The National Institutes of Health (NIH), the Substance Abuse and Mental Health Services Administration (SAMHSA), and the Agency for Healthcare Research and Quality (AHRQ) have historically restricted the amount of direct salary an individual may charge an NIH, SAMHSA, or AHRQ grant or contract. These "salary caps" have, for a number of years, been linked to the Executive Level I salaries of the federal executive pay scale and adjusted whenever federal salaries were increased. This usually happens on January 1 of each year.
Effective December 23, 2011, the salary cap was changed and linked to the Executive Level II salaries resulting in a reduction of the salary cap. At that time, the Center for Disease Control (CDC) and the Health Resources and Services Administration (HRSA) adopted the salary cap for the first time. The implementation of the new salary cap started with awards having an "Issue Date" on or after December 23, 2011.
Since this date, additional Federal and non-Federal sponsors have been discovered who are applying either the NIH salary cap or a unique salary cap. The effective date of these changes may vary by agency, so it is critical departments review the proposal and award requirements carefully to determine if a salary cap is being applied and the effective date. The bottom line is there are now unique circumstances that did not exist in the past. Namely:
- The salary cap fluctuates by award rather than a standard date in time, e.g. January 1
- It is now possible for two grants, each with a start date of January 1, 2012 to be subject to different salary caps if one was issued prior to December 23, 2011 and the other issued on or after December 23, 2011.
- Non-Federal agencies are more frequently applying either the DHHS salary cap or their own unique salary cap.
- Note: There are an increasing number of sponsors, including non-federal foundations, who are applying a salary cap. Care should be taken to ensure each sponsored program is reviewed for compliance with salary cap requirements, including their effective dates.
DHHS Salary Cap Threshold Changes: (Effective 1/3/2021 EL II Cap is $199,300)
For example on January 3, 2021 the Executive Level II (EL II) DHHS salary cap changed to $199,300 annually, an increase of $2,000 from the previous cap of $197,300. This change permits departments to charge more of an individual’s salary to grants thereby reducing the amount of salary cap cost sharing required. Departments may also elect not to increase the salary charges to grants especially when there are insufficient funds remaining in the grant budget to cover the additional charges. Note, sponsors will not provide additional funding to cover the increase in the salary cap threshold for existing awards.
Example - A department elects to charge more for a faculty member with an institutional base salary (IBS) of $250,000 per year and working 10% on a grant. They can increase the direct charge to the grant by $200 (per year) thereby reducing the salary cap cost sharing by $200 ($2,000 x 10%).
For grants whose existing funding was issued prior to December 23, 2011 and are still eligible to use the Executive Level I (EL I) salary cap, there is no indication in the NIH guidance to suggest this level has changed from the existing $201,700. To determine the salary cap threshold applicable to an individual grant the department should refer to the ‘Issue Date’ of the latest Notice of Award (NOA). If issued on or after December 11, 2011 it is subject to the EL II threshold. Departments can also check the value of the Grant Flag 08 field in the Budget Profile of MyFD. A value of “1” indicates the budget is subject to the EL I salary cap and a value of “2” indicates it is subject to EL II.
Impact - The new salary cap thresholds will be changed in eFECS to be reflected as follows:
- Will apply average of old and new cap, 198,300 for the 9/16/20 - 3/15/21 cycle.
- Will apply the new cap 199,300 for the 3/16/2021 - 9/15/2021 cycle.
- Will begin with the 1/1/21 - 6/30/21 cycle.
- eFECS will use the new salary cap threshold for the entire cycle when calculating salary cap cost sharing.
Since the 1/3/21 effective date of the change does not align with the FEC cycle dates it will be left to each school/college and/or department to determine if manual adjustments to the eFECS calculated salary cap cost sharing should be made. In most cases the difference will be relatively immaterial. The variances noted above will only change if the individual is below the new salary cap but above the old one (will go down) or the percentage charged to the grant is different (greater percent charged the greater the variance and vice versa). Departments are encouraged to make any changes in salary distributions now to avoid the need for OSETS later. Please direct any questions you may have to firstname.lastname@example.org with a subject line of “Salary cap threshold change”.
