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Understanding and Applying the Salary Cap. James Trotter Director Sponsored Projects Administration (SPA). Format of Presentation. This presentation will be broken into two main sections: Presentation of materials Background and theory Break (5-10 minutes)

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Understanding and Applying the Salary Cap


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    1. Understanding and Applying the Salary Cap James Trotter Director Sponsored Projects Administration (SPA)

    2. Format of Presentation • This presentation will be broken into two main sections: • Presentation of materials • Background and theory • Break (5-10 minutes) • Application of salary cap (nuts and bolts) • Questions and discussion • Questions are welcome through out, however, some questions may be deferred to the question and discussion section

    3. Presentation Materials • Handouts • PowerPoint Slides • Packet • Salary Cap Quiz (P.1) • Salary Cap Case Studies (P.2-3) • Case Study 8 Effort Statement (P. 4)

    4. Audience • This seminar is intended primarily for department administrative staff with individuals whose Institutional Base Salary (IBS) is over the salary cap and receive salary support on grants or contracts from the following sponsors: • National Institute of Health (NIH) • Substance Abuse and Mental Health Services Agency (SAMHSA) • Agency for Healthcare Research and Quality (AHRQ) Quiz question 1 & 2

    5. History • Since 1990 Congress has legislatively mandated a provision limiting the direct salary an individual may receive under an NIH, SAMHSA or AHRQ grant or contract • This is the ninth year that the limitation has been linked to Executive Level I of the Federal Pay Scale Quiz question 3

    6. History • The salary cap is updated annually on a calendar-year basis http://grants.nih.gov/grants/policy/salcap_summary.htm • 2010 - $199,700 • 2009 - $196,700 • 2008 - $191,300 • 2007 - $186,600 • 2006 - $183,500 • TIP – Budget for these increases on your applications Quiz question 4

    7. Case Study 1 • Dr. LaFleur

    8. Institutional Base Salary • Institutional Base Salary (IBS) is the annual compensation an institution pays on an employee’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 duties to the institution • Base salary may not be increased as a result of replacing institutional salary funds with grant funds

    9. Institutional Base Salary • An individual's base salary is NOT constrained, per se, 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 Quiz question 5

    10. Case Study 1 • Dr. LaFleur’s joint appointment: • VA salary is $105,000 • University salary is $97,500. • Assuming her university appointment is 1.0 FTE and the salary cap is $199,700 would her salary be limited on a SAMHSA grant?

    11. Subawards • The salary limitation provision DOES apply to subawards/subcontracts for substantive work under an NIH grant or contract. • The salary limitation does NOT apply to payments made to consultants under an NIH grant or contract.

    12. Case Study 2 • Dr. Sengupta

    13. Salary Increases • If adequate funds are available in active awards, and if the salary cap increase is consistent with the IBS, grantees may rebudget to accommodate the current salary cap • However, no additional funds will be provided to prior year grant awards

    14. Case Study 2 • Dr. Sengupta’s grant was awarded from NIH in 2008 when the salary cap was $191,300 • In 2010 salary cap is $199,700 and his IBS is $197,000 • He is currently under budget and would like to know if he can charge his grant based on the new higher rate. Can he?

    15. What to put on your application • On detailed budget pages it is appropriate to list the salary cap as the IBS, however, an asterisk notation needs to be added stating that actual IBS exceeds the salary cap • In the budget narrative indicate that actual IBS is greater than the salary cap • For specific questions contact you Grants and Contracts Administrator (GCA) Quiz question 6

    16. Case Study 3 • Dr. Jones

    17. Case Study 3 • Dr. Jones has an IBS of 230,000 • NIH grant application proposing 25% effort. • Assuming the salary cap is $199,700, what should he list on his application as IBS?

    18. Case Study 4 • Dr. Ramirez

    19. Annualized NIH Salary Cap • The salary cap is based on an annualized rate for full time appointment • Annualized salary cap of $199,700 by FTE: • 1.0 FTE = $199,700 ($199,700 X 1.0 FTE) • 0.75 FTE = $149,775 ($199,700 X 0.75 FTE) • 0.5 FTE = $99,850 ($199,700 X 0.5 FTE) • 0.25 FTE = $49,925 ($199,700 X 0.25 FTE) • 0.1 FTE = $19,970 ($199,700 X 0.1 FTE)

    20. Case Study 4 • Dr. Ramirez has an IBS of $100,000 for a 0.5 FTE appointment • Assuming the salary cap is $199,700 would his salary be limited on an AHRQ grant?

