Costing Policy & Analysis
Composite Benefit Rate FAQ
- The composite rates seem high. Why?
The new rates are based on actual benefit expenses for 2013-14. The increases in the rate in the subsequent years are the result of restarting retirement contributions and increases in health benefits costs, which went into effect in 2014-15. The increase in the rate is not related to the adoption of composite rates, but a reflection of increased actual costs.
- The composite rates seem low. For example, our lab staff includes academic titles of Post-doc, Project Scientist and Jr. Specialist. Based on December 2014 payroll, their actual benefit rates ranged from 13% to 69% depending on each employee individual benefit options. If we use a 30% fixed benefit rate for an employee who is actually at 69%, there would be a huge shortage in the benefits category vs. the actual costs. How would a PI handle this?
One of the advantages of moving to a composite benefit rate is that a department will no longer need to account or budget for benefit rates that are unique to each employee. This should make grant budgeting easier to manage because PIs need only manage the costs that will be charged through the fringe benefit rate. They do not need to be concerned with the wide variation of benefits for employees doing the same job.
All actual costs to the University will still be accounted for, but departments will not see them in their ledgers. Departments will not be responsible for any shortages resulting from the composite benefit rate as compared to actual costs. The rate vs. actual costs will be reconciled at year-end, and any over- or under-recovery will be adjusted in future year rates, similar to a recharge activity.
- How will the new rate structure affect existing awards?
- We understand that many researchers have multi-year awards and proposals which were approved with different fringe benefit rates than the composite rates. The campus is considering the creation of a funding pool to cover shortfalls created by the transition to composite rates to mitigate the impact to sponsored projects. This funding pool will not mitigate the impacts of increased health insurance costs or increased contributions to UC Retirement System. Regrettably, all project budgets will be negatively affected by actual cost increases, which are beyond the University's control.
If you have a sponsored project with an approved budget which will be significantly impacted by the change to Composite Fringe Benefit rates for reasons other than indicated above, you can submit your request to email@example.com for review by the campus committee. The request will need to include the following information for the committee review:
- Narrative describing how the change to Composite Fringe Benefit rates will impact the ability to perform the scope of the project
- Award number and FIS Account number
- Copy of the approved budget
- Staffing list of all individuals paid from the award and the impact to the award based on the change from charging actual fringe benefit costs to the Composite Fringe Benefit rate.
- Where do I get information on the actual calculations? Who can assist me with this?
- The calculation is actually very simple: applicable composite rate x (times) gross salary
The Kuali Financial System includes a Labor Distribution Module which will automatically charge the appropriate composite benefit rate based on the PPS attributes of the employee, whether they are eligible for the UC Retirement system (code U or B) and the title code. You can locate the retirement code for your employees in PPS, on the IGEN or IRET screens.
The Labor Distribution Module is new to UC Davis and provides functionality that is not available in DaFIS. It will be implemented in July 2011.
For guidance on how to use the rates in a proposed budget, contact the Office of Sponsored Programs.
For information about the rates themselves, refer to the Composite Benefit Rate section of the Accounting and Financial Services website, .
You may also contact Costing Policy and Analysis at (530) 752-1886 or firstname.lastname@example.org.
- What rate is used when an employee waives our medical benefits?
The composite fringe benefit rates are applied to all employees who are eligible for benefits regardless of whether or not they accept the benefit and regardless of which benefits options they elect.
- What happens when grants are submitted through one department, but employees' appointments are not in that department?
- There is no difference in the composite benefit rates for employees regardless of which department they work in. Composite fringe benefit rates are applied based on the salary amount and type of employee regardless of where the employee is appointed.
- Why do the composite rates not distinguish between academic year and summer appointment faculty?
- Composite fringe benefit rates are applied based on the salary amount and rate group the employee falls into regardless of when the employee is appointed.
Federal regulations require fringe benefits to be charged by aggregating fringe benefit costs on the basis of institution-wide salaries and wages of the employees receiving the benefits. The Composite Fringe Benefit rate is an average of all the benefits applicable to employees within rate groups based on attributes of the employees who fall into that group.
- What if a person is eligible for full benefits but is not appointed at 100% time?
The benefit cost for an employee is the applicable rate multiplied by gross salary. If the appointment percentage is lower, the salary is lower and, thus, the benefit cost will be lower, even if the employee receives full benefits. This is considerably simpler to calculate and also reduces benefit expenses for part-time employees as compared to the old method of calculating benefit costs.
- Must we use the new composite rates or can we use actual rates if we have them?
Once Composite Fringe Benefit Rates are implemented, we cannot mix between charging actual costs and composite benefit rates.