The matrix below reflects the known sponsors who are applying a salary cap and the caps they apply.
MATRIX OF SPONSORS APPLYING SALARY CAPS
|Sponsor - Federal||Cap Applied|
|National Institutes of Health||DHHS Salary Cap|
|Administration for Children and Families||DHHS Salary Cap|
|Administration for Community Living||DHHS Salary Cap|
|Agency for Health Care Research and Quality||DHHS Salary Cap|
|Center for Disease Control||DHHS Salary Cap|
|Health Resources and Services Administration||DHHS Salary Cap|
|Substance Abuse and Mental Health Services
|DHHS Salary Cap|
|Food and Drug Administration||DHHS Salary Cap|
|Sponsor - Non-Federal||Cap Applied|
|Anesthesia Safety Foundation*||DHHS Salary Cap|
|Cystic Fibrosis Foundation*||DHHS Salary Cap|
|Michael J. Fox Foundation*||DHHS Salary Cap|
|Edward P. Evans Foundation*||DHHS Salary Cap|
|Juvenile Diabetes Research Foundation*||DHHS Salary Cap|
|Multiple Sclerosis Society*||$199,700|
|Patient Centered Outcomes Research Institute*||$200,000|
|Susan G. Komen Foundation*||$250,000|
*Requires manual population of Grant Flag 08 by GCA.
The salary cap restriction limits the amount that will be awarded and can be charged to grants and contracts issued by sponsors that apply either the DHHS salary cap or a salary cap unique to their organization . It is important to note that the salary cap serves as the base for determining the amount of salary faculty (and any other UW employee) may be paid from awards issued by these agencies.
- The amount of the faculty member's institutional base salary (IBS) requested to be awarded (and ultimately charged) is determined based on the percentage of effort to be devoted to the grant multiplied by the salary cap (not the IBS).
For grant proposal budgets, the full uncapped IBS should be included in the "Institutional Base Salary" section of the proposal. The sponsor will adjust the awarded amount to the cap in effect at the time of the award. For the University of Washington, the IBS includes the following components:
- regular salary (REG) that now also includes summer salary (SUM), paid professional leave (PPL) and salary for retired faculty (TFA)
- administrative supplements (ADS)
- endowed supplements (ENS)
- clinical salary (CUMG and UWP)
Individuals with salaries over the cap must provide non-federal funding sourcess to cover that portion of their salary that exceeds the salary cap.
Example of Methodology for Proposing Salary on an NIH Proposal When Salary Exceeds the NIH Salary Cap
Dr. Einstein has a 100% appointment and is committing 10% effort on this project. Executive Level II cap is applied.
- Dr. Einstein's institutional base salary is $250,000 and the current cap is $199,300
- Salary proposed from NIH grant is $19,930 (10% * $199,300)
- Salary over the cap is $5,070 (10% * ($250,000 - $199,300))
- Effort required will be 10% with an institutional base salary of $250,000
- Salary will be funded up to the cap: 10% of $199,300 = $19,930
- Salary over the cap of $5,070 annually or 10% of the difference between the salary cap and the institutional base salary will be required.
- Salary paid to the employee is the amount charged to the Award ($19,930) plus amount over the salary cap ($5,070) = $25,000 or 10% of the IBS.
Salary Cap and Cost Share
Cost Share Addendum
Salary cap is not considered to be Cost Share as the salary over the cap is an unallowable expense on the Award. Variations in salary and annual changes in the salary cap affect (change) the amount of department funds needed to cover the salary cap. As a result, "after the fact" calculations are required to determine the correct salary cap percentage. These calculations are done automatically by eFECS and displayed on the FEC in the column "Salary Cap."
Details of the calculation can be viewed by opening the "Salary Cap Detail: How salary cap amount and % effort are derived" at the bottom of the online FEC. The department should confirm that there are no changes to the salary (e.g. salary transfers) or need to retain a prior cap due to sponsor or budget restrictions.
