ACYF Administration on Children, Youth and Families	U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Administration for Children and Families
	1. Log No. ACYF-IM-HS-98-13	2. Issuance Date: 11/02/98
	3. Originating Office: Head Start Bureau
	4. Key Word: Study of Benefits for Head Start Employees

INFORMATION MEMORANDUM

TO: Head Start Grantees and Delegate Agencies

SUBJECT: A Study of Benefits Available to Individuals Employed by Head Start Agencies Under the Head Start Act

INFORMATION: This study, undertaken by the Administration on Children, Youth and Families, was required by Section 120 of the Human Services Amendments of 1994. The study was conducted within a representative sample of all Head Start programs. The information yielded by the study is based upon interviews with Head Start staff members and on the analysis of the benefit plans provided by 360 programs.
This study contains information and recommendations which may be helpful to your program in establishing, or improving access to health care, retirement and other benefit plans and in comparing your program's benefits against those provided by other Head Start programs. For example, the study shows that:

• Virtually all programs provide access to health care benefits and more than 82 percent provide retirement benefit programs.
• While there are a variety of health and retirement plans available to program employees, salary levels, plan costs, and participation criteria can be barriers to employee participation in these benefit plans.
• About 17 percent of all Head Start staff do not participate in health care benefit plans, either because the cost of the plan is too high or because they are deemed ineligible to participate. While not all programs consider part-time employees to be ineligible for benefits, some programs apply this criteria to eligibility. 
• While more than 82 percent of all programs have established retirement plans, contributions to employee's accounts are made by slightly less than two thirds (62%) of these programs. About 15 percent of staff not participating in program sponsored plans cite that the cost is too high.

I urge that you review the study, discuss it with program staff and administrators and take what steps are necessary to help ensure that all Head Start employees have access to affordable benefit plans.
INQUIRIES TO:
Regional Administrators, ACF
American Indian and Migrant Programs Branches

/S/
Helen H. Taylor
Associate Commissioner
Head Start Bureau

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Study of Benefits For Head Start Employees
June 1998
EXECUTIVE SUMMARY
STUDY OF BENEFITS FOR head START EMPLOYEES

The Study of Benefits for Head Start Employees was undertaken by the Administration on Children, Youth and Families (ACYF) as required by Section 120 of the Human Services Amendments of 1994. The purpose of the study is to assess the benefits available to individuals employed by Head Start agencies under the Head Start Act, to make recommendations for increasing access to benefits, including a retirement pension program, and to look at the feasibility of participation in the Federal Employees' Retirement System.

RESEARCH FINDINGS

Head Start programs are not mandated to offer fringe benefits beyond those required of any employer (e.g., Social Security), but the data collected in the Study of Benefits for Head Start Employees indicate that the majority of programs have implemented fringe benefits programs on behalf of their employees, and that programs offer a range of benefit options. Virtually all Head Start programs (99 %) offer health benefits and high percentages offer retirement benefits (82 %) and family and medical leave (89%). Approximately 68% offer long-term disability benefits, while less than half (41 %) offer short-term disability benefits. The study did not address other employee benefits, such as vacation time and sick leave, that were not specified in the statute.

Fringe benefits are an important component of Head Start compensation and a critical source of physical and financial security for Head Start staff and their dependents. Head Start employees report fairly high levels of satisfaction with their benefits, but express concerns about the high relative cost of employee contributions, especially for health benefits, the lack of coverage for dependents because of cost and the lack of coverage for part-time employees. The study found limited employee participation in retirement plans.'
Specific key findings of the Study of Benefits for Head Start Employees are:

