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Department of Health and Human Service (DHHS) Salary Rate Cap

The Consolidated Appropriations Act, 2017, restricts the amount of direct salary to Executive Level II of the Federal Executive pay scale.  The Executive Level II salary was previously set at $187,000, and increased to $189,600 effective January 7, 2018 (NOT-OD-18-137, National Institutes of Health). 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 II salary level. However, no additional funds will be provided to these grant awards.

Background

Every year beginning 1990, Congress has mandated a provision limiting the direct salary that individual may receive under a DHHS award. This salary rate cap limits the rate of pay directly chargeable to grants, cooperative agreements and contracts issued by the DHHS, including National Institutes of Health (NIH), the Substance Abuse and Mental Health Services Administration (SAMHSA), the Agency for Healthcare Research and Quality (AHRQ), the Center for Disease Control (CDC) and the Health Resources and Services Administration (HRSA). The recipient institution may supplement the NIH salary contribution up to a level that is consistent with the institution's salary scale. An individual's institutional 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 DHHS grants and contracts. An institution may pay an individual's salary amount in excess of the salary cap rate with non-Federal funds.The difference may be charged to a privately sponsored award only when specifically allowed by the private sponsor. University policy states that supplementation of pay above the cap level is subject to the availability of funds and is not an entitlement, and 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 DHHS awards due to the salary rate cap. Salary over the cap cannot be used to meet committed cost sharing obligations because it is considered an unallowable expense on the award.

Guidance

Expressed as an annual rate for full time work, the most recent rates are at the Executive Level II, can be found on NIH Salary Cap Summary webpage.

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 DHHS 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 institutional base salary rate. If the combined rate of pay (including both X and Y) exceeds the capped rate, the maximum amount chargeable to NIH, AHRQ, SAMHSA, CDC, and HRSA awards is the capped rate multiplied by the employee's effort on each award. However, any additional compensation known as the "Z" component, is not included in the employee's institutional base salary rate. Even when X, Y, and Z combined do not exceed the capped rate, Z is not an allowable charge to DHHS awards.

What if the salary rate cap increases midway through the award?

The salary rate cap that should be applied is based on the “Issue Date” of the latest Notice of Award (NOA). Departments may elect to rebudget and to increase the salary charges for existing awards effective the new salary cap date; however DHHS will not provide additional funding to cover the increase in the salary cap threshold for existing awards.

In addition, the level the individual’s salary is increased to must be consistent with the individual’s institutional base pay.

When to apply the new salary rate cap?

The new salary rate cap should be used on all new, renewal, supplement, or resubmission DHHS proposals.

Fiscal Year Appointment

A fiscal-year appointment is an appointment for service throughout the fiscal year.

Example 1 – Employee with a Fiscal Year Appointment

Employee with full-time fiscal year appointment based on DHHS award issued after January 06, 2018 with salary limitation of $189,600, and $204,000 in annual institutional base salary for a full time appointment. 

Individual’s institutional base salary for a full-time 12 months   appointment

$204,000

Direct salary restricted to the capped rate of

$189,600

Salary support for 1 full month ($189,600 divided by 12 months)

$  15,800

Total 1 month salary to be paid to employee

$  17,000

Total 1 month salary to be paid from DHHS award (100% at a monthly rate   of $15,800)

$  15,800

If funded by the PI, amount covered from non-Federal, non-State funding   source (0% time)

$    1,200

 Academic Year Appointment (9/12)

An academic-year appointment is also known as a nine-month appointment. Academic-year appointees that render service during the entire academic year do not render service during the summer period, but may receive their annual salary in twelve equal installments throughout the calendar year.

 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 DHHS awards up to the capped rate.

 Example 2 – Employee with an Academic Year Appointment (9/12)

Employee with full-time academic year appointment based on DHHS award issued after January 06, 2018 with salary limitation of $189,600, and $204,000 in annual institutional base salary for a full time appointment.  

Individual’s institutional base salary for a full-time 9 months   appointment paid over a period of 12 months

$204,000

Direct salary restricted to the capped rate of ($189,600 divided by 12   months and multiplied by 9)

$142,200

Salary support for 1 full month ($142,200 divided by 12 months)

$  11,850

Total 1 month salary to be paid to employee

$  17,000

Total 1 month salary to be paid from DHHS award (100% at a monthly rate   of $11,850)

$  11,850

If funded by the PI, amount covered from non-Federal, non-State funding   source (0% time)

$    5,150

 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.

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