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Salary Cap – Frequently Asked Questions

 

General Information

What is the Salary Cap?
The Salary Cap is a limitation on the direct salary that an individual can receive under a Department of Health & Human Services (DHHS) awards.  The salary cap applies to all grants, cooperative agreements, and contracts from any DHHS agency.

Why is this important?
The Salary Cap limits the amount of salaries and wages for an employee that can be charged to an award. The limitation is legislatively mandated each year by Congress and is currently tied to the Executive Level II salary level. The Salary Cap does not limit the amount of compensation paid to an employee, but it does limit the amount that the funding agency will reimburse for that individual’s effort on the project.

What proposals/awards are subject to the Salary Cap?
All grants and cooperative agreements funded by DHHS agencies are subject to the Salary Cap. Some private foundations and non-DHHS federal agencies also have salary limitations, so please check with OSP if you are unsure.

Does the Salary Cap apply to my award if UMBC is not the direct recipient or prime awardee (ie the award comes to UMBC from another university)?
The Salary Cap is applicable to any award issued to UMBC where the prime award is subject to the Salary Cap.

How do I find out the current Salary Cap?
An annual notice is provided by NIH that states the salary limit (expressed as a maximum institutional base salary) as well as the period that the salary limitation is effective. For all DHHS awards, the applicable Salary Cap is determined by the Award Issue Date stated in the Notice of Award. The applicable cap takes effect on the Project Start Date for new and competing awards, and the Budget Start Date for non-competing awards.
The current Salary Cap rate and historical rates can be found at http://grants.nih.gov/grants/policy/salcap_summary.htm

What is institutional base salary?
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. For faculty on a 12-month appointment, the institutional base salary is the employee’s annual rate of pay.

How do I calculate my annual institutional base salary for an individual on a 9-month faculty appointment?
For 9-month faculty, the institutional base salary must be calculated by taking the 9-month salary and converting it to 12-month salary for the purposes of proposal preparation. The easiest way to do this is to divide the 9-month salary by 9 to obtain the monthly salary and then multiplying the monthly amount by 12 to obtain an annual base salary

Example:
Faculty member with 9 month appointment = $270,000
$270,000 salary / 9 months = $3,000 monthly salary
$3,000 monthly salary x 12 months = $360,000
$360,000 = annual base salary for faculty member

 

Proposal Preparation

 How do I prepare a proposal budget if I have an individual whose annual institutional base salary exceeds the current Salary Cap?  
It depends on what type of budget you are using:

Modular Budget –

If you are submitting a proposal with a modular budget, you will always use the current Salary Cap to calculate salaries for employees whose annual institutional base salary exceeds the cap.

Detailed Budget –

SF424 (R&R) Budget with no direct cost limitation – If you are submitting a proposal without a direct cost limitation, you will prepare your budget using the annual institutional base salary even if it is in excess of the current Salary Cap. You will enter the individual’s annual institutional base salary in the budget form and the funding agency will adjust the amount in accordance with the Salary Cap in effect at the time of award.

SF424 (R&R) Budget with direct cost limitation – If using the individual’s annual institutional base salary will cause the budget to exceed the solicitation’s direct cost limit, you may choose to use the current Salary Cap for your budget calculations. Enter the current Salary Cap as the base salary in the budget form. Include the individual’s annual institutional base salary in the budget justification and state that his/her salary has been calculated using the current cap.

Can I include cost-of-living/inflation adjustments if I propose using the Salary Cap?
Yes. You may include a reasonable cost-of-living/inflation adjustment for salaries even if you choose to budget using the current Salary Cap.

The SF424 requires effort to be expressed as person-months. How do I convert level of effort into person months?
NIH has provided guidance on how to convert % effort into person months on their FAQ at http://grants.nih.gov/grants/policy/person_months_faqs.htm

I’m still confused! Where can I get more help?
Additional guidance on preparing proposal budgets can be found on the NIH Grants website at http://grants.nih.gov/grants/developing_budget.htm#years If you still have questions, please contact your OSP Grants & Contract Manager and/or Specialist for more additional guidance on how to prepare your proposal budget.

 

Internal Processes

 Do I need to submit any additional materials with my routing package if someone on my proposal has an annual institutional base salary over the current cap?
Yes. If you are proposing someone over the cap, you must complete a Cost Sharing Statement and Approval Form. A note regarding Salary Cap as a cost share has been added to the Cost Sharing Statement and Approval Form.

How are salaries in excess of the cap recorded in PeopleSoft?
In PeopleSoft, Fund Code 1115 has been created for tracking of salary dollars over the Salary Cap. This fund code is to be used as part of the chart string for awards/projects that are affected.

Who do I call if I have questions on how to account for salary over the cap?
Any questions regarding post-award financial administration of awards subject to the salary cap should be directed to the UMBC Office of Contract and Grant Accounting.