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Understanding the NIH Salary Cap: Guidelines and Procedures for Compensation Limits

The NIH salary cap sets a maximum compensation limit for individuals funded by NIH grants. For the year 2004, this limit is $175,700 annually. Any portion of salary exceeding this cap cannot be funded by federal sources and may require alternate funding. The cap is updated yearly, and institutions like Caltech provide resources, such as spreadsheets, to assist in calculating appropriate salary allocations in compliance with NIH guidelines. This document outlines the necessary procedures for payroll transactions and maintaining accurate records regarding salary payments from NIH funds.

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Understanding the NIH Salary Cap: Guidelines and Procedures for Compensation Limits

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  1. NIH Salary Cap • NIH imposes a limitation on the rate of pay individuals may receive as compensation from NIH funds • For calendar year 2004, the cap is $175,700 per year • NIH also mandates that the portion of the individual’s salary that represents the difference between the capped rate and the actual rate may not be received from federal sources • The rate can and usually does change on an annual basis

  2. NIH Salary Cap For example: • PI with a salary of $200,000 per year • 25% paid by an NSF grant; 25% by an NIH grant; 50% by CIT funds • The PI may only be paid $43,920 from NIH funds (he will be paid $50,000 from NSF funds) • The difference of $6,080, which exceeds the NIH cap, can be paid from non-federal sources

  3. NIH Salary Cap • At Caltech an excel spreadsheet is available to assist division/center personnel in calculating the appropriate percent of time needed to input into the payroll system in order to maintain consistency with the NIH salary cap • This document also serves the purpose of providing an audit trail http://atc.caltech.edu/Finance/policies.htm

  4. NIH Salary Cap Procedure: • Prior to initiation of any payroll transaction from NIH funds, the division determines which employees are above the salary cap • Divisions utilize the NIH salary cap template to determine the percentage of salary that can be charged to relevant NIH grants, and what portion should be charged to non-federal funds • Divisions should retain completed NIH salary cap template as partof the record of that payroll transaction

  5. NIH Salary Cap Procedure: • On annual basis, and at the end of each NIH award’s competitive cycle, Project Accounting will run a report on that award to verify that all salary payments were consistent with the NIH salary cap in effect at the time of the payment, and work with the Division/Center to make necessary adjustments

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