Welcome to Feldesman's Grants Practice Shorts series where we discuss helpful tips and strategies in common areas of federal grant management. Be sure to check out our other installments on our Grants Practice Shorts page.
Fringe benefits grantees provide to their employees as compensation in addition to salaries and wages "include, but are not limited to, costs of leave, employee insurance, pensions and unemployment benefits." 2 C.F.R. § 200.431(a).
The costs of fringe benefits under Federal awards are allowable to the extent they are "reasonable and are required by law, an organization-employee agreement, or an established policy of the recipient or subrecipient." Id.
Per § 200.431(c), "[t]he cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in § 200.447); pension plan costs; and other similar benefits are allowable, provided such benefits are permitted under established written policies."
In addition, grantees "must allocate fringe benefits to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs following the recipient's or subrecipient's accounting practices." Id.
Moreover, with respect to allocating costs of fringe benefits, grantees "may assign fringe benefits to cost objectives by identifying specific benefits to specific individual employees or by allocating them based on entity-wide salaries and wages of the employees receiving the benefits. When the allocation method is used, separate allocations must be made to selective groupings of employees unless the recipient or subrecipient demonstrates that costs in relationship to salaries and wages do not differ significantly for different groups of employees." § 200.431(d).
Below, we address additional considerations relevant to leave costs under Federal awards. For pension costs, grantees are encouraged to review the requirements set forth at length at § 200.431(g).
Fringe Benefits: Leave Costs
Leave costs may be paid as regular compensation to employees during authorized absences from the job ("Paid time off" or "PTO"), such as annual leave ("vacation"), family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and similar benefits. § 200.431(b).
Costs of regular compensation paid during the employee's authorized absence from the job ("leave costs") are allowable if the following criteria are met:
- "(1) They are provided under established written leave policies;
- "(2) The costs are equitably allocated to all related activities, including Federal awards; and,
- "(3) The accounting basis (cash or accrual) selected for
costing each type of leave is consistently followed by the
recipient or subrecipient or a specified grouping of employees.
- "When a recipient or subrecipient uses the cash basis of accounting, the cost of leave is recognized in the period that the leave is taken and paid for. Payments for unused leave when an employee retires or terminates employment are allowable in the year of payment and should be allocated as a general administrative expense to all activities or included in the fringe benefit rate.
- "The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is earned. When a recipient or subrecipient uses the accrual basis of accounting, allowable leave costs are the lesser of the amount accrued or funded." § 200.431(b).
Per § 200.431, other fringe benefits recognized under the regulations include self-insurance reserves, automobile use for official purposes, post-retirement health insurance, and severance pay provided such benefits are paid pursuant to grantee's established written policies otherwise and consistent with the federal cost principles.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
