Wayne State University

NIH Updates FY 2006 Salary Limitation Information

Posted: Wednesday, January 18, 2006

On January 12, 2006, the NIH published updated information regarding the salary limitation for NIH grant and cooperative agreement awards and extramural research and development contract awards.

For seventeen consecutive years, Congress has legislatively mandated a provision for the limitation of salary. For FY 2006, the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, Public Law 109-149, restricts the amount of direct salary of an individual under an NIH grant or cooperative agreement (referred to here as a grant) or applicable contract to Executive Level I of the Federal Executive Pay scale. The Executive Level I annual salary rate was $180,100 for the period January 1 through December 31, 2005 (see NOT-OD-05-024, January 7, 2005). Effective January 1, 2006, the Executive Level I salary level increased to $183,500.

For the purposes of the salary limitation, the terms "direct salary," "salary," and "institutional base salary" have the same meaning and are exclusive of fringe benefits and facilities and administrative (F&A) expenses, also referred to as indirect costs. 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 the duties to the applicant organization.

NIH grant/contract awards for applications/proposals that request direct salaries of individuals in excess of the applicable RATE per year will be adjusted in accordance with the legislative salary limitation and will include a notification such as the following:

According to the Act for FY 2006, "None of the funds appropriated in this Act for the National Institutes of Health, the Agency for Healthcare Research and Quality, 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 Executive Level Iā€œ of the Federal Executive Pay Scale. This is the sixth year that the limitation has been linked to Executive Level I of the Federal Pay Scale.

Please see the salary cap summary and the time frames associated with existing salary caps at http://grants.nih.gov/grants/policy/salcap_summary.htm.

Implementation of new salary limitation:

- No adjustments will be made to modular grant applications/awards or to previously established commitment levels for non-competing grant awards issued with FY 2006 funds.

- NIH competing grant awards with categorical budgets reflecting salary levels at or above the new cap(s) issued in FY 2006 will reflect adjustments to the current and all future years so that no funds are awarded or committed for salaries over the limitation.

- For awards issued in those years restricted to Executive Level I (see Salary Cap Summary, [FY 1990 ā€“ FY 2006), if adequate funds are available in active awards, and if the salary cap increase is consistent with the institutional base salary, grantees may rebudget to accommodate the current Executive Level I salary level and contractors may charge at the higher level. However, no additional funds will be provided to the prior year grant awards and the total estimated cost of the contract will not be modified.

- An individual's base salary, per se, is NOT constrained by the legislative provision for a limitation of salary. The rate limitation simply limits the amount that may be awarded and charged to NIH grants and contracts. An institution may pay an individual's salary amount in excess of the salary cap with non-federal funds.

- The salary limitation does NOT apply to payments made to consultants under an NIH grant or contract although, as with all costs, those payments must meet the test of reasonableness and be consistent with institutional policy.

- The salary limitation provision DOES apply to subawards/subcontracts for substantive work under an NIH grant or contract.

Competing grant applications and contract proposals that include a categorical breakdown in the budget figures/business proposal should continue to reflect the actual institutional base salary of all individuals for whom reimbursement is requested. In lieu of actual base salary, however, applicants/offerors may elect to provide an explanation indicating that actual institutional base salary exceeds the current salary limitation. When this information is provided, NIH staff will make necessary adjustments to requested salaries prior to award.

For further questions and answers and examples for the new guidelines, please consult the complete announcement at the URL: http://grants1.nih.gov/grants/guide/notice-files/NOT-OD-06-031.html, and be sure to consult your Wayne State University grants officer.