Pooled Fringe Benefit Rates

1. Pooled Fringe Benefit Rates Proposed Implementation Plan Clemson University February, 2006

2. 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

3. Current Process Budget perspective – • E&G and PSA fringe benefits are covered with institutional funds • Difficult to estimate the funding level • Salary decisions at budget center 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

4. 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

5. Proposed Change in Fringe Benefit Expense Calculation Actual Calculated Fringe Expenses Pooled Fringe Benefit Rates

6. 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

7. 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

8. 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%

9. When are these rates effective ? Payroll expenses incurred on or after July 1, 2006

10. 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

11. Implementation Plan — Year One • FY07 • Existing E&G/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 • Establish a separate budget node for terminal leave payout tracking • Establish four new expenditure nodes for each of the four pooled fringe rates—9MO, 12MO, Student, Part-time/Temp

12. Implementation Plan — Year Two • FY08 • Existing 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

13. Other questions or concerns