HHS Salary Cap Guidelines & Procedures

Last updated: 1/26/2012 

Basis for Guidelines

In the past, there was a salary limitation on the rate of pay directly chargeable to grants, cooperative agreements, and contracts issued by NIH, AHRQ, and SAMHSA. The salary cap was indexed to Executive Level I and usually increased each January 1. The rate of pay was effective January 1 regardless of the award period. However, the Consolidated Appropriations Act, 2012 created a number of changes in regards to the salary cap:

  • it now applies to all HHS awards
  • it is reduced to Executive Level II, which is $179,700
  • it is effective for awards with an Issue Date on or after 12/23/2011 as follows:
    • New and Competitive awards with an Issue Date of 12/22/2011 or earlier – Personnel appointed to the award can stay at Executive Level I, $199,700, and the funding will not be adjusted by the sponsor.
    • Non-Competitive awards with an Issue date of 12/22/2011 or earlier – Personnel appointed to the award can stay at Executive Level I, $199,700, and the funding will not be adjusted by the sponsor.
    • New and Competitive awards with an Issue Date of 12/23/2011 or later – Personnel appointed to the award are subject to Executive Level II, $179,700, and awards with budgets reflecting salary levels at or above the new salary cap limit will be adjusted by the sponsor so no funds are awarded or committed for salaries over the limitation.
    • Non-Competitive awards with an Issue date of 12/23/2011 or later – Personnel appointed to the award are subject to Executive Level II, $179,900. The funding will not be adjusted by the sponsor and unless otherwise restricted, rebudgeting of the freed up funds is permitted.

Note: This means that a PI could be limited to $199,700 on one award and $179,700 on a different award at the same time.

When an individual's institutional base salary exceeds the salary cap, the difference between that individual's actual salary and the maximum amount allowed under the cap for their percent of effort is an unallowable cost on HHS awards and must be charged to a non-sponsored account. Institutional base salary is the annual compensation an individual receives, whether that individual's time is spent on research, teaching, patient care, or other activities. The base salary excludes incidental pay and any income that an individual is permitted to earn outside of duties for the institution. In the case of a joint UI/VA appointment, VA salary is included in institutional base salary. However, in no event will total salary charged to sponsored projects (which include grants, cooperative agreements, contracts, cost sharing accounts and salary cap accounts) exceed the individual's UI salary. VA salary cannot be used for cost sharing or for funding unallowable salary cap cost. The salary cap applies to grants, cooperative agreements, and contracts received directly from HHS and indirectly from HHS through another sponsor. It also applies to salaries being charged to cost sharing accounts associated with HHS projects. The unallowable portion of salary over the cap may not be charged to a regular cost sharing account.

The salary cap summary with links to the full text of the NIH guidelines can be found at the following web site: http://www.grants.nih.gov/grants/policy/salcap_summary.htm

Guidelines & Procedure Statement 

Effective July 1, 2004, the university began requiring departments to track in accounting the salary amount that cannot be directly charged to an NIH, AHRQ, SAMHSA grant, cooperative agreement, or contract due to salary limitations. This will now apply to all HHS awards received on or after 12/23/11. All unallowable costs attributable to salary cap must be charged to Grant/Program # 3-1111111. To request a new Salary Cap Who Key, departments should complete the Request to Establish New Salary Cap Account form found on the Grant Accounting website under Policies and Procedures and send it to Grant Accounting. Most funding sources, except for fund 500 and 510, may be used.

It is possible to use the lower salary cap for those awards with an Issue Date on or before 12/22/2012, but it is not encouraged. If the lower cap is chosen, the portion of Key Personnel salary between the cap used and the actual cap should be considered voluntary committed cost sharing and charged to an appropriate companion cost sharing account for each applicable HHS award. As this is a funding issue, it is up to the department or collegiate unit to determine how to fund the cost share account. Under all circumstances, the department will still be required to fund the difference between the capped salary and the actual cost of the effort committed.

Calculating Salary Cap

Example 1: Award issue date on or after 12/23/2012 and PI with 12 month appointment and an institutional base salary of $200,000 devoting 25% effort to grant 1-1234500

Charge to funded grant account 1-1234500 $179,700 x 25% effort = $44,925

Charge to salary cap account 3-1111111 ($200,000 x 25% = $50,000) - $44,925 = $5,075

Example 2: Award issue date on or after 12/23/2012 and PI with 12 month appointment and an institutional base salary of $200,000 devoting 25% effort to grant 1-1234500 and cost sharing 5% effort

Charge to funded grant account 1-1234500 $179,700 x 25% effort = $44,925

Charge to cost sharing account 3-1234500 $179,700 x 5% effort = $8,985

Charge to salary cap account 3-1111111 ($200,000 x 30% = $60,000) – $44,925 – $8,985 = $6,090

Example 3: Award issue date on or after 12/23/2012 and PI with 12 month appointment, an institutional base salary of $250,000 with UI salary of $200,000 and VA salary of $80,000, devoting 75% effort to grant 1-1234500 and cost sharing 5% effort:

Charge to funded grant account 1-1234500 $179,700 x 75% effort = $134,775

Charge to cost sharing account 3-1234500 $179,700 x 5% effort = $8,985

Charge to salary cap account 3-1111111 ($280,000 x 80% = $224,000) - $134,775 - $8,985 = $80,240

Example 4: Award issue date on or after 12/23/2012 and PI with 9 month appointment and an annualized institutional base salary of $200,000 devoting 25% effort to grant 1-1234500 during the academic year and 100% effort for summer months:

Charge to funded grant account 12343500

$179,700/12 months x 9 x 25% effort $33,694*
$179,700/12 months x 2 x 100% effort $29,950
  $63,664

Charge to salary cap account 3-1111111

$200,000/12 months x 9 x 25% effort = $37,500 - $33,694 $3,806
$200,000/12 months x 2 x 100% effort = $33,333 - $29,950 $3,383
  $7,189

*Salary Cap of $179,700 is based on a 12 month appointment. If the actual appointment is for less than 12 months, the equivalent pro-rata salary cap must be used.

 

Grant Accounting is a department under the Controller in the Finance and Operations organization.