New F&A Rates (Spring 2025): Frequently Asked Questions for MIT PIs and Research Administrators

F&A rates are used by universities to obtain reimbursement from sponsors for the indirect costs of sponsored research awards — the facilities (mainly) and administrative systems and support that are critical components of organized research. The Institute annually negotiates its F&A rates with the Office of Naval Research (ONR), which is our cognizant agency. The rates are based on a detailed accounting of the Institute’s total indirect research costs, estimated future costs, and the estimated base of direct research funding to which the rate will be applied. Then, after the research has been conducted, detailed accounting is completed (and audited by the government) to ensure our recovery reflects our actual costs.

The change relates to NIH salary cap rules. The NIH has, for some time, capped the amount of a researcher’s salary that can be charged as a direct cost on an NIH award. What has changed is that new HHS rules apply the salary cap to indirect costs as well (even for institutions that negotiate their F&A rates with ONR). Specifically, HHS is newly requiring institutions to exclude the portion of all salaries above the NIH salary cap from the Institute-wide cost pools by which the F&A rate is determined. 

During MIT’s latest renegotiation of F&A rates with ONR, we have worked to determine separate F&A rates for HHS-funded research awards and all other federal research awards. The two rates enable MIT to meet HHS requirements for HHS awards, while seeking reimbursement for the appropriate allowable amount on all other, non-HHS awards.

No. This change is completely unrelated to the NIH’s recent effort to cap indirect cost rates at 15%, which is under litigation and has been blocked by a federal judge, pending appeal. Rather, the creation of a unique HHS F&A rate at MIT is a result of an independent change in HHS financial policy that took effect in 2024 and was incorporated into our recently completed negotiations with ONR.

HHS includes the National Institutes of Health (NIH), Food and Drug Administration (FDA), Centers for Disease Control and Prevention (CDC), Advanced Research Projects Agency for Health (ARPA-H), and a number of other agencies.

Research awards with direct or flow-through funding from HHS agencies must use MIT’s HHS F&A rate.

Yes. Federally funded research sponsored by any agency other than those under HHS will bear the standard F&A rate, as updated for FY25 or FY26. See MIT’s current F&A rates. (For rates on federal awards that support activity other than research, see federal non-research rates.)

Both the standard F&A rate and the HHS F&A rate should be applied to modified total direct costs (MTDC), as usual.

Use the new fixed rate that will be in effect during the period of performance (FY25 / FY26) that matches the sponsor (federal / HHS) and the location of the project (on-campus / off-campus). See MIT’s current F&A rates. Kuali Coeus allows you to select the appropriate rate for your proposal and provides a way to synchronize rates.

We recommend you wait to see if you receive an award and address the rates with RAS at that time. Proposals submitted with provisional rates will be (once awarded) subject to the new rates, so in some cases rebudgeting may be necessary, as any increase in F&A will need to come out of the project’s budget for direct costs. When submitting a revised budget, PIs and DLCIs must work with RAS.

With FY26 budgeting underway, MIT’s senior leadership team recognizes the challenge of managing research budgets amid the current federal funding dynamics. Please continue to raise any FY26 financial concerns with your DLCI leadership first, and then elevate issues to your dean (or the VPR, for VPR units) as needed, so that we can work with you on these concerns.

The applicable rates will be determined by the effective date (start date) of the award, competing renewal, or non-competing continuation (see the “Federal award scenarios” below). 

For the most part, MIT systems will apply these rates to new awards accordingly. Where changes need to be made retroactively, administrators in VPR/VPF will manually implement those changes. No action on the part of the DLCI is needed. Manual adjustments should be complete by the end of June.

Yes, per HHS policy, MIT’s new HHS F&A rates will need to be applied to these awards according to certain criteria, as outlined in the “Federal award scenarios,” below.

For these awards, MIT systems will apply an FY25 rate through June 30. Because the new fixed FY25 rate is the same as the provisional FY25 rate, proposals that budgeted 59.0% on campus or 6.5% off campus will see no change in the rate applied to the award during FY25.

As of July 1, the FY26 F&A rate of 62.0% on campus / 5.9% off campus will apply, and this rate will remain fixed for the life of the award.

For these awards, MIT systems will apply the FY26 rate of 62.0% on campus / 5.9% off campus, and that rate will be fixed for the life of the award.

Beginning on the effective date of the award, these will bear the new FY25 HHS rate of 58.3% on campus / 5.4% off campus. 

On July 1, 2025, that rate will adjust to 61.3% on campus / 4.8% off campus. The FY26 rate will then be fixed for the life of the award.

Beginning on the effective date of the award, these will bear the FY26 HHS rate of 61.3% on campus / 4.8% off campus. This FY26 rate will be fixed for the life of the award.

When a non-competing continuation with an effective date on or after July 1, 2024, is issued on an HHS award, the FY2025 HHS F&A rate (58.3% on campus / 5.4% off campus) will apply retroactively. The FY2025 HHS F&A rate will apply to expenses incurred starting on the effective date and through June 30, 2025. 

On July 1, 2025, the rate will adjust to 61.3% on campus / 4.8% off campus, and this FY26 rate will be fixed for the life of the award.

MIT systems will apply the fixed F&A rate (the non-HHS rate) to these awards as expenses post, according to the fiscal year and on-campus/off-campus location. (MIT’s separate F&A rate for HHS has no impact on these awards.) The F&A rate on these awards during FY25 will continue to be 59.0% on campus / 6.5% off campus, and then the FY26 rate (62.0% / 5.9%) will apply to expenses after July 1, 2025.

Under-recovery of F&A costs occurs when a sponsor does not fully reimburse MIT at the Institute’s federally negotiated F&A rate. In these cases, MIT requires other funding sources to be used to cover F&A costs. Sponsored research projects with under-recovery are reviewed by the DLCIs and, if approved, funded using a combination of centrally allocated resources and local resources.

MIT's under-recovery commitments are covered by a combination of central resources and supplemental (local) DLCI resources. For next year, the Institute is increasing central resources for under-recovery on a one-time basis to account for the higher FY26 F&A rates. Details about the FY26 allocations will be shared later this year. 

No. MIT’s negotiated F&A rates for HHS awards are slightly lower than our negotiated F&A rates for other federal sponsors. While this new rate type for HHS projects causes MIT to recover less of the indirect costs of research, the difference will be funded centrally and it is not necessary to submit any under-recovery request for these projects.

Note: Contact your RAS contract administrator if a federal solicitation caps F&A recovery at a rate other than the rate MIT has negotiated with ONR.