Pooled Fringe Benefit Rates

Proposed Implementation PlanClemson UniversityFebruary, 2006

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

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

Current Process

Institutional Perspective — E&G funds are used for fringe benefits that

could be allocated to other sources Terminal leave for employees paid from non-E&G

funded sources Insurance benefits for 9-month employees Tuition waivers for employees with non-E&G

funding sources Graduate health insurance subsidies for students

funded from non-E&G sources

Current Process

Budget perspective – E&G 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

Current Process

Departmental perspective – Fringe benefits charged in detail

Seven types 19 variable rates

Inconsistent planning methods used by non-E&G funded areas

Payroll reporting includes detailed fringe activity

Proposed Change in Fringe Benefit Expense Calculation

Actual Calculated

Fringe Expenses

Pooled Fringe Benefit Rates

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

What is basis of the pooled rate?

Controller’s 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 Insurance—Health, Dental, Life Retirement Long-term disability Worker’s Compensation Termination Pay

Projects and negotiates anticipated rates for subsequent year

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%

When are these rates effective ?

Payroll expenses incurred on or after

July 1, 2006

Then what?

Fringe expense calculations posted for each payrollBased on benefits eligibility of employeeFringe expense posted to detail chartfield

stringTerminal leave paid from fringe pool

Rates are recalculated and resubmitted by December 31 annually for approval

Implementation Plan — Year One

FY07Existing E&G/PSA fringe base

Continue to manage centrally in year one to facilitate transition (Funds 10 and 15)

Central terminal leave payoutPropose 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

Implementation Plan — Year Two

FY08Existing E&G/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

Questions or Concerns