For more detailed information on how the cap is calculated and displayed on the FEC see "Salary Caps, K Awards and the FEC."
Departments should carefully review budgets subject to the salary cap listed on the FEC to ensure no retroactive salary expense transfers need to be processed. Any salary expense transfers processed before the FEC is certified by the faculty member will appear in eFECS the next business day after the transfer is posted. If the FEC is being recertified for a faculty member over the salary cap, the salary cap percentage - as well as the direct charged percentage - must be adjusted.
The salary cap should be determined and applied whenever an individual's salary exceeds the salary cap and his/her salary is charged to a qualifying budget.
- Information on how to apply the cap in various situations (e.g.. new awards, no cost extensions, carry forward, etc.) can be found in How to Apply NIH Executive Level II Salary Cap
- To assist in determining which cap is applicable, the Grant Control Flag "08" in MyFD, Budget Profile, will reflect a value of "1" for budgets subject to Executive Level I and a value of "2" for those budgets subject to Executive Level II.
Note: since the CDC and HRSA did not apply the salary cap prior to the implementation of the Executive Level II cap, the Grant Control Flag 08 for these agencies was set at a value of "9" for funding actions with an issue date prior to December 23, 2011, indicating the salary cap is not applicable.
- For other sponsors who may apply the DHHS cap to specific awards, the Grant Control Flag 08 will be set to a value of "1" or "2" depending on the issue date of the funding action. eFECS may or may not calculate the salary cap on the FEC. This is dependent on whether the sponsor applies the salary cap to all awards or selected awards and, if the former, eFECS has incorporated the appropriate revenue codes in the salary cap logic.
- For other sponsors who apply a unique salary cap (i.e. not the DHHS cap) to specific awards, the Grant Control Flag will be set to a value of "7"
- Since eFECS does not presently calculate the salary cap cost share for sponsors other than DHHS agencies listed above, and foundations applying the DHHS salary cap, departments should carefully review these budgets to determine if manual calculation of salary cap is required.
- Use the salary cap calculator for adjusting an FEC to determine the amount of salary over the cap.
- Use the Adjust/View Cost Share feature in eFECS to set up a short term shift to change the funding source for the amount of salary over the cap.
- Insert a note into the "Additional Comments" field indicating this is salary cap.
Salary Caps in Calendar and Academic Cycles
- Academic Cycle: the mandated salary cap which normally changes in January, will automatically be prorated for the autumn/winter cycle (if it's decided otherwise, it will be communicated to campus)
- If the salary cap changes on January 1 from $190,000 to $195,000, it will be prorated to $192,500.
- The salary cap for the spring/summer cycle will be $195,000.
- Calendar Cycle: the mandated salary cap should be the same during the entire reporting period (assuming the change is effective on or about January 1).
- For information on how salary cap is calculated and how to make adjustments on the FEC see Salary Cap Awards and the FEC.
- Salary Cap Calculator for Determining Salary Distribution - Assists in correct distribution of salary between grant and non-grant budgets when an individual’s salary exceeds the salary cap or when a faculty member receives Clinical, ENS and/or ADS salary and the department desires not to distribute those earnings to a grant(s), i.e., only REG salary.
- Salary Cap Summary - A summary of prior caps and links to current Notice of Salary Limitation on Grants, Cooperative Agreements and Contracts
- NIH Salary Cap Change Memo - An overview of salary cap reduction in FY 2012 NIH and other DHHS budgets
- How Salary Cap is Calculated on FEC - A visual view of salary cap calculations as displayed on the FEC
- Guidelines for Determining and Adjusting Salary Cap - for UW/VA Appointed Faculty Provides instructions on when and how to adjust salary cap cost sharing for faculty with joint UW/VA appointments.
- Salary Cap Detail - A visual view of salary cap calculations as displayed on the FEC for each faculty over the salary cap.