Salary Cap Limitations for DHHS Awards
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 Change, January 11, 2015
Effective January 11, 2015 the Executive Level II (EL II) NIH salary cap will change to $183,300 annually, an increase of $1,800 from the previous cap of $181,500. 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 $200,000 per year and working 10% on a grant. They can increase the direct charge to the grant by $180 (per year) thereby reducing the salary cap cost sharing by $180 ($1,800 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 begin with the 9/16/14-3/15/15 cycle.
- eFECS will average the old and new thresholds ($182,400) for determining the salary cap cost sharing.
- The maximum variance for someone over the new salary cap and charged 10% to grant for the full cycle will be $7.50
- Will begin with the 1/1/15-6/30/15 cycle.
- eFECS will use the new salary cap threshold for the entire cycle when calculating the salary cap cost sharing.
- The maximum variance for the full cycle for someone over the new salary cap and charged 10% to grant will be $4.93
Since the 1/11/15 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 email@example.com with a subject line of “Salary cap threshold change”.
The matrix below reflects the sponsors we currently know who are applying a salary cap and the caps they apply.
|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 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|
|Multiple Sclerosis Society||$199,700|
|Patient Centered Outcomes Research Institute*||$200,000|
|Susan B. 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)
- summer salary (SUM)
- paid professional leave (PLP)
- salary for retired faculty (TFA)
- administrative supplements (ADS)
- endowed supplements (ENS)
- clinical salary (CUMG and UWP)
Individuals with salaries over the cap must provide cost sharing from non-federal funds 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 $200,000 and the current cap is $183,300
- Salary proposed from NIH grant is $18,330 (10% * $183,300)
- Salary cost shared is $1,670 (10% * ($200,000 - $183,300))
- Effort required will be 10% with an institutional base salary of $200,000
- Salary will be funded up to the cap: 10% of $183,300 = $18,330
- Salary cap cost sharing of $1,670 annually or 10% of the difference between the salary cap and the institutional base salary will be required.
- Paid salary plus cost shared salary equals 10% of the IBS: ($18,330 + $1,670 = $20,000 or 10% of the faculty member's IBS)
Tracking Salary Cap Cost Sharing
Cost Share Addendum
Salary cap cost sharing should not be placed on the Cost Share Addendum. Variations in salary and annual changes in the salary cap affect (change) the amount of cost sharing required. As a result, "after the fact" calculations are required to determine the correct cost share 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 MyFinancial Desktop, 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 on the FEC for sponsors other than the 5 DHHS agencies listed above, 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 cost share.
- Use the Adjust/View Cost Share feature in eFECS to set up a short term shift cost share to document the salary cap cost share.
- Insert a note into the Additional Comments field indicating this is salary cap cost sharing.
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 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 January 1).
- Multiple Caps: If a faculty has more than one award subject to the salary cap, it is possible s/he may have multiple caps in effect for that cycle, i.e. Executive Level I for one award and Executive Level II for another award.
Using Sub Budgets
eFECS has been modified to accommodate multiple salary cap amounts however it cannot apply multiple salary cap amounts to a single budget within an FEC cycle. In these cases departments may choose (and are encouraged) to use a sub budget to make the distinction in the salary cap limitations, i.e. Executive Level I (EL I) charged to the parent budget and Executive Level II (EL II) charged to the sub budget
. It will be necessary for departments choosing not to use a sub budget to determine the correct amount of salary cap cost sharing required when this situation occurs using the Salary Cap Calculator for Adjusting an FEC.
- Budget originally subject to EL I
- Receive additional funds subject to EL II
- No sub budget set up for ELII component
- FEC covers period of time when there are salaries charged funds subject to the EL I salary limit as well as salaries charged subject to the EL II salary cap.
- Original award for April 1, 2011 - March 31, 2012 issued March 2011 (subject to EL I)
- New funds awarded for April 1, 2012 - March 31, 2013 issued March 2012 (subject to EL II)
- No sub budget established
- FEC covers 1/1/2012 - 6/30/2012
- 1/1-3/31/2012 subject to EL I
- 4/1-6/30/2012 subject to EL II
- Grant Flag 08 changed to reflect a value of "2" indicating EL II salary cap.
eFECS will calculate the salary cap cost sharing at the EL II (lower) salary cap limit. The department will need to adjust the salary cap cost sharing (generally downward) using the Salary Cap Calculator for Adjusting an FEC.
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 estimating the amount of source funding needed for salary cap cost sharing by year.
- 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 Cost Sharing - 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.