The University of Minnesota has encountered a unique situation
regarding the application of pooled fringe rates.  I apologize in
advance for the length of this message but would be very
appreciative of feedback from schools that have knowledge and/or
experience with pooled fringe benefit mechanisms and medical school
private practice plans.

Our institution charges a fringe rate for academic employees and civil
service employees. It does not differentiate employee groups by
college. Our medical school faculty are included in the academic pool
along with all other faculty. Our fringe pool charging program charges
the applicable fringe rate to cost centers based on gross salaries for
the pay period. The program does not take into consideration salaries
that reach FICA cap. Thus, the pool over-recovers on highly paid
employees whose salaries exceed the caps. This is consistently applied
to all employees in the pool.

Our institution has entered into a "common paymaster" arrangement
between the university and the physicians' private practice group for
our medical school. This is an arrangement, authorized by the Internal
Revenue Code, which allows one organization to act as the paying agent
for itself and other related organizations who employ the same
persons. Normally, each separate employer would be required to remit
the employer's share of FICA and Medicare to the IRS. With common
paymaster, all entities covered by the arrangement are combined and
remit only one employer's match rather than one for each of the
employers in the common paymaster. We have implemented this by
prorating the employer's share of FICA and Medicare in the same
proportion as the physicians' compensation are split between the
university and the practice plan. Thus, the university and the private
practice group incur combined savings for the employers' share of FICA
and Medicare matches that do not need to be remitted. These savings
are currently being realized in the academic fringe pool, in the form
of over-recoveries and lower fringe rates in the academic pool.

When this arrangement was implemented, our medical school was
expecting the savings to be credited back directly to the medical
school rather than to the fringe benefit pool. I am concerned about
taking these surpluses directly out of the pool and crediting them
back to the medical school, as it would appear to be a CAS consistency
violation. I consider it comparable to transferring a surplus out of a
recharge center, rather than rebating it back to all customers in the
form of lower rates. However, I also understand that the medical
school is disproportionately providing a subsidy to the fringe pool
with these savings. I would like to hear other viewpoints and
arguments that might give me additional guidance on an appropriate
treatment.

My aplogies to those of you who have seen this question on another
list-serve.  Thanks.

Joan Donaldson, Accounting Manager
Sponsored Financial Reporting
University of Minnesota
1100 Washington Ave; Suite 201
Minneapolis   MN   55415
Phone: 612-624-6026
Fax: 612-626-0321
e-mail: xxxxxx@tc.umn.edu

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