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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