• A vast majority of Head Start programs offer health care benefits; 99.2 percent of programs offer at least one type of health care benefit and program-sponsored plans include major medical, health maintenance organization, and preferred provider organization models. Comparably fewer programs (less than 20%) offer dental, prescription drug, and/or vision care plans as part of their medical benefits package.
• Long-term disability benefits are available in about two-thirds (67 %) of programs. Short-term disability is offered in less than half (41 %) of Head Start programs. When offered short-term disability benefits typically cover maternity leave for employees.
• More than four-fifths (82 %) of Head Start programs offer some type of retirement benefits. Less than half (44 %) of the retirement plans offered were 403 (b) savings plans, with various levels of program match and vesting period requirements.
• Family and medical leave policies have been implemented in a majority (88.6 %) of Head Start programs. More than half (52%) of these programs offer more liberal leave prerequisites than required by the Family and Medical Leave Act of 1993, such as allowing employees to use available paid leave time in the course of the allowable 12 weeks of unpaid leave.
• Seventy percent of all Head Start staff participate in their program's health care plan. The majority (77 %) of these employees elect employee only coverage. While nearly two thirds (65.2%) of employees have children or other dependents, less than 20 percent cover their children under their Head Start plan. Most dependents who are not covered by Head Start (77.7 %) are covered by another employee policy or by a spouse's policy; 1.4 percent are covered by Medicaid; 3.6 percent receive health care through welfare, SSI, Americor, or Healthy Start programs. However, nearly 5 percent are not covered by any health plan. At a minimum, an estimated 5,700 dependents of Head Start employees have no health coverage.
• Head Start program benefit packages have undergone various changes in the last 10 years. Seventy-five percent of programs changed their health benefit offerings in the last decade. In an effort to provide more affordable benefit alternatives, programs increased their contributions to offset employee premiums, changed insurance carriers, and implemented cost-saving managed care plans. Retirement benefit changes havebeen madeby 45 percent of programs. Retirement plans were added to the programs' benefits packages and additional types of plans were offered in order to contribute tothe financial security of staff and contribute to recruitment and retention of qualified staff. Family and medical leave policies have been the least subject to change, with only 30 percent of programs making any changes to enhance this policy. Further changes anticipated in each of the above benefit areas are expected to reduce costs and/or administrative burden and enhance the quality of benefits offered. 
• The reported level of benefit satisfaction among Head Start program directors is relatively high. In comparing their programs' benefits to those of other employers in their communities, most (62.5 %) Head Start directors feel their benefits are somewhat better or much better.
• Head Start staff reports of benefit satisfaction are also high. Nearly two-thirds (65 %) of employees report that their current benefits package is somewhat better or much better than those offered by other employers in their area. Of those employees who express some level of dissatisfaction with their programs benefits, 16 percent report that their dissatisfaction could potentially motivate them to leave the Head Start program.

CONCLUSIONS AND RECOMMENDATIONS

Head Start programs are operating in a highly competitive job market due to the nation's economic strength. Programs must be able to attract and retain qualified staff despite competition for skilled workers from a wide range of industries beyond child development and educational service areas. To develop and retain the qualified work force needed to maintain Head Start program quality and positive child and family outcomes, the Administration on Children, Youth and Families will work with local Head Start programs on the following recommendations:

• To improve teacher, aide and home visitor staff salaries; 
• To augment and maintain comprehensive fringe benefits packages for employees; 
• To identify health care plans with more affordable premiums; 
• To improve program retirement packages through matching employee contributions and providing employees with a variety of investment vehicles; 
• To educate Head Start staff about the importance of health care coverage for themselves and their dependents and about the economics of retirement planning and saving; and 
• To educate program managers about the selection of benefits packages for their employees and the importance of providing viable and appropriate options to employees for health care, disability and retirement.

After consultation with the Office of Personnel Management about including Head Start employees in the Federal Employees' Retirement System, HHS believes that FERS coverage for Head Start employees would be neither feasible nor desirable.

HHS does believe, however, that expanding the benefit options available to employees to better meet individual needs, reducing the costs of benefits in relation to employee wages, and increasing employee awareness of the role of benefits will contribute to a healthy, rewarding work environment for Head Start employees and should strengthen the capacity of programs to attract and retain high quality staff and to improve their job satisfaction. 

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I. Program Findings

A. DESCRIPTION OF SAMPLE PROGRAMS AND STAFF

Programs

The Study of Benefits for Head Start Employees was designed to collect data from a stratified, random sample of 360 Head Start programs and 360 employees. A program response rate of 87 percent yielded a final sample of 314 programs, resulting in a confidence level of .05. The study's sample size was large enough to generalize findings with confidence to the overall Head Start program and staff populations. Personal interviews were conducted on-site with 20 Head Start program directors and 360 Head Start employees. Telephone interviews were conducted with additional Head Start program directors from the remaining program sample of 340.

The selected program sample included Head Start programs from each of the 10 ACF regions and Migrant and Indian programs. The staff sample included part-time and full-time employees drawn from each Head Start position level (i.e., management, professional and para/nonprofessional).