- How will benefits be charged to my Account with the composite rates?
The composite benefit rates represent the percentage that will be applied to the employee salary. This amount will be charged to the account for fringe benefit costs regardless of the actual costs to the university.
- If I am charged a composite rate that is different from my actual costs, who will be responsible for the difference?
Departments will not be responsible for any shortages from the benefit rate to the actual costs of your employees. The composite rates applied to gross salaries replace the actual benefit costs to your ledgers. The actual costs to the University will still be accumulated, but they will not appear in the ledger.
At year-end, Accounting & Financial Services will reconcile actual benefit costs incurred by the University with the amount charged using the composite benefit rates. Any over- or under-recovery will be adjusted in future year rates, similar to a recharge activity.
This averaging concept for fringe benefits is permitted per OMB Circular A-21 which allows fringe benefits to be charged by allocating a pool of fringe benefit costs on the basis of institution-wide salaries and wages of the employees receiving the benefits
- Why are there different rates for Campus compared to ANR?
There is a difference between ANR and UC Davis because the two organizations are accounted for and reported differently for financial purposes.
It was necessary to create separate rates for ANR because ANR's reconciliation of actual costs to the composite benefit rates is completed for Chart L whereas UC Davis uses Chart 3 & S. The difference in composite rates for similar employee groups can be attributed to a much smaller ANR population among which to spread the actual fringe benefit cost and the different makeup of employees at ANR.
- How do I project composite benefits costs beyond the provided schedules?
A standard escalation of 3% should be used for budgeting beyond the provided schedules.
The projected rates for FY 2015-16 and beyond are for budgeting purposes only. They are subject to change based on the adjustments from previous years' actual costs.
- How are the salary bands for health benefits factored into the fringe benefit rates?
One of the advantages of moving to composite benefit rates is that a department will no longer need to account or budget for benefits that are unique to each employee. This should make grant budgeting easier to manage because PIs need only manage the costs that will be charged through the fringe benefit rate. They do not need to be concerned with the wide variation of benefits for employees doing the same job.
- How will the university cover the actual benefits cost if the composite rate is lower than the actual benefit cost for a particular employee?
At year end, Accounting & Financial Services will reconcile actual benefit costs incurred by the University with the amount charged using the composite benefit rates. Any over- or under-recovery will be adjusted in future year rates, similar to a recharge activity.
- How can you charge benefits to DOS codes that have not historically been charged for all benefits?
- The federal regulations allow fringe benefits to be charged by allocating a pool of composite benefit costs on the basis of institution-wide salaries and wages of the employees receiving the benefits.
To move to a composite benefit rate:
- the entire pool of fringe benefits for a group of employees is divided by:
- the total salaries of the employee group to develop the fringe benefit rate.
- How do I account for leave with the composite benefit rate?
The Leave Assessment process is changing with the implementation of the Kuali Financial System Labor Distribution module scheduled to go live in July 2011. The change in the current process is also driven by a change in a financial statement requirement.
In addition to the Base Employee Benefit rate, salary expenses will be assessed a leave rate for employees eligible to earn leave. The leave rate is based on the leave accrual code of the employee.
This assessment will be Leave Assessment Salaries and will post to SB28 (Leave) using object code 8930. Leave Assessment Salaries will then be assessed for benefits using the composite benefit rate of the employee and will post to SUB6 (Benefits), under its own object code. When an employee takes vacation, the department will receive a credit back for the appropriate salaries (in SB28, using object code 8931) and the composite benefit rate (in SUB6, using object code 8932) as it does now.
- In determining the Healthcomp Faculty salary amount for the two different composite benefit rates, what is considered the base salary?
- This would be the entire salary except for the Z component (HBZ DOS Code).
For the Healthcomp Faculty:
- with X+Y salary components over $200K, they would be in group A
- with a total X+Y less than $200K, they would be in group B.
- How do we account for projects that cross fiscal years and the rates change?
- The fringe benefit rate that will be charged to your accounts will be adjusted each fiscal year, so the first payroll feed in July will have the new rates charged to them.
If you are budgeting for a project that crosses fiscal years, then you will need to adjust the fringe benefit rates for the employees accordingly.
Because many researchers have multi-year awards and proposals which were approved with different fringe benefit rates than the composite rates, the campus is creating a funding pool to cover shortfalls created by the transition to composite rates. This funding pool will not mitigate the impacts of increased health insurance costs, increased contributions to UC Retirement System or other cost increases that are beyond the University's control.
- Who do I contact if I have questions not answered in the FAQ or on the Composite Benefit website?