Purpose: The questions and answers below are provided to offer guidance on the annual ETA Salary Cap Testing procedures to be performed by each entity on its own staff salaries and that it should be passing down as a requirement to its subrecipients. The information has been reviewed and feedback provided by USDOL, ETA in the development of this guidance. Q1: What is the ETA salary cap? A: The salary cap limits salary and bonus payments to individuals and applies to all ETA appropriated funds, including grants, contracts, and interagency agreements. Public law 109-234 contained the salary cap for all Employment and Training Appropriated funds. It applies to all funds available June 15, 2006 or later. Q2: Are there any exclusions? A: H-1B funded projects; disaster unemployment assistance; WIA incentive grants; and UI benefits. The reason being these are not funded with ETA appropriated funds but other sources. Job Corps is also excluded from this; however they have a separate limitation that is applicable. Q3: What is the basis for the cap? A: The amount is tied to the Federal Executive payscale specific within the Office of Personnel Management and is set to be equal to Executive Level II. The level is updated annually in January. Q4: Who is subject to the ETA Salary Cap? A: All RWB employees receiving wages and/or bonuses paid from ETA appropriated funds. This requirement also applies to all subrecipient employees with salaries paid by these programs. It applies to funds provided by contract, grant or interagency agreement as well as to direct costs or costs charged as part of an Indirect Cost Rate. Vendors are not subject to the limitation. Q5: What is the annual salary cap amount? A: The annual salary cap amount changes each year based on updates to the federal government s maximum Executive Level II rate. For calendar year 2014, the salary cap = $181,500. Page 1 February 23, 2015
Q6: Where can I find more information on the salary cap? A: US DOL ETA issued implementation guidance for the salary cap in Training and Employment Guidance Letter 5-06. Additionally, the topic was addressed in a webinar on September 22, 2006 entitled: Implementing the Salary and Bonus Limitations in PL109-234. All webinars are archived on www.workforce3one.org. The link to this webinar is: https://www.workforce3one.org/view/web121/info. Q7: What payments are subject to the salary cap? A: Salary, bonuses, monetary awards and monetary prizes. Note: the cap is applied not only to the gross amount of salary and bonus, but also to the rate at which the salary is paid. Therefore, the salary and bonus cap that applies to individuals who do not work full time on ETA funded projects or who are only employed part time or part of the year will be prorated based on the amount of time the individual is dedicated to the ETA funded grant. See below for examples. Q8: Where do we find the amounts subject to the salary cap for individual staff? A: Obtain the annual W-2 Forms and/or other equivalent data from calendar year payroll records. Identify the full amount of wages/bonuses paid and use this amount to begin your analysis calculations. Note: Amounts shown on the W-2 Forms should be examined carefully since they have been adjusted in many cases for items such as retirement contributions, medical flexible spending accounts (FSAs) and other cafeteria plan payments. All such deferred compensation amounts (whether paid or only accrued by the RWBs) normally reported for W-2 purposes are subject to the salary cap. Q9: Are there any circumstances when this general rule will change? A: Additional testing tasks will be needed if any of the following circumstances apply: RWB or RWB subrecipients have part-time staff with salary costs charged to ETA-funded programs RWB or RWB subrecipients have staff that were hired and worked for only a portion of the calendar year When these circumstances exist only a pro-rata portion of the annual salary cap can be used for each staff member. Salary cap calculations should be performed on a case-by-case basis, and other information the RWB will need to obtain includes (1) the start or hiring date during the calendar year for these staff members and/or (2) what FTE % is assigned to each part-time staff member. Page 2 February 23, 2015
Q10: What isn t subject to the salary cap? A: Fringe benefits and non-monetary compensation. For example, fringe benefits, insurance premiums, or pension plans paid by a recipient or subrecipient are not included in this calculation. Q11: Can salaries subjected to the salary cap be supplemented? A: Any salary payments that exceed the salary cap cannot be paid used ETA appropriated funds or other federal funds. The grantee may use non federal funds to supplement salaries above and beyond the salary cap. Q12: When do RWBs need to have salary testing done? A: W-2 information (or equivalent data from calendar year payroll files) should be used as the first step in testing. This information is generally prepared by all entities and ready to submit to the federal government by January 31 st each year. Consequently, we recommend the following target dates be used to complete salary cap testing: For RWB staff salary testing = 3-31-xx; For subrecipient staff salary testing = 3-31-xx; and Send Annual certification form to DEO by April 1, 2015 Page 3 February 23, 2015
Example A: Annual Gross Compensation Less Than the Cap Adam s W-2 for 2014 includes $150,000 of gross compensation. He has worked full time all year on ETA-funded grant programs. Based on this information, Adam is subject to the 2014 salary cap, but since his gross compensation is below $181,500 no additional testing is required. Example B: Annual Gross Compensation Over the Cap Bryan s W-2 for 2014 includes $200,000 of gross compensation. He has worked full time all year on ETA-funded grant programs. Based on this information, Bryan is subject to the 2014 salary cap of $181,500, and additional testing is required. If 100% of Bryan s salary costs benefited ETA-funded programs (whether directly or indirectly charged), the amount in excess of the salary cap for 2014 is $18,500 ($200,000 - $181,500). If, on the other hand, Brian had not worked 100% time on ETA-funded grant programs, but instead only 50% time, then 50% of Bryan s salary costs benefited ETA-funded programs (whether directly or indirectly charged). Therefore, Bryan s salary is eligible for 50% of the annual salary cap (50% of $181,500 = $90,750) and the amount in excess of the allowable 2014 salary cap would be $9,250 (50% of $200,000 = $100,000 $90,750). Example C: Part Time Employee Charlie s W-2 for 2014 includes $100,000 of gross compensation. He has worked part time all year (0.40 FTE) on ETA-funded grant programs. Based on this information, Charlie is subject to the 2014 salary cap of $181,500 and additional testing is required. If 100% of Charlie s salary costs benefited ETA-funded programs (whether directly or indirectly charged), Charlie s salary is eligible for 40% (.4FTE) of the annual salary cap (40% of $181,500 = $72,600) and the amount in excess of the allowable 2014 salary cap would be $27,400 ($100,000 - $72,600). If 50% of Charlie s salary costs benefited ETA-funded programs (whether directly or indirectly charged), Charlie s salary is eligible for 20% (.4FTE x 50%) of the annual salary cap (20% of $181,500 = $36,300) and the amount in excess of the allowable 2014 salary cap would be $13,700 (50% of $100,000 = $50,000 $36,300). Page 4 February 23, 2015
Example D: New Employee Hired During the Year Danny s W-2 for 2014 includes $50,000 of gross compensation. He was hired in October and worked on ETA-funded grant programs for three months. Based on this information, Danny is subject to the 2014 salary cap of $181,500 and additional testing is required. If 100% of Danny s salary costs benefited ETA-funded programs (whether directly or indirectly charged), Danny s salary is eligible for 25% (3mos/12mos) of the annual salary cap (25% of $181,500 = $45,375) and the amount in excess of the allowable 2014 salary cap would be $4,625 ($50,000 - $45,375). If 50% of Danny s salary costs benefited ETA-funded programs (whether directly or indirectly charged), Danny s salary is eligible for 12.5% (3mos/12mos x 50%) of the annual salary cap (12.5% of $181,500 = $22,687.50) and the amount in excess of the allowable 2014 salary cap would be $2,312.50 (50% of $50,000 = $25,000 - $22,687.50). Examples involving salaries paid by indirect allocations: Additional instructions may be required on a case-by-case basis. Please contact DEO for more information. Page 5 February 23, 2015