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National Institutes of Health (NIH) Salary Rate Cap

 

Background

For many years, Congress has passed a statutory restriction in the Health and Human Services (HHS) Appropriations Act that limits the maximum rate of compensation that can be paid to an individual to the Executive Level I of the Federal Executive Pay Scale. This “salary rate cap” limits the rate of pay directly chargeable to grants, cooperative agreements and contracts issued by the National Institutes of Health (NIH), the Substance Abuse and Mental Health Services Administration (SAMHSA), and the Agency for Healthcare Research and Quality (AHRQ). The FY 2009 salary rate cap is $196,700 per annum for January 1-December 31, 2009 and $199,700 per annum for January 1-December 31, 2010.

The portion of salary in excess of the rate cap is not allowable on NIH, SAMHSA and AHRQ awards. When an employee's rate of pay exceeds the salary rate cap, the difference between what the employee would have earned at full pay and the maximum amount allowed under the cap for that percent of effort must not be charged to another federal award. The difference may be charged to a privately sponsored award only when specifically allowed by the private sponsor. University policy also prohibits the use of State appropriations, including general (19900) funds, to pay for salary above the capped level. Unrestricted funds, including gift funds and health sciences compensation plan funds, may be used to make up amounts not chargeable to NIH, SAMHSA or AHRQ due to the salary rate cap.

The prohibition on the use of general funds for salary above the capped level is somewhat tempered by the broad range of purposes for which general funds may be appropriately used. Whenever employees with budgeted 19900 salaries charge a portion of their time to sponsored projects, salary savings are generated in the 19900 fund. In many cases these general fund salary savings can be substituted for unrestricted funds being used in an academic department, organized research unit, or dean's office, and the unrestricted funds can thereby be released and used for salary above the capped level without violating University policy.

Supplementation (i.e., pay above the capped level) is subject to the availability of funds and is not an entitlement. The Chancellor or designee may authorize supplementation for individual faculty. The above policy was disseminated to Academic Vice Chancellors in a memo from Associate Vice President Moore dated March 22, 1991.

Guidance

Compliance with the salary rate cap requires comparing a University employee's rate of pay with the maximum rate of pay established by Congress for the NIH, SAMHSA and AHRQ awards. For purposes of University guidance regarding the salary rate cap, an employee's rate of pay is the salary in dollars payable to the employee per unit of time worked, normalized to one person-month at 1.0000 FTE effort.

For example, a fiscal year employee who is paid $120,000 per year for full time work has a rate of pay of $10,000 per full time month worked. A fiscal year employee who is paid $60,000 per year for half time work also has a rate of pay of $10,000 per full time month worked. An academic year employee who is paid $120,000 for full time effort during the academic year has a rate of pay of $13,333.33 per full time month worked, because the annual salary is divided by nine months of required effort, not twelve. The rate of pay in the last example is unaffected by whether the employee receives pay in nine or twelve annual installments; the timing of paychecks does not determine the rate of pay for salary rate cap purposes.

Expressed as a monthly rate for full time work, the most recent rates are as follows:

  • For awards made with federal FY 2010 funds:
    • $16,641.67/month (beginning 1/1/10)
    • $16,391.67/month (beginning 10/1/09 - 12/31/09)
  • For awards made with federal FY 2009 funds:
    • $16,391.67/month (beginning 1/1/09)
    • $15,941.67/month (beginning 1/1/08 - 12/31/08)

The salary rate cap only affects employees whose rate of pay is above the defined rates, and who charge some or all of their salary to NIH, SAMHSA or AHRQ awards or subawards to UCI that flow down NIH, SAMHSA or AHRQ funds. The salary rate cap has no effect on employees whose rate of pay is less than the defined rates, or whose salary is not charged to sponsored projects originating from NIH, SAMHSA or AHRQ.

Determining Which Fiscal Year (FY) Funding Was Used to Make an NIH Award

Section I of the NIH Notice of Grant Award (NOGA) disseminated with the UCI e-Award Synopsis contains the fiscal information about the award. The federal FY for the current budget period appears after the following characters: IC/ CAN /. Although there may be other federal FYs noted after IC/ CAN /, those FYs are applicable to continuation funding only. In the following example, federal FY 2009 monies were used to fund the current budget period:

IC/ CAN / FY2009 / FY2010 / FY2011

Types of Pay Excluded/Included in Determining the Rate of Pay

Only the categories of pay that can be charged to sponsored projects are counted in an employee's rate of pay for comparison with the salary rate cap.

