (competing or non-competing) has already been issued in FY 2016, will an adjustment be made?
A: No adjustments will be made. However, rebudgeting is allowable.

2. Q: Can I rebudget grant funds or charge contracts issued in prior years (see Salary Cap Summary, FY 1990 – FY 2016) funds to allow for the 2016 salary cap increase?
A: Yes, provided funds are available and the increase is warranted. Prorated figures should be used for the applicable months, i.e., the $185,100 level is effective beginning January 10, 2016.

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

4. Q: Does the NIH appropriation language link the salary cap to a Federal Executive Level or to a dollar level?
A: The link is to the Federal Executive Level pay scale (i.e., Executive Level I for FYs 2001-2011, Executive Level II for FYs 2012-2016).

5. Q: 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?  
A: 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. Q: Will grantees be permitted to submit revised categorical budgets reflecting higher base salaries?
A: 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 on or after January 10, 2016 with salary limitation of $185,100)

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

$ 185,100

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

$   92,550

Fringe benefits (25% of allowable salary)

$   23,137

Subtotal

$  115,687

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

$   52,059

Total amount to be awarded due to salary limitation

$  167,746

Amount of reduction due to salary limitation

($181,250 requested minus $167,746 awarded)

$ 13,504

Example 2. Individual with Half-Time Appointment (based on a grant award/contract issued on or after January 10, 2016 with salary limitation of $185,100)

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

$   92,550

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

$   27,765

Fringe benefits (25% of allowable salary)

$     6,941

Subtotal

$   34,706

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

$   15,618

Total amount to be awarded due to salary limitation

$   50,326

Amount of reduction due to salary limitation

 

($54,375 requested minus $50,326 awarded)

$    4,049

Example 3. Individual with a Nine-Month Appointment (based on a grant award/contract issued on or after January 10, 2016 with salary limitation of $185,100)

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

$  138,825

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

$   41,648

Fringe benefits (25% of allowable salary)

$   10,412

Subtotal

$   52,060

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

$   23,427

Total amount to be awarded due to salary limitation

$   75,487

Amount of reduction due to salary limitation

 

($81,563 requested minus $75,487 awarded)

$   6,076

Inquiries

Division of Grants Policy
Office of Policy for Extramural Research Administration (OPERA)
Office of Extramural Research
National Institutes of Health
Telephone: 301-435-0949
Email: GrantsPolicy@od.nih.gov

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