University of California Office of the President
Senior Vice President—Business and Finance

Research Administration Office


Operating Guidance

No. 90-6 Suppl. 4
February 17, 2000



Subject: NIH/SAMHSA Salary Cap 

In each of the past eleven years, the HHS Appropriations Act passed by Congress has included a salary rate limitation affecting extramural awards from the National Institutes of Health (NIH) and the Substance Abuse and Mental Health Services Administration (SAMHSA). Salaries in excess of a statutorily-defined rate of pay (commonly referred to as the "cap") may not be paid from NIH or SAMHSA grants and contracts. 

After extensive discussion, the 106th Congress decided to continue the NIH/SAMSA Salary Cap. Two recent changes have increased the threshold level of the cap. First, the cap has been tied to the Federal Executive Level III and is now tied to the Federal Executive Level II. Second, a raise for federal employees took effect on January 1, 2000. This is very good news! The practical effect is a reference salary increase from $125,900 to $141,300.

There were many who participated in the effort to eliminate or raise the cap. The UCDC office was actively involved with Senator Feinstein's office. See copy of Senator Feinstein's letter attached.

NIH provided guidance regarding the new cap in Notice OD-00-011 dated January 6, 2000, Attached. Please note, capped rate amounts are tied to federal fiscal year appropriations which become effective October 1, and calendar year cost of living increases which become effective January 1. Because NIH will not increase modular awards or established commitment levels for non-competing grant awards issued with FY 2000 funds, it is recommended that for modular grants, routine salary increases be budgeted in anticipation of federal annual increases in capped salary levels to maximize recovery of capped salaries. (See RAO Guidance Memo 99-03, NIH Modular Grant Applications and Awards). NIH will adjust proposals with categorical budgets that contain actual salaries. If the capped salary is used in lieu of actual salary, then NIH as a general rule will not accept revised budgets and will used information in existing applications to administer the salary cap.

Over the past year, the HHS Office of Inspector General (HHS-OIG) has been auditing the Cost Accounting Standards Disclosure Statements submitted by each campus. In the course of their review, HHS-OIG found instances of noncompliance with the statutory rate limitation, i.e., some University employees were found to have been paid from NIH/SAMHSA funds at rates in excess of the cap. 

The attached Question-and-Answer document was developed to provide University-wide guidance on the nature of the salary cap, its implications for University employees, and its relationship with University policy. It was circulated in draft form for comment to Academic Personnel Directors, Accounting Officers, Control Directors, Extramural Funds Managers, Federal Audit Coordinators and Contract & Grant Officers. The Q&A document incorporates changes to address the comments and suggestions received.

Compliance with the NIH/SAMHSA salary cap is a legal requirement. Based on the attached Q & A, campuses should develop and implement a formal process to ensure compliance locally. It is not necessary or expected for the same systems and procedures to be adopted at all campus locations. We request campuses to provide their implementation procedures to UCOP by April 21, 2000, attn: Robert Baum, Costing Policy & Analysis. 

You should also be aware that HHS has been considering expanding the salary cap to all HHS components beyond NIH and SAMHSA. RAO wrote to OMB taking issue with three agencies in HHS applying the cap without statutory authority. After the Research Administration Office brought this to COGR's attention, COGR met with HHS and sent a letter to discourage the expanded application of the cap. See copy of COGR letter, Attached. We will keep you informed regarding the outcome of this proposed change.

Refer: Meredith O'Connor
(510) 987-9847

Subject Index: 07
Organization Index: F-375

David F. Mears
Research Administration Office 


Cc: Academic Personnel Directors
Accounting Officers
Control Directors
Extramural Fund Managers
Federal Audit Coordinators

University of California, Office of the President

Questions & Answers Regarding the NIH Salary Cap


1. What is the NIH salary cap and where does it come from?

Basic Guidance

2. What is a "rate of pay" and why is it important?

3. What are the maximum rates of pay chargeable to NIH and SAMHSA awards?

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

6. Is all pay included in determining whether someone’s rate of pay exceeds the cap?

7. Are administrative stipends, honoraria, or consulting fees included in the salary cap?

8. Is pay above the Health Sciences Salary Scales base salary included in the salary cap?

9. Is summer research pay included in the salary cap?

Considerations Applicable to Academic Year Appointees

10. How is the rate of pay calculated for academic year appointees paid over twelve months?

11. What are the capped rates for academic year salary paid over twelve months?

12. How does the salary cap affect summer work of academic year appointees?

Guidance on Compliance

13. What procedures will ensure that personnel charges do not exceed the salary cap?

14. What fund sources can be used for salary not reimbursed by NIH/SAMHSA?

15. Does the salary cap affect pay on NIH / SAMHSA awards only, or all fund sources?

16. How is information on the salary cap level updated?

As of the date of issuance of this guidance, the latest NIH announcement regarding the salary cap is found at: 

