Holiday Cheer! The Compensation Limit for 2021 is Here!

December 8, 2020

The holiday season means you’re probably knee-deep into budgeting cost for the upcoming year.  When you are estimating compensation or pay increases for the employees and executive team, take note of any amounts in excess of the maximum allowable limit.

For the year ending December 31, 2021, the maximum allowable compensation that can be claimed is $568,000.  Any compensation above that amount must be recorded as an unallowable cost.  This limit is calculated in accordance with Section 702 of the Bipartisan Budget Act of 2013 (BBA; Pub. L. 113-67, December 26, 2013).

Aronson has calculated the limit as follows:

The compensation cap applies to contracts awarded after June 24, 2014.  It restricts the sum of any contractor employee’s allowable wages, salaries, bonuses, deferred compensation, and contributions to defined contribution pension plans per FAR 31.205-6(p).

Regardless of whether the compensation for the Executive team falls below or meets the limit, you must have supporting information or analysis that shows the reasonableness of the compensation amounts being claimed.

If you have further questions about Executive Compensation, Budgeted Indirect Rates, or Incurred Cost Submissions, please contact Donna Dominguez, Deirdre Bond or any of our government contracting specialists at 240.630.0702