In addition to director and staff interviews, existing Head Start data sets (HSCOST Management System and the Head Start Program Information Report) were accessed for program budget, staff composition and salary information relevant to this data collection. Descriptive and comparative analyses were then conducted at the completion of the data collection.
A majority, approximately 52 percent, of the surveyed programs were located in rural service areas, 27.2 percent were located in urban or inner city areas, 6.2 percent were located in suburban areas, and 14.4 percent were in other locations. Programs included in the other category were mainly combination sites (i.e., urban/rural or suburban/rural).

Programs in the "other" locations had the largest average number of staff (121.3 employees). This was followed by urban sites with 110, suburban with 81.2 and rural with an average of 71.8 staff members.
Approximately 37 percent of all sample programs operated under the auspices of Community Action Agencies (CAAs). The next greatest concentrations of programs operated under public/private/nonprofit agencies, e.g., churches and universities (33%) and school systems (20.9%). Government agency (5.2%) and Indian Tribe programs (4.1%) comprised smaller segments of the sample population.
Employee membership in a union was reported by 15.3 percent of Head Start programs.

Staff

Eighteen percent of the employees were management staff (i.e., program directors, coordinators or other management staff), 45 percent were professional staff (i.e., teachers, family service workers, component assistants or home visitors), and 33 percent were in para/nonprofessional positions (i.e., teachers aides, bus drivers, janitors, cooks, and other positions). More than one quarter (28%) of the employees interviewed in this study were teachers. The vast majority (90.6%) of the sample employees were full-time employees while 9.4percentwere part-time. Over two-thirds of the employees (67.5%) worked 9 to 10 months of the year (during those months when Head Start children were attending classes). An additional 30.3 percent worked the full calendar year. The majority of these year-round employees were management and administrative staff.

The average annual salaries in the programs of the full-time Head Start staff members sampled were as follows:

Average director salary $42,728
Average teacher salary $17,437
Average teacher's aide salary $11,351

B. FRINGE BENEFITS OFFERED BY HEAD START PROGRAMS

The majority of head Stan programs offer health, long-term disability, retirement and family and medical leave benefits (Exhibit 1). Only 41 percent offer short-term disability.

Health Care

Health care benefits are offered in nearly all programs, with 99.23 percent offering at least one type of health care benefit. Plan types offered include both traditional and managed care plans. Each of these plan types entails different levels of employer and employee costs in addition to varying degrees of choice of care providers. Traditional major medical plans (e.g., Standard Blue Cross/Blue Shield) were offered in 38.2 percent of the programs, health maintenance organizations (HMOs) were offered in 41.6 5; of programs, and preferred provider organizations (PPOs) were offered in 42.2 percent of the programs. (Programs can offer more than one type of health plan.)

Among programs offering medical benefits, 20.7 percent offer dental care, 15.3 percent offer a prescription drug plan, and 12.7 percent offer a vision care plan. Of the programs offering health benefits, 69.7 percent of staff participate in the program's plan and 30.3 percent do not participate. Employees who do not participate in the health plan include employees who cannot afford to pay for the coverage (11 % of non-participants) and staff who are ineligible to enroll because they work part-time or are new hires. These non-covered employees comprise 17 percent of all Head Start staff. The remaining non-participants, approximately 12 percent of all employees, have health coverage through a spouse or another policy of their own.

Few Head Start employees elect dependent or family health care coverage. The majority (77%) of staff members who participate in their program's health benefits, elect "Employee Only" coverage. While nearly two-thirds (65.2%) of employees report having children or other dependents, less than 20 percent cover their children under their Head Start benefits. The majority of dependents who are not covered by Head Start (77.7%) are covered by another policy of the employee's or by the employee's spouse. Fourteen percent of the dependents are covered by Medicaid and 3.6 percent receive health care through welfare, SSI, Americor or Healthy Start programs. Nearly 5 percent (4.7%) have no health care coverage of any type.

Based on all employees who report that their children are not covered by Head Start or any other form of health care coverage, an estimated minimum of 5,700 dependents of Head Start employees have no health coverage. Head Start employees whose children have no medical coverage pay cash out-of-pocket or in installments for their children's care and/or accesscare through school systems and free clinics.