Changes to the NIH/SAMHSA salary cap are communicated to campuses via Contract and Grant Memos. The most recent C&G Memo regarding the salary cap is dated February 17, 2000 and is available at:


United States Senate

July 26, 1999

The Honorable Arlen Specter, Chairman
Subcommittee on Labor-HHS-Education Appropriations
United States Senate
184 Dirksen Office Building
Washington, D.C. 20510


Dear Mr. Chairman: 

We are writing to urge the subcommittee an Labor-MRS-Education Appropriations to raise the NIH salary cap for university-based researchers to a level equal to the salaries of top researchers based at NIH, if salary cap language is included in the bill. 

As you know, our subcommittee instituted a cap ($120,000) in the FY 1990 Labor/HHS-Education Appropriations bill on the salary level that researchers could apply toward their NIH grants. The FY 1992 bill raised the cap to $125,000, where it stayed for many years. In last year's appropriations for the National Institutes of Health (Omnibus Consolidated and Emergency Supplemental Appropriations for fiscal Year 1999- Public Law 105-277), the language in Sec. 204 changed the cap again to restrict it to federal executive level III. But tying the cap to executive level M (currently at $125,900) still leaves the cap far too low, especially compared to the cap on researcher salaries within NRL which are tied to executive level I (currently at $151,800).

  1. eliminate the disparity between the salary level of NIH researchers and external researchers on NIH grants.
  2. allow universities and other academic research institutes to better compete with the private sector and attract the nation's top biomedical researchers; and
  3. require the NIH to pay a more equitable share of the salaries of distinguished scientists who are interested in performing NIH-supported research.

As you know, this Subcommittee has focused in recent years on increasing the NIH research budget. Now is the time to adequately support the women and men working on NIH-sponsored grants in the university laboratories to conduct the research leading to medical advances and cures.

Thank you for your attention to this important issue.



Dianne Feinstein
United States Senator


Patty Murray
United States Senator





 Release Date: January 6, 2000
NOTICE: OD-00-011 

National Institutes of Health 

The purpose of this notice is to provide updated information regarding the salary limitation as it relates to NIH grant and cooperative agreement awards. This information also applies to extramural research and development contract awards. The last notice in the NIH Guide for Grants and Contracts regarding the salary limitation was published December 22, 1998.

Fiscal Year (FY) 2000 is the eleventh consecutive year for which there is a legislatively mandated provision for the limitation of salary. specifically, the Department of Health and Human Services (HHS) Appropriation Act for FY 2000, Public Law 106-113, restricts the amount of direct salary of an individual under an NIH grant or cooperative agreement (hereafter referred to as a grant) or applicable contract to Executive Level II of the Federal Executive Pay scale. For FY 2000 awards the Executive Level II salary level is $136,700 for the period October 1 through December 31, 1999. Effective January 1, 2000, the Executive Level II salary level increased to $141,300. 

For FY 1999 awards, the legislatively imposed salary limitation was linked to Executive Level III of the Federal Executive Pay scale, which was set at a level of $125,900 for the period October 1, 1998 through December 31, 1999. Effective January 1, 2000, this level was raised to $130,200. Direct salary is exclusive of fringe benefits and facilities and administrative (F&A) expenses, also referred to as indirect costs. NIH grant/contract awards for applications/proposals that request direct salaries of individuals in excess of the applicable RATE per year will be adjusted in accordance with the legislative salary limitation and will include a notification such as the following: 

According to the FY 2000 HHS Appropriations Act, "None of the funds appropriated in this title for the National Institutes of Health and the Substance Abuse and Mental Health Services Administration shall be used to pay the salary of an individual, through a grant or other extramural mechanism, at a rate in excess of Executive Level II of the Federal Executive Pay Scale." 

The term "salary" means "direct salary" which is exclusive of fringe benefits and F&A expenses. "Direct salary" has the same meaning as the term "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 duties to the applicant organization. 

