WHY IS THIS INITIATIVE IMPORTANT?
Benefit costs are a significant and growing share of university expenditures. Benefit costs include the University’s contributions to retirement, Social Security, Medicare, health insurance, post-retirement health insurance, unemployment, and worker’s compensation. For FY 2016, benefit costs alone totaled over $260M (34% of salaries). By way of comparison, total University expenditures in the same year for all campus building utilities, equipment, supplies, and vehicles totaled approximately $204M.
Benefit costs associated with state-supported positions are budgeted and reimbursed centrally, but salaries are budgeted and reimbursed within each hiring unit. This practice obscures the total cost of employment and, consequently, the total cost of state-supported operations for each unit. Salary and benefit costs for all other funding sources are already budgeted and reimbursed by the same fund source. Accurately representing the state-supported figure to the end user and consistently approaching this expense across fund sources are major goals of the redesign.
As part of the Budget Model Redesign project, the University is changing the accounting for fringe benefits. The change will greatly simplify accounting, budgeting, and projection of fringes, will adopt a widely used best practice of the national college/university community, and will improve financial decision-making.
In FY20, the University will begin charging fringe costs based on pooled fringe rates to accounts rather than actual fringes. Rates will be established for all wage object codes grouped by benefit eligibility and employee classification. The University has submitted a fringe rate proposal to the U.S. Department of Health and Human Services (DHHS) with the intent to use these negotiated rates for all types of accounts, regardless of fund source.
Please visit the Fringe Rates page to view updated information on annual rates.
This project is sponsored by the Office of the President and the Office of the Senior Vice President and Provost, and is supported by the Administrative Modernization Program.