Retirement

Retirement benefits are offered by 82.4 percent of programs and retirement plan contributions are made by nearly two-thirds (62%) of all Head Start programs. The most frequently offered plan type was a 403(b) savings plan. These plans are similar to the 401(k) plans that are available to for-profit companies. In a 403(b) plan the employee contributes a set dollar amount or percentage of his/her salary and this may be matched by the employer. These funds are theninvested. The investment choices and employee control of choices vary by program. The average program contribution is 5.4 percent of the employee's salary.

Over forty-four percent (44.3 %) of programs provide a 403(b) plan. City/county/state retirement benefits are offered by 18.1 percent of the Head Start programs and School System retirement programs are offered by 9 percent. Simplified Employee Pension (SEP) and College/University plans are offered by 5.1 percent and 2.8 percent of programs, respectively.

Vesting period requirements vary across programs. Vesting periods of less than 3 years are required by 16.8 percent of Head Start programs, 10.4 percent of programs provide vesting between 3 to 4 years, 29.5 percent of programs require employees to be employed 5 to 6 years, and 9.7 percent require 7 to 8 years of employment before employees are fully vested in their retirement plan. One-third (33.6%) of programs have vesting periods of more than 8 years.

About half (47.2 %) of all Head Start staff do not participate in a Head Start-sponsored retirement plan. Over fifteen percent (15.2%) of the non-participating employees cite that participation in the retirement benefits is too expensive. A majority of these employees are teachers or teachers' aides (60.2 %). The contributions of retirement plan participants are likely to be insufficient for this same reason.
Family and Medical Leave

Family and medical leave policies have been implemented in the majority of Head Startprograms (88.6 %). At a minimum, the terms (of the leave must be those specified by the Family and Medical Leave Act (FMLA) of 1993 (i.e., up to 12 weeks of unpaid leave are allowed within a 12-month period with the employee being allowed to return to employment). In addition, the FMLA permits employers, at their own discretion, to allow employees to substitute paid leave for any portion of the 12-week leave period. Program prerequisites for family and medical leave are in fact more lenient in some Head Start programs than required by the legislation. Fifty-two percent of programs do not require employees to exhaust all sick or vacation leave before taking the leave.

Disability

Short-term disability (STD) plans are offered by less than half (41 %) of Head Start programs. In those programs where STD benefits were available, 88 percent covered maternity leave within their short term disability policy.

Long-term disability (LTD) benefits are offered by 67.2 percent of the sample programs. In a majority of these programs, employees receive disability pay equivalent to approximately two thirds of their salary while on leave.

Cafeteria Plans

Cafeteria plan designs allow employers to allocate a fixed dollar amount of funds per month to employees which can be applied toward payment for a "menu" of benefit options. Forty-four percent of programs offer a cafeteria plan. Of those programs that offer benefits in the form of a cafeteria plan, 65.7 percent include a medical plan and 45.4 percent include dental benefits. Fewer programs offer prescription drug (33.6 %), retirement (28.7 %), and vision (28 %) options. Other benefits offered through the cafeteria plans of Head Start programs are life insurance, cancer insurance, intensive care insurance, and dependent care reimbursement.

C. ELIGIBILITY REQUIREMENTS

Part-Time Staff

Approximately 69 percent of the programs surveyed base their employees' eligibility to receive benefits on whether the employee is fall- or part-time. In most cases, part-time employeesarenot eligible for health benefits. However, 26 percent of the programs surveyed provide benefits to part-time staff as well as to full-time employees.

Length of Employment

Length of employment is a criterion for eligibility in less than half (41.9%) of the programs, with the most common waiting period being 30 days after employment.

Position Level

Eligibility differences based on position level are a criterion in only 3.4 percent of programs, indicating that the majority of Head Start programs make benefits available to all staff members, regardless of position level.

D. EFFECTS OF BENEFITS ON RECRUITMENT, RETENTION AND TURNOVER

The impact of fringe benefits on Head Start programs' ability to attract and retain employees is one of several factors examined in this study. Many Head Start programs report relatively low turnover (i. e., rates of less than 10 %). Less than half (43.5 %) of programs report turnover rates of less than 6 percent, and another 17 percent report a rate between 6-10 percent. However, about 40 percent of programs report turnover rates of 11 percent or more (approximately 20 percent have

rates between 11-20 percent and 19.8 percent have rates higher than 20 percent). The mean turnover rate is 7.55 percent.

