Flexible credits converted to salary
I am pleased to announce that St. Thomas is changing the way it pays $1,000 in annual “flexible credits” to employees who are eligible to receive them.
Effective April 1, the $1,000 – or $41.67 per pay period 24 times a year – will be added to the base salary of all eligible employees and no longer will be considered a “flexible credit.” This change will show up in paychecks received on April 13 for both exempt and non-exempt employees.
St. Thomas is making the change in an effort to provide a stronger compensation package for employees and to equalize the benefits it provides employees regardless of their employment date. Employees who began work at St. Thomas on or after Jan. 1, 2007, were not eligible for the $1,000 flexible credit. The conversion of the “flex credit” to base pay had the unanimous support of the Fringe Benefits Advisory Committee, the Academic and Administrative Leadership Group and the President’s Staff.
We believe the new system will benefit employees in three primary ways:
- They will have a higher base salary from which future salary increases will be computed. For example, an employee who has a $40,000 salary now will have a $41,000 salary beginning April 1. If that employee receives a 3.5 percent salary increase in September, the annual increase will amount to $1,435 based on the salary of $41,000 – or $35 higher than if the salary remained at $40,000.
- They will receive higher pension benefits. For example, an employee earning $40,000 a year receives 10.4 percent in pension benefits, or $4,160 a year. Under the new system, the employee will receive $4,264 in pension benefits – or an additional $104 than if the salary remained at $40,000.
- They will be eligible for slightly higher coverage for life insurance, accidental death and dismemberment insurance, long-term disability and short-term disability, all of which are based on salary. For example, life insurance coverage is provided at no cost to employees in the amount of two times their annual base salary, to a maximum benefit of $200,000, until age 65, when the insurance benefit is reduced.
The conversion of the flexible credit to salary will carry no negative tax consequences because the $1,000 always has been treated as taxable income.
St. Thomas began awarding flexible credits in the 1980s as a way to help employees pay for health care plans in addition to the salaries and health plan subsidies they received from the university. Employees who began work at St. Thomas on or after Jan. 1, 2007, will not be affected by the April 1 conversion.
Any employee with questions about the flexible benefits credit conversion should contact Pete Ronza or me directly at (651) 962-6521 or (651) 962-6511, respectively.