SALARY LIMITATION ON GRANTS, COOPERATIVE AGREEMENTS AND CONTRACTS

Release Date:  January 6, 2000

NOTICE:  OD-00-011

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 December 22, 1998.

Fiscal Year (FY) 2000 is the eleventh 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 
2000, Public Law 106-113, 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 II of the Federal 
Executive Pay scale.  For FY 2000 awards the Executive Level II salary level 
is $136,700 for the period October 1 through December 31, 1999.  Effective 
January 1, 2000, the Executive Level II salary level increased to $141,300.  

For FY 1999 awards, the legislatively imposed salary limitation was linked to 
Executive Level III of the Federal Executive Pay scale, which was set at a 
level of  $125,900 for the period October 1, 1998 through December 31, 1999.  
Effective January 1, 2000, this level was raised to $130,200.  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 2000 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 Executive Level II 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)	
  October 1, 1998 through December 31, 1999                    $125,900
  January 1, 2000 and beyond                                   $130,200

FY 2000 Awards	(Executive Level II)
  October 1, 1999 through December 31, 1999                    $136,700
  January 1, 2000 and beyond                                   $141,300

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, 2000 with a $141,300 salary 
limitation)

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 F&A  (indirect) costs at a
rate of 45% of subtotal                                        $ 42,188

Amount requested - salary plus fringe benefits
plus associated F&A (indirect) costs                           $135,938

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                        $141,300
multiplied by effort (50%) to be devoted to project            $ 70,650
Fringe benefits (25% of allowable salary)                      $ 17,663
Subtotal                                                       $ 88,313

Associated F&A (indirect) costs at 45% of subtotal             $ 39,741

Total amount to be awarded due to
salary limitation                                              $128,054

Amount of reduction due to salary
limitation ($135,938 requested minus
$128,054 awarded)                                              $  7,884

EXAMPLE 2.   INDIVIDUAL WITH HALF-TIME APPOINTMENT (based on a grant 
award/contract issued after January 1, 2000 with a $141,300 salary 
limitation)

Individual's institutional base salary for a
HALF-TIME appointment (50% of a full-time
twelve month appointment)                                      $ 75,000

Research effort requested in application/proposal     30%

Direct Salary requested                                        $ 22,500
Fringe benefits requested (25% of salary)                      $  5,625
Subtotal                                                       $ 28,125

Applicant organization's F&A (indirect) costs at a rate
of 45% of subtotal                                             $ 12,656

Amount requested - salary plus fringe benefits
plus associated F&A (indirect) costs                           $ 40,781

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                        $141,300
multiplied by 50% appointment by 30% effort
to be devoted to project                                       $ 21,195
Fringe benefits (25% of allowable salary)                      $  5,299
Subtotal                                                       $ 26,494

Associated F&A (indirect) cost at 45% of subtotal              $ 11,922 

Total amount to be awarded due to salary
limitation                                                     $ 38,416

Amount of reduction due to salary limitation
$40,781 requested minus $38,416 awarded)                       $  2,365


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 2000 funds. 
o NIH competing grant awards with categorical budgets reflecting salary 
levels at or above the new cap(s) issued in FY 2000 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 1999 funds are still restricted to the Executive 
Level III.  From the period October 1, 1998 through December 31, 1999, the 
level is $125,900.  Effective January 1, 2000, Executive Level III is limited 
to $130,200.  If adequate funds are available in active FY 1999 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 1999 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 1999 funds to 
allow for the increase from $125,900 to $130,200?  Yes, provided funds are 
available and the increase is warranted.  Prorated figures should be used 
for the applicable months, i.e., the $130,200 level is effective for 
budget periods that extend beyond January 1, 2000.
2. If a grant award (competing or non-competing) has already been issued in 
FY 2000, 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).
5. 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.  
The following provides an example.

A competitive grant or a contract, using FY 1999 funds, requested 
salary in excess of the cap and was awarded with an August 1, 1999 
start date reflecting a salary level of $125,900.  The 
grantee/contractor may charge salary at a rate of $125,900 per annum 
through December 31, 1999.  Effective January 1, 2000, salary may be 
charged at a rate of $130,200 per annum through July 31, 2000.  
Effective with the FY 2000 non-competing award or contract, salary may 
be charged at the rate of $141,300 per annum.

6. 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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