Pooled Fringe Benefit Rates

1
Pooled Fringe Benefit Rates

• Proposed Implementation Plan
• Clemson University
• February, 2006

2
What is a pooled fringe rate?

• Result of the process of taking all employee
  benefits for an employee group and averaging them
  into one fringe benefit rate for the group

3
Why a pooled rate?

• Provides a simpler approach process for
  administering budgets
• Considered to be a best practice of leading
  research institutions
• Reduces questions on specific benefits allowed
  under grant funding
• Provides an opportunity to recover employee
  benefit costs currently funded and managed at the
  institution level

4
Current Process

• Institutional Perspective
• EG funds are used for fringe benefits that could
  be allocated to other sources
• Terminal leave for employees paid from non-EG
  funded sources
• Insurance benefits for 9-month employees
• Tuition waivers for employees with non-EG
  funding sources
• Graduate health insurance subsidies for students
  funded from non-EG sources

5
Current Process

• Budget perspective
• EG and PSA fringe benefits are covered with
  institutional funds
• Difficult to estimate the funding level
• Salary decisions at departmental level
• Hiring decisions not based on benefit projections
• Ever-increasing fringe benefit escalation
• Departmental budgets pay for annual leave payouts
  
• Experienced rates sometimes include unidentified
  data anomalies

6
Current Process

• Departmental perspective
• Fringe benefits charged in detail
• Seven types
• 19 variable rates
• Inconsistent planning methods used by non-EG
  funded areas
• Payroll reporting includes detailed fringe
  activity

7
Proposed Change in Fringe Benefit Expense
Calculation
Actual Calculated Fringe Expenses
Pooled Fringe Benefit Rates
8
Why change now?

• More accurate fringe planning associated with all
  salaries
• Easier to calculate unexpended grant funds when
  closing out grant
• Places accountability at point of decision-making
• Monthly budget status reports will be simplified

9
What is basis of the pooled rate?

• Controllers office calculates and negotiates
  annual rates
• Compiles experienced rates from the previous year
  across all funds and seeks approval from the
  Department of Health and Human Services
• FICA
• Unemployment Tax
• InsuranceHealth, Dental, Life
• Retirement
• Long-term disability
• Workers Compensation
• Termination Pay
• Projects and negotiates anticipated rates for
  subsequent year

10
What are the new proposed rates?

• 9 Month Faculty 23.7
• 12 Month Faculty/Staff 29.2
• Students 2.9
• Part-time/Temporary 14.9

11
When are these rates effective ?
Payroll expenses incurred on or after July 1,
2006
12
Then what?

• Fringe expense calculations posted for each
  payroll
• Based on benefits eligibility of employee
• Fringe expense posted to detail chartfield string
• Terminal leave paid from fringe pool
• Rates are recalculated and resubmitted by
  December 31 annually for approval

13
Implementation Plan Year One

• FY07
• Existing EG/PSA fringe base
• Continue to manage centrally in year one to
  facilitate transition (Funds 10 and 15)
• Central terminal leave payout
• Propose a permanent reallocation from operational
  budgets equal to 1.0 of 12MO salary base in
  Funds 13 and 15 to fund central terminal leave
  payout
• Terminal leave payouts covered from pooled fringe

14
Implementation Plan Year Two

• FY08
• Existing EG/PSA fringe base
• Allocate permanently to budget centers based on
  FY07 costs in funds 10, 13 and 15
• Budget centers have full accountability for all
  fringe costs
• Terminal leave payouts covered from pooled fringe

15
Questions or Concerns