From NIH NOT-OD-14-052
(issued 2/10/14):

This Notice provides information regarding the salary limitation for NIH grant and cooperative agreement awards and extramural research and development contract awards (referred to here as grants). For FY2014, the Consolidated Appropriations Act, 2014 (Public Law 113-76) signed into law on January 17, 2014, restricts the amount of direct salary to Executive Level II of the Federal Executive Pay scale. The Executive Level II salary has increased to $181,500 effective January 12, 2014.

Questions & Answers

1. If a grant award (competing or non-competing) has already been issued in FY 2014, will an adjustment be made? No adjustments will be made. However, rebudgeting is allowable.

2. Can I rebudget grant funds or charge contracts issued in prior years (see Salary Cap Summary (FY 1990 – FY 2014) funds to allow for the 2014 salary cap increase? Yes, provided funds are available and the increase is warranted. Prorated figures should be used for the applicable months, i.e., the $181,500 level is effective beginning January 12, 2014.

3. If an application/proposal fails to provide needed salary information, will an adjustment be made based on the new rates? No adjustment will be made if an application fails to provide adequate information regarding the individual's actual salary level.

4. Does the NIH appropriation language link the salary cap to a Federal Executive Level or to a dollar level? The link is to the Federal Executive Level pay scale (i.e., Executive Level I for FYs 2001-2011, Executive Level II for FYs 2012-2014).

5. As the cap is linked to Federal Executive Levels, can grantees/contractors with ongoing awards rebudget/charge up to the various salary caps, based on the fiscal year of the award and the time the salary expense is incurred?  Yes, salary may be charged in accordance with the FY cap(s), as long as the levels are consistent with the individual's institutional base pay. Please refer to the salary cap summary with times frames for existing salary caps, at http://grants.nih.gov/grants/policy/salcap_summary.htm.

6. Will grantees be permitted to submit revised categorical budgets reflecting higher base salaries? Not as a general rule. NIH policy for categorical budgets states that grantees should always reflect actual base salaries in the requested budgets or provide an explanation indicating that actual institutional base salary exceeds the current salary limitation. As a general rule, NIH will use the information available in the existing application and make adjustments for the salary cap based on information available at the time of award.

The following are examples of the adjustments that NIH will make when salaries exceed the current salary limitation:

Example 1. Individual with Full-Time Appointment (based on grant award/contract issued on or after January 12, 2014 with salary limitation of $181,500)

Individual's institutional base salary for a FULL-TIME calendar year appointment	$ 200,000
Research effort requested in application/proposal - 6 months (50%)
Direct Salary requested	$  100,000
Fringe benefits requested (25% of salary)	$   25,000
Subtotal	$ 125,000
Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal	$   56,250
Amount requested - salary plus fringe benefits plus associated F&A (indirect) costs	$ 181,250
If a grant/contract is to be funded, the amount included for the above individual will be calculated as follows:
Direct salary - restricted to a RATE of		$ 181,500
Divided by 12 months multiplied by 6 months (50%)		$   90,750
Fringe benefits (25% of allowable salary)		$   22,688
Subtotal		$  113,438
Associated F&A (indirect) costs at 45% of subtotal		$   51,047
Total amount to be awarded due to salary limitation		$ 164,485
Amount of reduction due to salary limitation
($181,250 requested minus $164,485 awarded)	$ 16,765

Example 2. Individual with Half-Time Appointment (based on a grant award/contract issued on or after January 12, 2014 with salary limitation of $181,500)

Individual's institutional base salary for a HALF-TIME calendar year appointment	$  100,000
Research effort requested in application/proposal - 1.8 months (30% of 6 months)
Direct Salary requested	$   30,000
Fringe benefits requested (25% of salary)	$    7,500
Subtotal	$   37,500
Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal	$   16,875
Amount requested - salary plus fringe benefits
plus associated F&A (indirect) costs	$   54,375
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	$   90,750
Divided by 6 months multiplied by 1.8 months (30%)	$   27,225
Fringe benefits (25% of allowable salary)	$     6,806
Subtotal	$   34,031
Associated F&A (indirect) cost at 45% of subtotal		$   15,314
Total amount to be awarded due to salary limitation	$   49,345
Amount of reduction due to salary limitation
($54,375 requested minus $49,345 awarded)	$       5,030

Example 3. Individual with a Nine-Month Appointment (based on a grant award/contract issued on or after January 12, 2014 with salary limitation of $181,500)

Individual's institutional base salary for a nine-month calendar year appointment	$   150,000
Research effort requested in application/proposal - 2.7 months (30% of 9 months)
Direct Salary requested	$   45,000
Fringe benefits requested (25% of salary)	$   11,250
Subtotal	$   56,250
Applicant organization's F&A (indirect) costs at a rate of 45% of subtotal		$   25,313
Amount requested - salary plus fringe benefits
plus associated F&A (indirect) costs	$   81,563
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 75% of $181,500	$  136,125
Divided by 9 months multiplied by 2.7months (30%)	$   40,838
Fringe benefits (25% of allowable salary)	$   10,209
Subtotal	$   51,047
Associated F&A (indirect) cost at 45% of subtotal	$   22,971
Total amount to be awarded due to salary limitation	$   74,018
Amount of reduction due to salary limitation
($81,563 requested minus $74,018 awarded)	$       7,545