Departments are charged a benefit rate and a leave rate for their employees. These rates are evaluated and adjusted each year based on benefit premiums and market fluctuations.
The benefit rate, comprised of a per-person component and a pay-based component, helps fund the university's portion of benefits related benefit-eligible employees (e.g., subsidize insurance premiums, match retirement contributions, etc.). The benefit rate is levied on all benefit-eligible employees.
A separate leave rate (effective Jan. 1, 2024), levied only on leave-eligible employees, funds the qualified leave plans (short-term disability, parental leave and caregiver leave), as well as unused leave paid at separation (campus units only). This rate is separate from the benefit rate because not all benefit-eligible employees are eligible to participate in the leave program.
Benefit and Leave Rates
| Benefit and Leave Rates per Fiscal Year | ||||||||
|---|---|---|---|---|---|---|---|---|
| Universities and UM System central office | Hospital | |||||||
| Benefits rate per-person component (annual) | Benefits rate pay-based component | Leave rate (Jan. 2024)* | FICA | Benefits rate per-person component (annual) | Benefits rate pay-based component | Leave rate (Jan. 2024)* | FICA | |
| FY26 Rate | $11,100 | 16.65% | 2.6% | 7.65% | $10,800 | 16.95% | 2.0% | 7.65% |
| FY25 Rate |
$10,400 | 16.15% | 2.6% | 7.65% | $9,900 | 16.45% | 2.0% | 7.65% |
| Account | 710010 | 710025 | 710027 | 710050 | 710010 | 710025 | 710027 | 710050 |
*The Leave Rate will be charged on the first bi-weekly pay period of 2024 which will pay January 17, 2024.
Note: Consult the breakdown of current and historical benefits rate (PDF, 1.4MB) for additional information.
Per-Person Component
The per-person component pays for those benefits that are not tied to salary, such as medical and dental premiums. The annual amount is prorated over each pay period for benefit-eligible employees (please note, departments with faculty who have nine-month contracts will be charged over nine months for those employees). The per-person component amount is consistent for each benefit-eligible employee regardless of the medical insurance plan in which the employee may be enrolled, or if the employee waived coverage. For employees whose salary is split-funded, the per-person component will also be split based on the percentage of the employee's total pay allocated to a given chart field.
Benefit-eligible employees are those faculty and staff whose primary position is at least 75% of a full-time equivalent (FTE) position and have an indicated appointment duration of at least nine months, as defined by University policy HR-101: Employee Status. The annual amount for the per-person component does not differ for employees with FTE between .75 and 1.0.
The per-person component is largely impacted by the change in medical premiums. Medical premiums increase due to increasing medical claims cost caused by employee and dependent healthcare consumption, increasing cost of healthcare services, and specialty drugs. Generally, any decrease in the per-person component is a result of changes in medical plan designs and/or cost share of the medical premiums. The University's benefits and finance offices continue to evaluate plan designs and cost control opportunities to achieve an affordable cost trend while maintaining a competitive benefits package.
Pay-Based Component
The pay-based component pays for benefits that are tied to employee salary, such as retirement, life insurance and long-term disability insurance. A percentage of pay is charged on wages with an earn code that is pension-eligible (PEN). Consult the (Excel, 206KB) for more information as to which earn codes are marked "Y" for "PEN".
The pay-based component is mostly driven by the required contribution to the University’s defined benefit pension plan which is highly reliant on investment returns. As the pension plan’s unfunded liability continues to grow, the need to increase contributions will be critical for the plan’s sustainability.
Leave Rate
The leave rate pays for the costs of qualifying leaves, including short-term disability (and related top-off pay), parental leave and caregiver leave, as well as unused payable leave at separation for campus units (up to 80 hours PTO or vacation balance). Like the pay-based component, the leave rate is charged as a percentage of pay, however it is only charged for employees eligible for the leave program.
The rate is charged even if an employee is not utilizing a qualifying leave, however, employees taking qualifying leave receive pay paid by a central pool and departments are not charged for payroll or benefits for the duration of the approved qualifying leave period. If the employee uses PTO, vacation or banked sick to extend their time off beyond the qualified leave period, the department is charged those costs.
Payroll confirmation dates and approval timing for short-term disability, parental or caregiver leave will impact the pay period for which the pay and benefits are drawn from the central pool. Departments should not create a payroll correcting entry (PCE) to move this cost. The payroll system will correct the funding source on the following pay period if corrections are necessary.
| Department Pays | Central Pool Pays (funded by leave rate) |
|---|---|
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Vacation transition payouts (annual payout over three years) related to the leave program transition (vacation to PTO) is not covered by the leave rate. Please reach out to your campus finance office for more information about how the vacation transition payout is funded for your unit.
Grant-Paid Positions
Grant Benefit Rate
The federal government requires that the benefit rate for federal grants be a percentage of salary. Therefore, in lieu of the three components described above, all University grant funds (2100-2299) are charged the federally negotiated benefit rate in account 710015 through a process generated by the finance software system.
| Benefits Rate per Fiscal Year | |||
|---|---|---|---|
| for Grant-paid Positions (all business units) | |||
| Percentage of salary | Grant leave rate (begins FY26) | FICA | |
| FY26 Rate | 28.88% | N/A | 7.65% |
| FY25 Rate | 25.00% | N/A | 7.65% |
| Account | 710015 | 710050 | |