On July 1, the University of Oregon will implement a new, simpler process for how it budgets and charges university departments for employee benefits such as vacation and sick time, health insurance, retirement, unemployment and workers compensation.
These benefits are knowns as “other personnel expenses” or OPE. Jamie Moffitt, vice president for finance and administration, sent a memo to campus department heads and budget managers outlining the changes to the way OPE will be budgeted and charged.
Under the current model, the university charges departments the actual cost of employee benefits. This requires an individual calculation for every single university employee. The new system will base charges on projected averages within employee pools, resulting in “blended” rates. Moffitt said conducting benefit calculations this way will significantly simplify personnel budgeting and is considered a best practice among research institutions.
“Moving to a process that uses blended OPE rates will simplify and improve budgeting, provide more consistency and help improve accounting for leave balances,” Moffitt said.
Beginning in fiscal year 2018, when employees take leave — such as sick time or vacation — their salary and OPE will be charged to a central pool instead of to department budgets. Moffitt said this should help departments to cover costs for employees out on extended leave and eliminate the issue of departments having to cover large vacation payouts at the end of employment.
However, because the new blended rates include leave costs, the proposed blended OPE rates for FY18 are noticeably higher than in previous years. In addition to the inclusion of leave, the proposed rates also include projected increases for health insurance and retirement. Retirement benefit rates in particular are going to rise significantly in FY18 due to unfunded liabilities in the state pension program.
“Our goal is to have the proposed new blended OPE rate pools affect final costs to departments as minimally as possible,” Moffitt said. “To this end, we will be adjusting budgets wherever possible in order to minimize the impact of this transition.”
The Office of the Vice President for Research and Innovation will send out a memo providing more details of how sponsored project funds will be affected.
The Office of Budget and Resource Planning will be conducting mandatory training on the new blended OPE rates for all level 3 budget managers. Information about the new rates, along with memos from the finance and research vice presidents, is posted at https://brp.uoregon.edu/content/blended-ope-process. Any questions regarding blended OPE, should be directed to each department’s budget and resource planning analyst.