PR02 Pooled Fringe Benefit Rates
Table of Contents
- Purpose
- Scope
- Definitions
- Roles and Responsibilities
- Policy
- Violations
- Non-Compliance
- Further Information
- Cross References
- Policy Status
Purpose
The purpose of this Pennsylvania State University (“University” or “Penn State”) policy is to establish a standardized method for allocating employee fringe benefit costs via fringe benefit rates. This approach ensures equitable and consistent distribution of benefit costs across all organizational units, promotes financial transparency, and supports compliance with applicable cost accounting and regulatory requirements.
Scope
This policy applies to all University units, faculty, staff, and administrators who are responsible for budgeting, charging, or administering employee compensation and fringe benefits. This policy applies to all sources of funding, including University funds, auxiliary funds, and externally sponsored grants and contracts. All units must use the University’s approved fringe benefit rates when preparing budgets, recording compensation expenses, or charging payroll costs to any funding source.
Penn State Health or its subsidiaries, and Penn College of Technology, each having separate governance structures and policies, are exempt from the requirements of this policy.
Definitions
- Fringe Benefits
- Non-wage expenses paid by an employer on behalf of their employees, including health and other insurance, retirement contributions, payroll taxes, and other legally required or institutionally approved benefits.
Roles and Responsibilities
University Units
University units, including colleges, campuses, and administrative departments, are responsible for:
- Using the approved fringe benefit rates when preparing budgets and charging payroll costs.
- Ensuring compensation and related fringe benefit costs are charged to the appropriate funding source.
- Complying with this policy and other applicable University financial policies when managing employee compensation and benefits.
Cost Analysis
Cost Analysis, a unit within the Office of Budget and Finance, is responsible for:
- Developing and administering fringe benefit rates applied to federal grants and contracts.
- Ensuring fringe benefit rates charged to sponsored awards comply with Uniform Guidance 2 CFR 200 and sponsor requirements.
- Maintaining supporting documentation used in the development of rates applied to federal awards.
Office of Budget and Finance
The Office of Budget and Finance is responsible for:
- Developing the University’s annual fringe benefit rates.
- Maintaining documentation that supports the calculation of fringe benefit costs.
- Communicating approved fringe benefit rates to University units.
- Ensuring fringe benefit rates are applied consistently across funding sources.
Associate Vice President for Budget and Finance & Controller
The Associate Vice President for Budget and Finance & Controller is responsible for:
- Providing oversight and direction for the development of the University’s fringe benefit rates.
- Ensuring the rates are developed using reasonable cost estimates and consistent financial practices.
- Ensuring compliance with applicable federal regulations, including Uniform Guidance 2 CFR 200.
Senior Vice President for Finance and Business/Treasurer
The Senior Vice President for Finance and Business/Treasurer is responsible for:
- Reviewing and approving the University’s annual fringe benefit rates.
- Providing financial oversight to ensure fringe benefit rates support sound financial management and regulatory compliance.
Policy
The University shall establish annual fringe benefits rates to recover the cost of employee benefits. The University will develop rates specific to the following categories of employees and compensation:
- Salaried employees
- Hourly employees
- Hourly employees – overtime
- Undergraduate students
- Graduate students
- Postdoctoral scholars
- Compensation in any of the above categories that is charged to federal grants and contracts
Fringe benefit costs shall be based on actual costs or reasonable estimates of the costs expected during the fiscal year. The rates will be calculated to recover the full cost of employee benefits.
For salaried employees, the full fringe benefits rate will be apply to the first $500,000 of an employee’s total annual compensation. Compensation above $500,000 will be charged at 7.65%, which represents the employer’s share of Social Security (FICA) and Medicare taxes.
Cost Analysis, a unit within the Office of Budget and Finance, is responsible for developing and managing the fringe benefit rates charged to federal grants and contracts. These rates must follow the requirements of Uniform Guidance 2 CFR 200.
The Office of Budget and Finance develops the University’s annual fringe benefit rates under the direction of the Associate Vice President for Budget and Finance & Controller. The Senior Vice President for Finance & Business/Treasurer must review and approve the rates each year.
Violations
Violations of University policy should be reported to the appropriate supervisor, unit manager, Human Resources representative, or the office responsible for the relevant policy or procedure. If these channels are insufficient or unavailable, individuals may submit an anonymous report through the Penn State University Hotline, accessible via the Reporting at Penn State website.
Non-Compliance
Units that do not follow the guidelines set forth in this policy will, at a minimum, be held responsible for any fines, penalties, or losses.
Further Information
For questions, additional details, or to request changes to this policy, please contact the Policy and Procedure Office by submitting a Technical Support Request form.