Administrative stipends, honoraria, outside consulting fees and supplemental compensation for incidental services to University Extension are not included in the rate-of-pay determination. These types of pay should not be charged to NIH and SAMHSA awards.

For employees covered by a health sciences compensation plan, both the UC Health Sciences Salary Scale base salary, or "X" component of salary, and the negotiated additional compensation, or "Y" component of salary, are included in determining the employee's rate of pay. If the combined rate of pay (including both X and Y) exceeds the capped rate, the maximum amount chargeable to NIH and SAMHSA awards is the capped rate multiplied by the employee's effort on each award. However, any incentive/bonus compensation under a health sciences compensation plan, also known as the "Z" component, is not included in the employee's rate of pay, and is not an allowable charge to NIH, SAMHSA or AHRQ awards.

Considerations Applicable to Academic Year Appointees

Most academic year appointees receive their academic year salary over twelve monthly pay periods for service rendered over a nine month period. For example, Professor Smith has an academic year salary of $170,000 and receives twelve monthly paychecks of $14,166.67 each. At first glance Professor Smith's rate of pay would appear to be below the FY 2010 capped rate. However, his academic year pay is earned based on nine working months, not twelve, so his actual rate of pay is $170,000 / 9 months = $18,888.89 per month, which exceeds the FY 2010 capped rate. Consequently, a portion of Professor Smith's compensation could not be charged to NIH, SAMHSA or AHRQ awards.

The capped rates of pay apply equally to academic year appointees and fiscal year appointees. The rates shown below are equivalent to the capped rates shown above, but scaled to the academic year and 12-month payment plan, respectively:

  • For awards made with federal fiscal year 2010 funds:
    • $149,775/academic year or $12,481.25/month over 12 months (beginning 1/1/08)
    • $147,825/academic year or $12,293.75/month over 12 months (beginning 1/1/09 - 12/31/09)
  • For awards made with federal fiscal year 2009 funds:
    • $147,525/academic year or $12,293.75/month over 12 months (beginning 1/1/09)
    • $143,475/academic year or $11,956.25/month over 12 months (beginning 1/1/08 - 12/31/08)

Summer salary of academic year appointees is also subject to the salary rate cap. Summer pay is based on effort (service days on duty status), and is chargeable to NIH, SAMHSA and AHRQ awards up to the capped rate. The University's guidelines for payment of additional compensation to academic year appointees during the summer can be found in the Academic Personnel Manual 600, Appendix 1. The guidelines provide for calculation of summer pay using time factors that correspond to the number of service days on duty status during a given calendar month.

For academic year employees whose rate of pay exceeds the cap and whose summer pay will be charged to NIH, SAMHSA, or AHRQ grants, the time factors corresponding to service days working on the NIH, SAMHSA or AHRQ grants should be multiplied by the applicable capped rate of pay.

Note that for a one-third summer appointment, the sum of the time factors cannot exceed 1.0000; the total pay cannot exceed 1/9 of the academic year compensation, and the total charged to NIH/SAMHSA/AHRQ cannot exceed the monthly capped amount. For a two-thirds summer appointment, the sum of the time factors cannot exceed 2.0000; the total pay cannot exceed 2/9 of the academic year compensation, and the total charged to NIH/SAMHSA/AHRQ cannot exceed two times the monthly capped amount. For a three-thirds summer appointment, the sum of the time factors cannot exceed 3.0000; the total pay cannot exceed 3/9 of the academic year compensation, and the total charged to NIH/SAMHSA/AHRQ cannot exceed three times the monthly capped amount.

Example: Professor Lee, who earns $143,500.00 for the academic year, is working in the summer of 2008 on a SAMHSA grant made in federal fiscal year 2008. She has a full summer appointment, two thirds of which will be spent working on the grant. Two thirds of the summer period translates into 38 service days in duty status. Professor Lee works 23 days in July and 15 days in August, corresponding to time factors of 1.2105 and 0.7895, respectively. With the salary rate cap, the maximum salary that could be charged to the SAMHSA grant would be $18,823.28 in July [=$15,291.67 x 1.2105] and $12,276.73 in August [=$15,291.67 x 0.7895]. If there were no salary rate cap, the total salary chargeable to the SAMHSA grant would be 2/9 of Professor Lee's academic year compensation, or $31,888.89. However, because of the salary rate cap, the maximum that can be charged to the SAMHSA grant is $31,100.01. The difference of $788.88 would need to be charged to an unrestricted, non-State fund in order for Professor Lee to receive her regular compensation for the work in question.

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