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ETA Salary Cap Testing
Frequently Asked Questions (FAQs)
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 2012, the salary cap =
$179,700.
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ETA Salary Cap Testing
Frequently Asked Questions (FAQs)
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.
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ETA Salary Cap Testing
Frequently Asked Questions (FAQs)
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 31st each year. Consequently, we recommend the
following target dates be used to complete salary cap testing:
 For RWB staff salary testing = 2-28-xx;
 For subrecipient staff salary testing = 3-31-xx; and
 Send Annual certification form to DEO by April 15, 2013
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ETA Salary Cap Testing
Frequently Asked Questions (FAQs)
Example A: Annual Gross Compensation Less Than the Cap
Adam’s W-2 for 2012 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 2012 salary cap, but since his gross compensation is below
$179,700 no additional testing is required.
Example B: Annual Gross Compensation Over the Cap
Bryan’s W-2 for 2012 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 2012 salary cap of $179,700, 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 2012 is $20,300 ($200,000
- $179,700).

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 $179,700 = $89,850) and the amount in excess
of the allowable 2012 salary cap would be $10,150 (50% of $200,000 = $100,000 –
$89,850).
Example C: Part Time Employee
Charlie’s W-2 for 2012 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 2012 salary cap of $179,700 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 $179,700 = $71,880) and the amount in excess of the allowable 2012 salary cap
would be $28,120 ($100,000 - $71,880).

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 $179,700 = $35,940) and the amount in excess of the allowable 2012 salary
cap would be $14,060 (50% of $100,000 = $50,000 – $35,940).
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ETA Salary Cap Testing
Frequently Asked Questions (FAQs)
Example D: New Employee Hired During the Year
Danny’s W-2 for 2012 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 2012 salary cap of $179,700 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 $179,700 = $44,925) and the amount in excess of the allowable 2012 salary
cap would be $5,075 ($50,000 - $44,925).

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 $179,700 = $22,462) and the amount in excess of the
allowable 2012 salary cap would be $2,538 (50% of $50,000 = $25,000 - $22,462).
Examples involving salaries paid by indirect allocations:
Additional instructions may be required on a case-by-case basis. Please contact DEO for
more information.
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