    21. Case Study 5 • Dr. Jay

    22. Annualized NIH Salary Cap Continued • The salary cap is not a set dollar limitation • For 1.0 FTE, annualized salary cap of $199,700 by % effort: • 100%= $199,700 ($199,700 X 100%) • 75%= $149,775 ($199,700 X 75%) • 50%= $99,850 ($199,700 X 50%) • 25%= $49,925 ($199,700 X 25%) • 10%= $19,970 ($199,700 X 10%) Quiz question 7 & 8

    23. Annualized NIH Salary Cap (continued) • Annualized salary cap of $199,700 by: • Effort Period = $ 99,850 ($199,700 X ½ year) • Month = $16,641 ($199,700 ÷ 12 months) • Pay Period = $7,680 ($199,700 ÷ 26 Pay Periods)

    24. Case Study 5 • Dr. Jay has an IBS of $225,000 • Labor distributions equal to his effort of 75% on grants from NIH, SAMHSA and AHRQ • He is only charging $168,750 (75% of his IBS) to his grants • Is this appropriate because in total he is charging less than the cap of $199,700?

    25. Case Study 6 • Dr. Vlad

    26. NIH Salary Cap • The salary cap is calculated on a per grant basis, not aggregate basis • Every payment each pay period should meet the salary cap requirement (averaging is not appropriate)

    27. Case Study 6 • NIH GRANT0012B, 20% pay is distributed for 20% effort • NIH GRANT0030A, 10% pay is distributed for 20% effort • Combined distributions are under the cap relative to effort, is he in compliance with the salary cap?

    28. Break

    29. % Labor Distribution Calculation (Dollar Method) • To determine the appropriate % Labor Distribution, divide the allowable salary support (percent effort commitment multiplied by NIH salary cap dollar amount) by the IBS dollar amount

    30. Calculating the salary cap(Dollar Method)

    31. Calculating the salary cap(Dollar Method)

    32. Calculating the salary cap(Dollar Method)

    33. Calculating the salary cap(Dollar Method)

    34. Calculating the salary cap(Dollar Method)

    35. Calculating the salary cap(Dollar Method)

    36. % Labor Distribution Calculation (Percentage Method) • To determine the appropriate % Labor Distribution, divide the salary cap by the IBS and then multiply the result by the effort commitment

    37. Calculating the salary cap(Percentage method)

    38. Calculating the salary cap(Percentage method)

    39. Calculating the salary cap(Percentage method)

    40. Calculating the salary cap(Percentage method)

    41. Calculating the salary cap(Percentage method)

    42. Calculating the salary cap(Percentage method)

    43. Cost Sharing • When a dept agrees to pay personnel over the salary cap they are, de facto, agreeing to cost sharing for any current or future NIH, SAMHSA or AHRQ grants • Labor Distribution Schedules in Oracle should be setup with the cost sharing mission code or unique program number Quiz question 9

    44. Case Study 7 • Dr. Uberstern

    45. Case Study 7 • Dr. Uberstern has IBS of $300,000 • He works on NIH and AHRQ grants that take up 100% of his time • Assuming the salary cap is $199,700, what is the maximum percent of his IBS that can be supported by his grants? • What percent of his IBS will need to be supported by the department?

    46. Case Study 7 • For a salary cap of $199,700 and IBS of $300,000 only 66.57% (salary cap divided by IBS) of effort can be charged on the grants, the remaining 33.43% must be cost shared by the department

    47. Case Study 8 • Dr. Zhang

    48. Effort vs. LD • For individuals over the salary cap the % of effort cannot equal the labor distribution % on the grant • The difference between % effort and labor distribution % should be reflected as cost sharing on the Effort Certification Statement (ECS) • 5% rule doesn’t apply Quiz question 10

    49. Case Study 8 • NIH GRANT0001A 20% effort • NIH GRANT0020A 40% effort • NSF GRANT0030A 25% effort • Department Chair 10% effort • Teaching 5% effort • Salary cap is $199,700 • IBS is $250,000

    50. Case Study 8NIH GRANT0001A