Ad Hoc Committee on Summer Benefits Rate Summary

An Ad Hoc Committee was formed to address concerns raised by 9-month faculty regarding the full fringe benefits charged on their summer salaries derived from grants or contracts. The faculty feels that since benefits are paid during the academic year, charging them in the summer is unnecessary. The committee investigated the implications of the current policy, procedures, AU policy changes, and an escrow analogy to explain the situation. The AU fringe rate for FY 2017 was also calculated and discussed.

• Committee
• Summer Benefits
• Faculty
• Fringe Benefits
• Policy

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1. Ad Hoc Committee on Summer Benefits Rate

2. Committee Charge (July 2016) Certain 9-month faculty charge extramural grants for the time they work on projects during the summer. There is a question about the charge for fringe benefits against those salaries since faculty believe that the benefits have been paid for during the normal course of the nine-month academic year. Determine if there are inappropriate charges being applied and if yes, how we might get this corrected. If no, develop an explanation of the current charges so that faculty can understand why they need to be levied.

3. Issue presented 9 month faculty concerned about full fringe (33%) benefits on summer salary 9 month salary derived from grants, contracts, or pools of funds from salary savings No notable communication about change in policy

4. Implications of the current policy for 9 month faculty Practically, 3 months with a 33% fringe rate is like earning 4 months of salary from grants Most grants limited to 1-2 months of salary in budget Management of multiple projects Reserve funds for salary also charged full fringe

5. Procedures Current AU policy Fringe practices at peer institutions Collect information Meetings Conclusions Budget services Summary Suggestions Committee discussions

6. AU Policy and when it changed Effective FY2010, fringe benefits became based on pooled rate rather than actual Pooled rate selected for ease of budgeting Employee portion of fringe paid coincident with pay schedule Employer portion paid over 12 months Source: Financial Liason meeting Aug 31, 2009.

7. Escrow Analogy University wide fringe is a pool funds similar to escrow account for real estate When the pool is overdrawn fringe rate is increased, decreased when running a surplus

8. AU fringe rate calculated as: FY 2017 Summary Rates Full-Time Part-Time Graduate 13.0% 6.8% 7.3% 0.1% 0.1% 0.2% 0.1% 2.9% 0.5% 0.1% 0.3% 0.1% 0.6% 32.0% 2.7% 6.7% 0.5% 0.0% 0.0% 0.1% 0.1% Retirement FICA/Medicare Health Insurance Life Insurance Long-Term Disability Worker's Compensation Unemployment Comp Retiree Benefits Employee Tuition Remission Sabbatical Pay Termination Pay Stop Loss Carry Forward Total Fringes 0.0% 5.4% 0.2% 0.6% -1.1% 9.6% 0.1% 5.6% *Provided by Larry Teeter *Provided by Larry Teeter

9. Do peer institutions reduced summer fringe rates? Most do not. UFL, UA, LSU UFL uses RCM and has pooled fringe; no reduction for 9 month faculty paid over summer Others had more complex calculations or fixed rate plus health care costs

10. Committee Discussion Appropriateness of full fringe Should the university reduce fringe rate on 9 month research faculty to incentivize grant writing? Faculty could invest fringe savings into their programs

11. Are these charges appropriate? Yes, in part. AU employer portion must be paid for 3 months for all 9 month employees If paid from a grant, there is likely a surplus going into the pool What if paid from reserve funds? Reserves are savings from previous scholarly activity Full fringe can depletes reserves between grants

12. Should the summer fringe rate change? ~200, 9 month faculty take summer salary A decrease for one group will increase the rate for everyone else Less funds paid into fringe would increase funds for research\scholarship

13. Conclusions Fringe rates are appropriate because university budgets are annualized and costs must be paid Communication about the change to a pooled fringe rate was poorly handled

14. Conclusions Pooled fringe rate is the best policy but with impacts on 9 month faculty the fund summer salary Should fringe rate on summer salary change to incentivize research?