Effective on the start date of FY2026, July 1, 2025, UMBC will implement an Annual Leave Payout Rate . The business process and technical capabilities for managing an annual leave pool and accrual method, along with implementing an adjusted distribution of final leave payout expenses, will replace the previous practices in effect. This will affect both sponsored and non-sponsored budgeting and expense for the eight (8) employee class codes listed below, referred to as “designated classes”.
This Leave Payout Rate is negotiated annually with UMBC’s cognizant federal agency, Department of Health and Human Services (DHHS).
The terminal leave rate effective FY2026 is 0.79%.
In order to comply with updated 2024 Uniform Guidance and best practices, UMBC will no longer expense terminal leave payouts against sponsored awards at termination. The Leave Payout Rate will allow UMBC to recover leave payout expenses with sponsored awards and be in alignment with best practices, allowing for allowability, allocability, and reasonableness.
UMBC is implementing a model utilizing a Leave Payout Rate Pool concept. This pool, housed centrally, is funded throughout the employment period of designated classes via a negotiated Leave Payout Rate. All designated classes below, regardless of whether they are State, Institutional, or Sponsor funded, will contribute to the pool. The Pool operates as a central project responsible for funding leave payouts.
When an employee retires or terminates their employment with UMBC, the associated leave payout cost is charged to the pool, ensuring a streamlined and equitable approach to managing these expenses.
Example: $60,000 salary expense * 0.0079 terminal leave rate = $474.00 leave expense automatically charged to the pool {account code 6016700 – Leave Payout Rate Expense (LPREXP)}.
The Leave Payout Rate applies only to the following Employee Classes at UMBC:
| Employee Class Code |
Employee Class Description |
| V35 |
Exempt, Contingent II |
| T33 |
Exempt, Regular |
| Q20 |
Nonexempt Regular |
| N15 |
Faculty Non Tenure Continue Contr |
| J03 |
Faculty Not Tenured Not on Track |
| I02 |
Faculty Not Tenured On Track |
| H01 |
Faculty Tenured |
| D25 |
Faculty, Contractual |
Leave Payout Rate FAQs
Q1: How do I include the Leave Payout Rate in my budget for sponsored awards? (OSP)
When it is time to prepare a detailed budget for the project proposal, ensure that the Leave Payout rate is included in the budget itself. In constructing the budget, the Business Unit Research Administrator(s) should use the UMBC flat fringe benefit rate of 36%.
As a best practice, before applying the 36% rate, each member of the designated proposal team’s actual fringe rate should be reviewed to determine and confirm that the actual rate is either at or below the proposed 36% rate. If the actual rate is not at or below the 36%, then the actual rate should be used to create an accurate budget.
Q2: How do I include the Leave Payout Rate in my non-sponsored budget? (Budget Office)
For FY2026, the Budget Office has included a dedicated account line for Terminal Leave in the budget Excel files. This amount is automatically calculated using the same methodology as for sponsored projects: it is based on the budgeted filled positions as of March 31 and applies to specific job categories.
There is no need for manual adjustments; the Terminal Leave amount is pre-populated and reflects the appropriate rate for eligible positions.
Q3: What is the proposed language for my Leave Payout Rate Budget Justification narrative? (OSP)
LEAVE PAYOUT RATE:
The University of Maryland Baltimore County (UMBC) develops Fringe Benefit Rates each year for Terminal Leave Payout, in compliance with Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 2 CFR 200, Section 200.431 and the U.S. Department of Health & Human Services (HHS) CAS Best Practices Manual for Reviewing Institutions of Higher Education Long-Form Facilities & Administrative Cost Rate Proposals (Section XII.A. Fringe Benefits). Employing the Leave Payout Rate calculation of 0.79%, the payout for unused leave at termination of employment will be charged to UMBC’s internal leave pool liability (the Pool). The Pool will be funded by the Leave Payout Rate charged against salaries each pay period and included as a fringe benefit expense.
Q4: How will the Leave Payout Rate show up in Kuali? (OSP)
In a Kuali proposal, utilize a detailed budget by navigating to the detail budget panel and creating a budget in Proposal Development. The Leave Payout Rate will be included in the Fringe Rate Tab in the Budget Rates Panel, based on the employee classes affected by this change.
Q5: How often does the Leave Payout Rate change? (Cost Accounting and Analysis)
Annually with each fiscal year. Leave Payout Rate will be reconciled, reviewed, and negotiated with DHHS annually by the Cost Accounting and Analysis department.
Q6: What do I do when someone leaves UMBC and has a Leave Payout? (Payroll/PS Systems)
There will be no process change for the payroll preparers in processing the final leave payout. The leave payout will continue to be processed with the earnings code LV1.
Grant Administrators will not need to do anything more than their normal reconciliation. They will see the leave post in salary and it will be automatically removed via journal entry, all in the same pay period. If that doesn’t happen then put in an RT ticket.
Q7: How will the Leave Payout Rate affect retros? (Cost Accounting and Analysis)
If you are submitting a retro in FY2026 for an FY2026 pay period, the FY2026 Leave Payout Rate will automatically be calculated at the FY2026 rate. If you are submitting a retro in FY2026 for an FY2025 (or earlier) pay period, no Leave Payout Rate will be calculated as no Leave Payout Rate was in effect. If the retro includes periods in both FY2025 and FY2026, then the system will not include the Leave Payout Rate in the pay periods which occurred in FY2025 and will include the Leave Payout Rate in the pay periods which occurred in FY2026.
Q8: How do I respond if a sponsor requests further justification of the Leave Payout Rate? (OSP)
Forward request to OSP, who will communicate with the external entity the current status.
Q9: Does the new Leave Payout Rate only apply to Sponsored Awards? (Cost Accounting and Analysis)
No, the rate will apply to all personnel no matter their source of funds.
Q10: When will the new Leave Payout Rate be effective? (Cost Accounting and Analysis)
The rate is effective July 1, 2025.
Q11: How are we monitoring subrecipient costs and obtaining justification for any Leave direct charges? (OSP)
For new subawards. When completing and executing the Subrecipient Commitment Form, the subrecipient will now be required to certify and represent on that form that their Leave Payout Rate calculation is consistent with current Federal regulations.
“Our Terminal Leave rate calculation (__% is our rate) is consistent and compliant with the cost principles established in “Uniform Guidance 2 CFR 200 (200.431) Compensation – Fringe Benefits”
Existing Subawards (as of July 1, 2025) will receive an update on this policy change via email communication. The Subrecipient will be required to certify that their rate is consistent and compliant annually (as their rate would necessarily change at the changing of the fiscal year).
(Note: The Subrecipient may refer to this at their institution as “Terminal Leave” as opposed to Leave Payout)
Q12: How will this be reflected in Financial Reports? (PS Systems)
The Journal Entry Section will show expenses to account code 6016700 – Leave Payout Rate Expense to reflect the 0.79% of salary and wages.
Q13: How will this affect the Statement of Payroll Charges, or the History of EE Pay, or Effort Reports?
As it is essentially independent of payroll processing, the SOPC, the History of EE Pay and Effort Reports (if applicable) are unaffected.