In summary, the following reflects the time frames associated with the existing salary caps: 

FY 1999 Awards (Executive Level III)

October 1., 1998 through December 31, 1999 $125,900

January 1, 2000 and beyond $130,200

FY 2000 Awards (Executive Level II)

October 1, 1999 through December 31, 1999 $136,700

January 1, 2000 and beyond $141,300

The following are examples of the adjustments that NIH will make when salaries exceed the current salary limitation:


Amount of reduction due to salary limitation

($40,781 requested minus $38,416 awarded) $ 2,365


Council on Governmental Relations

1200 New York Avenue, N.W., Suite 320, Washington D.C. 20005



It is instructive in this regard to look at the legislatively mandated compensation cap under federal contracts. Here Congress did establish that the cap was to be based on a comparison to salaries paid in the private sector to major government contractors. Congress gave OMB very detailed guidance on what it considered reasonable, and the cap on compensation under contracts applies to all federal agencies. It seems fair to assume that if it had intended to establish reasonable compensation under grants from the entire Department, Congress would,have taken those steps, as it did for contracts, and applied the salary cap to all DHHS agencies. 

We agree that DHHS awarding agencies have an obligation to ensure that all costs are reasonable. We object strongly when those agencies stray from the guidance in OMIB Circular A-21 in determining reasonable compensation, by adopting a political cost saving measure targeted speciflically for NIH a n-d SAMHSA.

The President's National Science and Technology Council recently issued a report entitled, "Renewing the Federal Government-University Research Partnership for the 21' Century", which resulted from a Presidential Review Directive to review the causes of stress in the partnership and to make recommendations to strengthen the partnership. The NSTC report identified increased cost sharing by universities as a particular cause of stress, and specifically pointed to disincentives in contribution of voluntary faculty effort on research projects and limitations on reimbursement of costs. As faculty salaries have increased in the last ten years with essentially no increase in the NIH salary cap, universities have been forced to cost share at increasing levels and have established more stringent controls on cost sharing. Some auditors are treating the difference in what is allowed by NIH and what a researcher actually earns as required cost sharing. This is reducing the ability of faculty to contribute effort voluntarily. As discussed in more detail below, the salary cap has also had a disproportionate impact on physician investigators engaged in clinical research.

Since DHHS is the major funding source for university research, other federal agencies and private foundations are tempted to adopt the salary cap. We have seen this in attempts by the Army Breast Cancer Research Program and the National Cancer Society to impose the cap, arguing that they are funding the same researcher as NIH and therefore should not pay at a higher compensation level. They and others funding healthrelated research are likely to become more restrictive if DHHS were to extend the salary cap. The American Cancer Society, unfortunately, has adopted the cap as part of its grants policy. Extending the salary cap to other HHS agencies will only exacerbate the stress on the government-university partnership, rather than strengthen the partnership as called for in the NSTC report.

The Salary Cap is a Potential Impediment to Emerging Research Programs 

A major concern of the health campuses is the expansion of this nation's capacities to support clinical research. Clinical research is a component of medical and health research intended to produce knowledge essential for understanding human disease, preventing and treating illness, and promoting health. It embraces a continuum of studies involving interaction with patients, diagnostic clinical materials or data, or populations, in any of these categories: disease mechanisms; translational research; clinical knowledge, detection, diagnosis, and natural history of disease; therapeutic interventions including clinical trials-, prevention and health promotion; behavioral research; health services research; epidemiology, and community-based and managed care-based research (the latter significantly relying on agencies across the Public Health Service). The recently released report of the convocation of academic, industrial, and governmental representatives has called attention to the national need for supporting this research, particularly as revenues from patient care surpluses historically used to support costs related to this research have decreased. The AAMC's Task Force on Clinical Research has completed an 18-month effort to develop recommendations for medical schools and teaching hospitals to organize and to strengthen programs of clinical research. The Clinical Research Summit and the AAMC Task Force have noted that the sponsored research programs of the Agency for Healthcare Research and Quality, the Centers for Disease Control and Prevention, and other Public Health Service agencies will be critical for this undertaking. Extension of the salary cap across these agencies will exacerbate the problem of attracting physician investigators within the mix of health professionals needed to support this research, and will further tax limited institutional resources, many of which are already extensively over-leveraged. Indeed, the cap could actually divert institutional funds within academic medical centers away from sponsoring programs and recruiting faculty in emerging areas of health services and other population-based research. 

For all these reasons we believe extending the salary cap to agencies other th, an NIH and SAMHSA is poor public policy and should be withdrawn from consideration.

Thank you for the opportunity to provide these comments. 

Cc: Board of Directors
Research Compliance and Administration Committee
Steve Heinig, AAMC
George Leventhal, AAU