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. 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

5. 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

6. 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

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? • 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

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 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 • Terminal leave payouts covered from pooled fringe

14. 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

15. Questions or Concerns