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Statement on Employee Benefit Rates

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January 7, 2005

Northwestern has historically applied a single fringe benefit rate to all categories of salary and wages. 

A second rate, the “Federal rate,” became effective Sept. 1, 1999 for salaries and wages charged against Federally sponsored projects. The Federal rate excludes the cost of the reduced tuition and portable tuition plans, which provide tuition assistance for employees’ dependents. These costs are unallowable under OMB Circular A-21.

In fiscal 2004, at the request of the University’s cognizant agency (the Department of Health and Human Services), two additional rates were calculated and negotiated:  a statutory rate, applicable to salary and wages that qualify only for those benefits mandated by statute (Social Security, Medicare, workers’ compensation insurance, and unemployment insurance) and a Graduate School student rate, applicable to full-time Graduate School students receiving pay for service as teaching assistants, research assistants, or graduate assistants. 

The primary benefit that Graduate School students receive is a University contribution toward the student hospitalization insurance premium. The University determined that the benefit eligibility of these two populations is sufficiently different from the general employee population to warrant separate benefit rates.

For fiscal 2006, those same four rates remain in effect, according to Senior Vice President for Business and Finance. The table below displays the various fringe benefit rates in effect over the past two fiscal years and the negotiated rates for fiscal 2006. (Note that in fiscal 2005, the University did not distribute a notification memo.)

Rate Description  Type of pay it covers FY 2004 FY 2005 FY 2006
Full non-Federal Benefits-eligible employees
paid from non-Federal funds    
23.4% 23.4% 24.7%
Full Federal* Benefits-eligible employees
paid from Federal funds
22.1% 22.1% 23.4%
Statutory Temporary employees,
supplemental pay to regular
employees
6.6% 6.6% 7.0%
Graduate School student  TGS teaching assistants,
research assistants, graduate
assistants
1.8% 1.8% 1.8%
Other student Hourly wages to student
workers, non-Graduate School
graduate students
0.0% 0.0% 0.0%
Exempt Federal Work Study salaries &
wages, Kellogg consulting
0.0% 0.0% 0.0%

* Note:  The full Federal benefit rate applies whether funds are received directly from the Federal government, or if Federal funds are subcontracted to Northwestern through another educational institution, industrial sponsor, state or local government, or other sponsor. 

As a reminder, starting in fiscal 2004, student hourly wages, formerly assessed a full benefit charge, are now exempted from any benefit charge. The University also now exempts from a benefit charge any graduate students not enrolled in the Graduate School who are working as teaching assistants, research assistants, or providing some other form of service, since the University does not subsidize part of the hospitalization insurance premium for them.

The benefit rates will be assessed based on the object of expense to which a salary or wage is charged. That is, each salary or wage object is associated with only one benefit rate. It is therefore important to review the definitions for use of each object code to ensure that the correct benefit rate is applied.

To facilitate the budgeting of grant and contract proposals to external agencies, the University is providing a five-year rate projection. Since the University must negotiate benefits rate annually, the rates indicated for years beyond fiscal 2006 must be considered tentative. While the University continues attempting to smooth the rate over multiple years, the requirement for annual Federal review and approval may lead to wider fluctuations in the rates. The projected rates shown below represent our best estimate of future conditions and should be used on all proposal budgets submitted to sponsoring agencies. Actual rates charged in these years will be determined through negotiation with DHHS and may be different from the projected rates shown here.

Historical rates are as follows:

Full Non-Federal Full Federal Statutory TGS Student
1998-99 (9/1/98-
4/30/99)
19.25% NA NA NA
1998-99 (5/1/99-
8/31/99)
18.00% NA NA NA
1999-00 18.00% 16.65% NA NA
2000-01 18.85% 17.50% NA NA
2001-02 (9/1/01-
2/28/02)
20.75% 19.75% NA NA
2001-02 (3/1/02-
8/31/02)                
18.25% 17.25% NA NA
2002-03 19.70% 18.70% NA NA
2003-04 23.40% 22.10% 6.60% 1.80%
2004-05 23.00% 22.10% 6.60% 1.80%

Projected rates are as follows:

Full Non-Federal  Full Federal  Statutory  TGS Student 
2005-06   24.70% 23.40% 7.00% 1.80%
2006-07 25.10% 23.80% 7.00% 1.80%
2007-08 25.10% 23.80% 6.80% 1.80%
2008-09 25.60% 24.20% 6.80% 1.80%
2009-10 26.00% 24.80% 6.80% 1.80%

Questions regarding the employee benefit rate may be directed to the Office of Budget Planning (847-491-4286 or email to tvanneck@northwestern.edu). Assistance on developing budgets for proposals to sponsoring agencies may be obtained from the Office of Sponsored Research (847-491-3003 or 312-503-7955).

Topics: People