According to program director reports regarding staff turnover, employees who leave the Head Start program cite salary as the top reason for leaving. Approximately 35 percent of programs reported low salary as the most frequent reason for turnover. The most frequently given reasons for employees leaving the Head Start program were (in order of frequency):

1. Inadequate, low salary (35.1%)
2. Move to another location (13.4%)
3. Personal reasons not related to the job (11. 9 %)
4. Better job in the child development/care field (11. 0 %)
5. Better job in another field (8.9%)

Approximately one-third of programs report that their current benefits hinder hiring (31.5 %) or retaining staff (32.7%).

Another question of interest is the relationship between the number of "soft benefits" offered by a program and the program's turnover rate. "Soft benefits" include such things as free meals, free care for employee's children, free employee counseling sessions, training, tuition, and access to a food bank. Most of the programs do not offer these additional benefits, although some programs offer as many as seven. In terms of staff turnover, those programs with the lowest turnover rates had the highest number of additional "soft benefits."
 
E. BENEFIT COSTS AND AFFORDABILITY

Benefits are a substantial expense for Head Start programs and employees. However, program-sponsored benefits are an important source of physical and financial security for employees. The data also indicate that benefits can influence the level of satisfaction employees experience in fulfilling their roles.

Program budgets for fringe benefits are comprised of administrative fees and premium contributions on behalf of individual employees. Program expenditures for health, retirement, disability and other fringe benefits are discussed below.

Health

Program contributions for employee health premiums are presented in Exhibit 2. The contributions vary depending upon the type of plan offered/selected, as well as by the cumber of family members covered in addition to the staff member. For Employee Only coverage, costs were highest for the primary major medical plan ($158.46 per month) followed closely by the primary PPO plan ($157.54). HMOs were slightly less at $148.18, and secondary major medical, HMOs, PPOs, and other alternatives followed. Costs for family coverage were the highest and in this category major medical coverage was considerably higher than other plan types. Major medical family coverage averaged $272.99 per month, followed by PPO at $262.59, and HMO at $256.12. Somewhat surprisingly, program contributions for the employee and children were lower than those for the employee plus one other individual (usually the spouse). This occurs because adult coverage is more expensive than child coverage.

Exhibit 2. Average Monthly Employer Contributions for Health Benefits N = 311
Type of Health Benefit Plan	Employee Only	Employee+ 1	Employee + children	Family
Major Medical plan primary	$158.46	$227.17	$190.37	$272.99
Major medical plan, secondary	83.90	67.72	57.61	144.58
HMO, primary	148.18	204.30	192.54	256.12
HMO, secondary	135.38	188.22	167.39	234.56
Preferred provider, primary	157.54	211.36	199.06	262.59
Preferred provider, secondary	126.85	184.52	152.65	209.83
Other plan type, primary	131.53	189.66	160.45	226.03
Other plan type, secondary	117.45	188.17	112.21	224.28

As indicated in this exhibit, the monthly contributions per employee made by Head Start programs for health benefit premiums are substantial. In addition to offering different types of health coverage (i.e., major medical, HMO, preferred provider), programs may also offer more than one plan of a given type to expand choices for employees. When asked how they felt about their own health care contribution level, 44.4 percent of participating employees report that the costs are too much, while 12.8 percent report that the costs are about right.

Retirement

Retirement benefits comprise a small but still significant cost for those programs reporting them. Sixty-six percent of the programs reported expending less than $50,000 annually for retirement benefits. However, approximately 13 percent of programs spend more than $100,000 annually.

Most programs contribute a percentage of the employee's salary, rather than a whole dollar value, to retirement plans. The highest contribution levels for employers were plans offered by city/county/state governments and school systems. The average percentage contribution for city/county/state government retirement programs was 11.3 percent of salary, while for school system retirement plans the average program contribution was 8.7 percent. Programs, on average, match 5.4 percent of employee salary for 401k/403b plans and 4.7 percent for college/university plans. Finally, programs contribute, on average, 3.9 percent to Simplified Employee Pension or SEP plans.

The average employee contribution to a retirement savings plan is $57 per pay period (typically twice a month). As employees are able to choose the amount of their retirement contribution, the level of contributions varies by position level. Average staff contributions are as follows:

Management staff $87 per pay period
Professional staff $44 per pay period
Para/nonprofessional $41 per pay period
About half (47.2%) of all Head Start staff do not participate in a Head

Start-sponsored retirement plan. Over fifteen percent (15.2%) of the non-participating employees cite that participation in the retirement benefits is too expensive. A majority of these employees are teachers or teacher's aides (60.2%).

