[NCASG] [External] Total Comp Methods - Please Respond by 4/15/2021

Fri Apr 9 09:31:39 MDT 2021

Good morning, Terri. Please see responses below for North Carolina. -Joe

From: Parker, Terri (OFM) <terri.parker at ofm.wa.gov>
Sent: Thursday, April 1, 2021 7:51 PM
To: NCASG (dhr_ncasg_survey_list at admws.idaho.gov) <dhr_ncasg_survey_list at admws.idaho.gov>
Subject: [External] [NCASG] Total Comp Methods - Please Respond by 4/15/2021

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Hi all,

In 2020, Washington implemented a total comp methodology that considered the employee’s value of health care and retirement benefits as opposed to a comparison of employer/employee premium costs. An explanation of those methodologies can be found here<https://urldefense.com/v3/__https:/ofm.wa.gov/sites/default/files/public/shr/CompensationAndJobClasses/Salary*20Surveys/2020TCS/2020_Jan272020WSECR_MethdOvrwWeb.pdf__;JQ!!HYmSToo!NO2mM9wif2JuyDPSd7pQS84nXq5sVmNFEouImE2hBRz7fR8xkkKoxct48WWKZM9w$>. As we prepare for the 2022 survey cycle, we’d like to know what other states are doing. To that end, we would greatly appreciate your response to the following by April 15. Thank you!

Do you have a total rewards definition? If yes, please provide.
Total compensation is described as follows in our Annual Report: “Total compensation measures an employee’s base salary, benefits, and other perquisites that the employer provides. When comparing compensation with that of other employers, whether public or private, the focus is often on total compensation rather than just base pay. This report includes comparisons of base pay as well as fringe benefits. It is important for employees to be knowledgeable of the value of their employment in terms of base pay, benefits and other reward opportunities. Employee benefits are key components of a total compensation package. In addition to salary, a competitive benefits package is a primary attractor in the recruitment of prospective employees, particularly in hard-to-fill occupations. Benefits are equally critical in the retention of high performing employees. The State communicates this important aspect of employees’ compensation to both current and prospective employees through the use of a web-based total compensation calculator.”

Do you have a total rewards compensation philosophy? If yes, please provide.
Our Total Compensation Philosophy is under review for potential revision. Our current philosophy statement published in early 2018 states: “The State of North Carolina is committed to attracting and retaining a diverse workforce of high performing employees with the competencies, skills, knowledge, and dedication needed to consistently meet continually evolving strategic goals. The State’s compensation system should be reflective of occupational trends and best practices. It should be meaningful and easily understood by employees and managers and administered by Human Resources professionals in a consistent manner.

  *   Market Responsiveness:

     *   Position total compensation competitively with relevant labor markets
     *   Recognize that labor market factors differ for specific occupations

  *   Equitable and Affordable Compensation:

     *   Align internal pay within occupational groups while avoiding adverse impacts
     *   Maintain internal classification structure alignment
     *   Maintain fiscal responsibility”

Do you consider statistics from the "Employer Costs for Employee Compensation" from the Bureau of Labor Statistics? If yes, please describe how that data is used.
Yes. Below is a sample table created using that data source. Our process for creating this table is:

  *   Use whatever data is most current on the BLS site.
  *   Place the correct percentages (from the second column) directly into the “BLS Percentages of Total Compensation” column of the Table. We report percentages straight from BLS.
  *   For the OASI-DI category, we report the “legally required benefits” total.
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If you conduct compensation surveys, do you include health care and retirement benefits?

·         If no, do you conduct a separate benefits survey(s)?
In addition to using the 2020 NCASG Benefits Survey, North Carolina county governments report on choice of health plan, deductibles and employee and agency cost. We analyze the ten most populous North Carolina counties.

We also contracted with Mercer (US), Inc. in 2019-20 to conduct a Total Remuneration Analysis for the State to assess market competitiveness across all elements including base pay, total cash, benefits and total remuneration. Total Remuneration is calculated using the median benefits for each market comparison group (public sector, private sector/general industry, higher education, and sworn law enforcement). The most common benefit plan was valued for each comparator in the market. Included in the study were our retirement, medical, dental, vision, life insurance, STD, LTD, and paid leave plans, as well as analysis of the prevalence of other benefits utilized in the comparison markets.

If you survey health care benefits:

  *   Do you collect health benefit premium rates?
  *   Do you collect the Affordable Care Act (ACA) actuarial value “metal” categories (Bronze, Silver, Gold, and Platinum)? If yes, please describe how that data is used.
  *   Please describe any other methods used to ascertain the value of health care benefits beyond the employer/employee premium rates.

If you survey retirement benefits:

  *   Do you survey employer contribution amounts for defined benefit and defined contribution plans?
  *   Do you calculate the value of defined benefit plans?         If yes, please describe your methodology.

RETIREMENT VALUATION:

§  NC: Benefits are projected for seven service profiles (5, 10, 15, 20, 25, 30 and 35 years of service at retirement age) and then converted to an equivalent lump sum at retirement.

§  NC: An equivalent level percentage of pay (ELPP) is calculated for each profile
‒      ELPP is the percentage of annual base pay that is required over an employee’s career, when accumulated with interest, to replicate total retirement benefits
‒      Employee deferrals/contributions are netted out of the total ELPP to determine the annualized value of employer-paid benefits
•         NC: For each benchmark job, the average projected service at retirement is used for all employees within the job to determine the employer-paid ELPP associated with the closest service profile
•         NC: Employer-paid ELPP is multiplied by average base pay for each benchmark job to compute annualized employer-paid retirement values
•         Market: All employer-paid plans (defined benefit and defined contribution) available to new hires are valued
•         Market: Consistent with the methodology used for North Carolina, total employer-paid benefits are converted to ELPPs for each organization
•         Market: The market median ELPP for the closest service profile is multiplied by market quartile base pay to compute annualized employer-paid retirement values

MEDICA: and DENTAL VALUATION:
•         NC: A relative valuation of North Carolina’s benefits is calculated for the most common plan (i.e., the PPO 80/20 Medical Plan and the High Option Silent PPO Dental Plan)
•         NC: The benefit is valued using the coverage replacement method, which represents the cost to the employee of employer provided benefits if s/he left employment and were to purchase coverage to duplicate the benefits in the marketplace
‒      This approach removes the influence of claims utilization and vendor fee negotiations from the cost of providing coverage
•         Market: A relative valuation of each organization’s medical (active and retiree) and dental benefits is calculated for the most common plan
•         Market: The benefit is valued using the same coverage replacement method as above
•         Market: The median benefit is added to market quartile total cash compensation

LIFE AND DISABILITY VALUATION:

  *   Employer-paid premiums are estimated using standardized rates and the average base pay for each benchmark role
  *   Annual values are calculated using standardized rates, market median coverage levels, and market quartile base pay levels

Terri Parker (she/her/hers)
Compensation Policy & Planning Analyst
OFM/ State Human Resources
Cell 360-515-6299
terri.parker at ofm.wa.gov<mailto:terri.parker at ofm.wa.gov> | labor.relations at ofm.wa.gov<mailto:labor.relations at ofm.wa.gov>

________________________________

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