Department of Health and Human Services (HHS) agencies, including AHRQ and NIH, have a legislatively mandated Salary Cap, meaning the amount of salary for personnel over the cap is not an allowable cost. The salary cap applies to direct salary charged to grants, cooperative agreements, and applicable contracts, and is set at the Executive Level II of the Federal Executive pay scale. The cap also applies to all subawards and subcontracts.*

The Consolidated Appropriations Act, 2021, signed into law
on December 27, 2020, includes an update to the restriction on the amount of direct
salary that may be paid to an individual on an HHS-funded award. The new law
set the salary limitation to $199,300, effective January 3, 2021. This means
that for new awards from HHS agencies, salary will be reimbursed at the new
rate beginning January 3, 2021.

For new awards already issued, “if adequate funds are available in the award, and if the FY2021 salary cap limitation is consistent with the institutional base salary, grantees may re-budget funds to accommodate the FY2021 salary cap effective January 3, 2021.” However, ‘No additional funds will be provided for [these] grant awards.’”

Implementation at the Proposal Stage

Applicants are reminded to use actual institutional base salary (IBS) when budgeting for salary support.** Alternatively, applicants may budget using the salary cap, including an explanation in the budget justification that the actual institutional base salary exceeds the current salary limitation. When an award budget includes personnel with salary exceeding the cap, the agency will make necessary adjustments to requested salaries prior to award.

To document salary over the cap in KR PD, create a budget version for salary over the cap named, “Over Salary Cap.” Do not charge F&A to this budget and do not mark this budget version, ‘for submission,’ as this version is for internal use only. If you have specific questions, consult your OSP pre-award contact.

For more on developing NIH budgets impacted by the salary limitation, visit NIH Develop Your Budget. NIH typically publishes guidance on new salary limitations early February – stay tuned! For AHRQ awards, see Notice NOT-HS-21-007: Salary Limitation on AHRQ FY2021 Grants, Cooperative Agreements, and Contracts.

*The salary cap limitation does not apply to consultants; however, consultants must meet the tests of reasonableness and consistency with institutional policy for rates paid to consultants.

**NIH modular budget requests should be based on the DHHS salary cap in place at time of proposal. No mention of salary above the cap should be made in the Personnel Justification.