FRINGE BENEFIT RATES. Introduction: No new fringes created. New system adopted effective July 1, 2003.

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1 FRINGE BENEFIT RATES Introduction: Change in Cost Allocation Methods for Fringe Benefits; impacts the distribution of Fringes to Grants, Budgets, Move from employee specific, date specific procedures to group specific by year costing. No new fringes created. New system adopted effective July 1,

2 Comprehensive Fringe Benefit System Place every employee in a group (only one group). Allocate fringes to each group-actual, headcount. Group fringes divided by group compensation to derive a group rate. THINK AVERAGES. Fringes distributed based on the group rates per year. ALL PAY TYPES SUBJECT TO FRINGE, uniformly throughout the year Qualify more costs as fringes employee waivers, termination pay, sabbaticals improves recovery. Disposition of variances between rates charged and actual rates. Budgeting easier, reporting easier, records are cleaner. 2

3 Who is using the rate system? Number of rates in use varies from school to school, every school in the Controller s Group uses a comprehensive rate system. Tufts Duke BU Miami Rice Vanderbilt Cal Tech Northwestern Emory So Cal Case Western George Washington Stanford Princeton (one rate) 3

4 Employee Groups Rates for Each Group 1. Uptwn Faculty 22.1% 2. Uptwn Staff 26.6% 3. HSC Faculty 21.7% 4. HSC Staff 26.3% 5. FPP Physicns 15.2% 6. Temp/Part T/ students 4.2% 7. Medcl Resdnts 8.1% Benefits Included 1. Health/Life 2. Retirement 3. FICA 4. Tuition Waivers for employees 5. Termination pay /Sabbatical pay 6. Unemployment/Work Compensation 4

5 Example Rate Calculations, Uptown Faculty 5

6 Retirement Programs FICA Actual $ 3,452,613 Standard Retirement Actual $ 4,046,754 Total $ 7,499,367 Insurance Programs: Health/Life Insurance Headcount $ 2,450,867 Death Benefit Headcount $ 3,584 Workers Compensation Headcount $ 140,746 Unemployment Headcount $ 15,737 Total $ 2,610,934 Other: Termination Pay Actual $ - Sabbatical Leave Actual $ 1,668,487 Daycare Headcount $ 33,040 Tuition Waiver Actual $ 69,890 Employer Assisted Housing Headcount $ 3,929 Total $ 1,775,347 Prior Year Adjustments: N/A - Initial proposal year N/A $ - Total Fringe Benefit Cost Pool $ 11,885,648 Salary Base $ 53,698,536 Fringe Benefit Rate 22.1% 6

7 Where are we with the Project? Previously reviewed with President s Cabinet, Admin. Council (twice), Department Bus. Officer Network (twice) at the Medical School. Reached agreement with DHHS-DCA this summer. Rates set for fiscal 2004 and 2005, propose rates for 2006 by 12/31/04 based on 2004 activity. Communicated rates in recent memo. 7

8 Steps Still Open Complete data processing preparations for 2004, budget model adjustments made. Modeling for units will be complete with the 2004 budget bottom line starting points will include implementation of fringe benefit rates. Evaluate impact on grant accounts. File amended Disclosure Statement by July 1,

9 Impact on Grant Accounts FRINGES will be generally higher on project accts. All compensation will be subject to a group rate: impacts use of one-time pays, summer salary, stipends, etc. Relatively minor absolute dollar increases will be posted over many project accounts. Where we can t re-budget, we can cost share. New proposals will feature these rates. 9

10 Example Grant Accounts National Institutes of Health (NIH) National Science Foundation (NSF) We have re-budget authority. 10

11 National Institute of Health example One time pay $ 4,099 Research Assts 8,500 Subtotal 12,599 Posted Fringe 314 Effective rate 2.5% New rates Faculty 22.1% Students 4.2% New faculty fringe 907 New student fringe 357 New fringe total 1,264 Difference $

12 National Science Foundation example One time pay $ 7,236 Research Assts 9,393 Subtotal 16,629 Fringe 855 Effective rate 5.1% New rates: Faculty 22.1% Student 4.2% New Fac Fringe 1,599 New RA fringe 394 Total new fringe 1,993 Difference $ 1,138 12

13 Abbreviated Fringe Reallocation example Description DMC Unit 1 DMC Unit 2 Grants Overall Net Bottom Line, 2003 $ 2,000,000 $ (2,500,000) $ - $ (500,000) Fringe reallocations: - Fringe transferred in (300,000) (500,000) (800,000) Fringe transferred out 800, ,000 Subtotal 1,700,000 (1,700,000) (500,000) (500,000) Grants Rebudgeted 100, ,000 New cost share budgets (400,000) 400,000 - Revised starting point for 2004 budgets $ 1,700,000 $ (2,100,000) $ - $ (400,000) 13

14 Summary Advantages Supports proposal preparation Agencies generally prefer rate system Supports billing and reporting Reports no longer delayed for fringe calculations Supports budgeting Disadvantages Perception that accuracy is impacted 14

Direct Charging vs. Fringe Benefit Rates and the Process of Changing to a Fringe Benefit Rate Methodology. Deston Halverson Huron Consulting Group

Direct Charging vs. Fringe Benefit Rates and the Process of Changing to a Fringe Benefit Rate Methodology Deston Halverson Huron Consulting Group Agenda Direct Charging Fringe Benefits verse Fringe Benefit