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Salary
Cap Administration
Revised: December 12, 2007
Summary
This document outlines the procedures for
implementation of salary caps set by sponsoring agency regulations,
i.e., a maximum reimbursement for project participants. The cap is
either a rate or an amount of pay.
Policy
Virginia Commonwealth University will comply
with all requirements of sponsoring agencies for awards accepted by the
University. If an agency specifies a salary cap, the University will
ensure that any salary above that rate or amount will not be charged to
the award, but will be treated as voluntary committed cost sharing. The
existence of a salary cap may influence the University’s willingness
to propose, or to accept, a specific award.
Procedures
1. Definitions
A salary cap is defined as a maximum amount
or rate of compensation for personal services that a sponsor
will reimburse the University on a sponsored program.
The limitation may be stated in terms of an amount
of pay that may be charged to an agreement, regardless of the rate
of pay of the individual to whom it applies. For example, if an amount
for reimbursement is capped at $100,000 for an annual budget period
and Dr. Jane Doe earns $200,000 during that period, it would be
allowable to charge up to 50% of her salary to the award during that
period but any effort beyond that amount would have to be cost
shared.
The limitation may be stated in terms of a rate
of pay that may be charged to an agreement, regardless of the total
amount of pay that is charged for the individual to whom it applies.
For example, if a rate of pay for reimbursement is set at
$100,000 annually and Dr. Doe still earns $200,000 annually, the
University would have to cost share one half ($100,000/$200,000) of
Dr. Doe’s salary for whatever percent effort Dr. Doe worked on the
project.
As of August 2001, the only agencies with
established salary caps are the National Institutes of Health (NIH)
and the Department of Defense (DOD). The NIH cap is currently
(August 2001) set at a pay rate of $161,200 per year for any
individual directly charged to an NIH award. The DOD cap
("Benchmark Compensation Amount", applicable to contracts
only, is currently (August 2001) set at a total compensation rate
(all forms of remuneration for services, and related costs that
would be considered fringe benefits) of $374,228 per federal fiscal
year. These limits change periodically.
Institutional salary is defined as
the contracted salary approved by appropriate University officials
following prescribed administrative procedures.
2. Proposal
Preparation
The University’s practices in submitting
proposals recognize and comply with the policies, guidelines and
practices of the intended sponsoring agency.
a. Submitting Proposals to NIH
When submitting competing NIH
proposals, the University will calculate requested salary
amounts based on the full institutional salary rate of each
individual proposed to work on the project. NIH has indicated
that the awarded budget will reflect any applicable salary cap.
For example, for Jane Doe, M.D., with an institutional salary of
$175,000 and 20% annual effort, the salary budgeted on a
competing proposal should be $35,000 ($175,000 x 20%).
When submitting non-competing
continuation NIH proposals, if an individual’s rate of pay
exceeds the established cap, the University will calculate the
proposal budget based on the maximum allowed (capped) salary
rate, because the reduction to the cap has already been
recognized by NIH in computing the approved budget target for
the continuation year. For example, for Jane Doe, M.D., with an
institutional salary of $175,000 and 20% annual effort, the
salary budgeted on a non-competing proposal should be $32,200
(the capped rate of $161,200 x 20%).
b. Submitting Contract proposals to DOD.
When submitting proposals for DOD
contracts, the University shall make all reasonable efforts to
avoid proposing an amount of effort for any individual which
will cause the total compensation (salary and benefits) to
exceed the DOD compensation cap. Computing the effect of this
limitation on any specific proposal is complex, because the
limitation applies according to the federal fiscal year, it
changes periodically, and is set at a level that few, if any VCU
proposals will be affected. If the amount of salary (annual
salary X % effort) being proposed for any individual exceeds
$290,000 per year, contact the Office of Sponsored Programs for
assistance.
3. Project Administration
Virginia Commonwealth University’s procedures
in administering awards involving a salary cap will be consistent
throughout the University.
If unobligated funds are carried forward
into a subsequent budget period, they are subject to any salary cap
in effect within that subsequent budget period.
a. Rate Limited Caps
When the salary cap is in the form of a
limit in the rate of pay, the maximum salary chargeable
to the award in any pay period is the capped rate divided by the
number of pay periods in a year. For example, Jane Doe, M.D.,
who has an institutional salary above a $125,000 rate cap
and is paid twice monthly on a 12 month contract, cannot have
salary charged to the award at a rate of more than
$5,208.33 per pay period (i.e., the amount charged will be the %
effort times that rate cap for a pay period).
When an individual’s salary rate
exceeds the cap established by the funding agency, the
difference between that individual’s salary rate and the
maximum rate allowed under the cap must be charged to a
voluntary cost sharing index created for this purpose. This
difference must be reported as voluntary committed cost sharing
on the effort certification report. In Dr. Jane Doe’s case,
the $50,000 annual salary difference must be charged to a
voluntary cost sharing index at a rate of $2,083.44 per
pay period (i.e., the amount charged will be the % effort times
that rate difference for a pay period). For example, 20%
effort x $2,083.44 = $416.67 chargeable to the voluntary cost
sharing index.
b. Amount Limited Caps
When a salary cap is in the form of a limit
in the amount of pay, the maximum salary chargeable to
the award in any pay period is the capped amount divided by the
number of pay periods in a year. When an individual’s salary amount
exceeds the cap established by the funding agency, the
difference between that individual’s salary amount and the
maximum amount allowed under the cap must be charged to a
voluntary cost sharing index created for this purpose. This
difference must be reported as voluntary cost sharing on the
effort certification report.
Each situation involving an amount cap
must be individually evaluated, taking into index the makeup
of the capped amount (e.g., salary, salary plus benefits, etc.),
the period to which the cap applies (e.g., payments within a
specific federal fiscal year, payments within an award budget
year, etc.) and other factors. Every reasonable effort should be
made to calculate the applicable limits and cost sharing when a
capped person’s pay action is initiated. However, at times it
will be necessary to adjust the amounts charged to the project
and cost sharing accounts after the fact.
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