Benefit Replacement Pay for Institutions of Higher Education

Background

This policy statement covers the effect of Senate Bill 102 on institutions of higher education.

The 74th Legislature, Regular Session, implemented SB 102, which eliminated the state-paid portion of the employee contribution to Social Security for wages paid after Dec. 31, 1995.

Beginning with wages paid Jan. 1, 1996, state-paid Social Security ceased and eligible employees began receiving a “benefit replacement pay” increase in compensation to offset the loss of the state-paid Social Security.

The Comptroller’s office issued a separate advisory for state agencies other than institutions in October 1995. See the policy statement Benefit Replacement Pay for State Agencies (Other Than Institutions of Higher Education).

Calculating and Reporting Benefit Replacement Pay

Benefit replacement pay (BRP) for higher education employees is an increase in compensation and is not paid under a separate expenditure object code.

BRP Amount

The amount of the increase in compensation for BRP is equal to 5.85 percent of the employee’s compensation as of Oct. 31, 1995, not to exceed $965.25, plus an additional amount equal to the retirement contribution paid by the employee because of the BRP.

Institutions are responsible for ensuring that eligible employees’ compensation is increased the full amount of their authorized BRP over what they would be compensated if they were ineligible for BRP.

Effective Jan. 1, 1996, a one-time increase was made to the compensation of eligible employees in the amount of the BRP to which the employee was entitled. The amount of the BRP increase was calculated based on the employee’s Oct. 31, 1995, annualized base salary or wages, including longevity and hazardous duty pay.

Compensation rates for personnel actions after Jan. 1, 1996, were determined in accordance with the institution’s standing policies applied to the employee’s compensation as increased for BRP.

BRP Recordkeeping

Institutions of higher education must ensure the total compensation paid to their eligible employees includes their BRP entitlements. Institutions are required to keep sufficient records to prove they meet this requirement, and must make those records available to the Comptroller’s office on request.

An individual’s annualized compensation rate (ACR) must be completed according to the following formula:

ACR = (BC + LH) x P

BC: The employee’s base compensation for services rendered during the pay period that included Oct. 31, 1995.

LH: The longevity or hazardous duty pay the employee received for services rendered during the pay period that included Oct. 31, 1995.

P: The number of pay periods during a calendar year, based on the employee’s pay frequency as of Oct. 31, 1995.

In the above formula, the BC of an employee who worked part time as of the pay period that included Oct. 31, 1995, was not based on a full-time equivalent rate, but instead based on the compensation paid for the part-time hours worked.

The BC of an employee who was paid on an hourly basis as of the pay period that included Oct. 31, 1995, is the product of:

• The employee’s average hourly base compensation rate for the pay period that included Oct. 31, 1995.
  – and –
• The number of hours the employee was normally scheduled to work during a pay period. The number of hours the employee was normally scheduled to work must be based on policies in effect on Oct. 31, 1995.

In the above formula, P would be:

• 12 for an employee who was being paid on a monthly basis as of that pay period.
  – or –
• 9 for a faculty member with a nine-month appointment.
  – or –
• 24 for an employee who was being paid twice monthly as of that pay period.
  – or –
• 26 for an employee who was being paid every other week as of that pay period.

Employees With Unusual Circumstances

Institutions must adopt policies to determine the most appropriate calculation to be used to compute the annualized compensation rate for employees with unusual circumstances.