SALARY LIMITATION ON GRANTS AND CONTRACTS

NIH GUIDE, Volume 23, Number 7, February 18, 1994



P.T.





Keywords:



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 (hereafter called 'grant').  This

information also applies to extramural research and development

contract awards.  In addition, this notice describes a change in the

way that NIH Institutes and Centers (I/Cs) are treating salaries in

excess of the limit for any future years in competing grant awards.

The last notice in the NIH Guide for Grants and Contracts regarding

the salary limitation was in Vol. 20, No. 47, December 20, 1991.



Fiscal Year (FY) 94 is the fifth 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 94, Public Law 103-112, restricts the

amount of direct salary an individual under a grant or applicable

contract issued by the NIH 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 93 level.



The NIH will continue to apply the limits to all grant and applicable

contract awards and all funding amendments to existing awards made

with FY 94 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:



According to the HHS Appropriations Act, "None of the funds

appropriated in this title for the National Institutes of Health ...

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."



The following are examples of the adjustments that NIH will make when

salaries exceed the limit:



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



*  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.



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 is a change in the way that NIH I/Cs are treating salaries

in excess of the limit for any FUTURE years beginning with COMPETING

grant awards funded with FY 94 funds.  Based upon experience and the

expectation that the salary restriction will continue in future

appropriations (although the amount of the limitation may change with

future appropriations), NIH awards for COMPETING applications 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  With regard to NON-COMPETING continuation grant applications

submitted to NIH, these applications 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.



For further information concerning policies relating to grants or

contracts, contact any of the grants management offices and/or

contracts management offices of the NIH funding components.



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