June 2014

Senate Pleased with Compromise Composite Benefit Rates Plan

Academic Senate leaders say they are for the most part pleased with an agreement about Composite Benefit Rates (CBR) reached at the May 7 Council of Chancellors meeting.

The agreement comes after more than 18 months of discussion between the Senate and administration about the impact CBRs would have on the availability of funds for sponsored research and graduate student support.

CBRs pool all eligible benefit costs for a given employee group to create an average overall percentage rate at which the cost for employees in that group should be charged to any funding source, rather than calculating actual individual-by-individual benefits costs for which the fund source is responsible. They help simplify accounting and eliminate volatility when an employee’s personal circumstances change, such as the addition of dependents. However, depending on how CBRs are structured, the total benefit cost for faculty, staff and students charged to extramural grants can change substantially. To be clear, a CBR does not change an employee’s benefit charges; it changes the rates charged to the fund sources that pay for the UC portion of the benefit. The CBRs are also being designed to align with UCPath, the systemwide payroll system that is scheduled for implementation on campuses beginning in 2015. 

Summary of the Consensus Approach to CBRs 14 CBR categories, with ten shared in common by all campuses, and four to be developed locally by each campus. For non-health sciences faculty, separate rates for 9-month and summer salaries. Rates for both will include payroll taxes. Rates for 9-month salary will include UCRP and health and welfare benefits. Rates for summer salary will include DCP, but not UCRP or health and welfare benefits. For HSCP faculty, no splitting of “X” and “Y” salaries. “Z” payments (honorarium, stipends, clinical incentives, etc.) will be excluded. Campuses can use their campus-specific rates to otherwise differentiate groups of HSCP faculty. No retroactivity: All current grants will be made whole if negatively affected by imposition of this CBR approach. Create a study group of faculty and staff from the Provost’s Office, to examine how UC’s practices for charging expenses against grants compare to other universities.

The Senate has supported, in principle, the move to CBRs because they spread charges evenly across each CBR group. However, the Senate expressed concern when UCOP released a set of scenarios in 2012 that would have established only one or two rates per campus. This proposal would have increased benefit expenses (by charging UCRP costs for salary that is not UCRP covered compensation) to many faculty grants that include summer salary and to Health Sciences Compensation Plan (HSCP) fund sources with a “Y” salary component. The Senate also pointed out that the plans would charge the summer salary components of grants for health benefits of employees whose 9-month salary already covers health benefits for a 12-month period. Using UCOP data, the Senate estimated the proposed plan would shift $27 million systemwide out of grants and clinical revenue into general funds, cutting support for graduate student researchers up to $10M and saving Auxiliaries about $14M.

The Senate lobbied for a plan that would rest on the principle that charges assessed against a funding source should be tied to actual benefits received by employees paid from that source, and should distinguish a larger number of employee types. This would minimize fund shifts across departments and fund sources while preserving the benefits of using CBRs. In March 2014, as a final decision loomed, Senate Chair Jacob communicated the Senate’s concerns to the President and urged collaboration in the development of better options. Several chancellors also shared the Senate’s concerns.

President Napolitano responded by asking a joint Senate-Administration Advisory Group to model alternatives to help guide her decision. Chair Jacob and the Senate members of the Advisory Group used data about employee categories, funding sources, and salary/benefits costs to build a model that estimated how much different CBR plans would shift costs across fund sources in relation to projected actual benefit costs for each. The models helped illuminate a fuller range of possibilities for CBRs and the pros and cons of each.

Chair Jacob says the May 7 agreement reflects much of what the Senate has sought – more rates that account for a wider variety of employee types, separate rates for faculty on nine-month and summer salary, and added flexibility for campuses to determine the number of rates they use locally. Jacob also notes that the agreement is not perfect and the Senate is disappointed that the plan does not impose different rates on “X” and “Y” salaries for Health Science Compensation Plan faculty; however, he says he hopes campuses will use their campus-specific rates to address disparities. 

“This resolution is a solid victory for shared governance,” said Chair Jacob. “The President clearly wanted to reach a sensible middle ground, and the Senate’s careful analysis was convincing enough to have a significant impact on the final outcome. I hope the clinical faculty will become engaged in their campus process as the CBR project moves forward, because the structure of their campus-specific rates could impact funds available for research. The Senate has formed a group to provide advice in this area, but in the end, each campus will go its own way on the ‘X’ and ‘Y’ components of salary.”