Disability and Other Fringe Benefits

Most of the sample programs (82%) expend less than $26,000 annually for state disability. The average program contribution for short-term disability is $19-78 per employee per month. The average contribution for long-term disability is $31.91 per month. Of those programs thatprovide other fringe benefits, the majority of programs (60.6%) expend less than $26,000 annually for these benefits.

F. HEAD START BENEFIT CHANGES

The benefits packages of Head Start programs have undergone various changes in the last 10 years and programs expect further changes during the next 2 program years.

Health

In terms of health benefits, 75 percent of programs made changes within the last 10 years, and 37 percent expect to make changes in the next 2 years. In an effort to provide more affordable benefit alternatives, programs increased their contributions to offset increases in employee health premiums, programs changed insurance carriers, and they implemented managed care plans, such as health maintenance organizations and other preferred provider arrangements. The most frequently cited reasons for past changes were to provide higher quality benefits (31 %) or to provide less expensive coverage (18%). Similarly, Head Start programs cite "higher quality benefits " (28 %) and more affordable benefits " (16 %) as reasons for expecting to make changes in health benefits in the next 2 years.

Retirement

Forty-five percent of programs changed their retirement benefits within the last 10 years. Retirement plans were added to the programs' benefits packages and additional typesof retirement plans were offered, including 403(b) and simplified employee pension plans in order to promote the future financial security of Head Start staff and to contribute to recruitment and retention of qualified staff. The most frequently cited reasons for retirement plan changes were: a) Additional funding became available (47 %); b) to obtain higher quality benefits (24 %); c) to contribute to the financial security of employees (14%); d) to demonstrate a sense of commitment to staff (11 %); and e) to attract or retain qualified staff (11 %).

Twenty-three percent of Head Start programs expect to make a change in their currentretirement benefits.Of these programs, 21 percent seek higher quality benefits, while 13 percent expect the change to help the program attract or retain qualified staff. Ten percent report that the retirementplan changes will be made in response to staff request, and 10 percent report that the change will improve staff s financial security.

Family and Medical Leave

The passage of the Family and Medical Leave Act of 1993 led Head Start programs to expand their leave policies to include unpaid leave allowances in the event that staff were required to care for themselves or a sick family member. As a federally-mandated leave policy, family and medical leave practices are the least subject to change. Only 30 percent of Head Startprogramdirectors report having made a change in their agency's family and medical leave benefits in the last 10 years. Seven percent report that changes were designed to reduce administrative burden, while 5 percent made changes that enhanced their previous policies by offering a more generous leave. Barring a change in the legislation, comparably fewer (3.8%) programs expect to change their current family and medical leave policy within the next 2 years. Of those programs who do expect a change, 50 percent desire less paper work and 42 percent would like to create a more liberal policy.
 
II. CONCLUSIONS AND RECOMMENDATIONS

The data collected in the Study of Benefits for Head Start Employees show that the majority of Head Start programs have implemented comprehensive fringe benefits programs on behalf of their employees and that programs offer a range of benefit options. Virtually all Head Start programs (99 %) offer health benefits and high percentages offer retirement benefits (82 %) and family and medical leave (89%). Approximately 68 percent offer long-term disability benefits and a significant percentage (41 %) offer short-term disability benefits.

Head Start employees report fairly high levels of satisfaction with their benefits, but express concerns about the high relative cost of employee contributions, especially for health benefits, the lack of coverage for dependents because of cost, and the lack of coverage for part-time employees. The study found limited participation in retirement plans.
Issues that remain to be addressed include expanding the benefit options available to employees in order to best meet individual needs, reducing the costs of benefits in relation to employee wages, and increasing program awareness of the role of benefits in creating a healthy, rewarding work environment for Head Start employees.

Head Start programs are operating in a highly competitive job market due to the nation's economic strength. Programs must be able to attract and retain qualified staff despite competition for skilled workers from a wide range of industries beyond child development and educational service areas. To develop and retain the qualified work force needed to maintain Head Start program quality and positive child and family outcomes, the Administration on Children, Youth and Families will work with local Head Start programs on the following recommendations:

• While fringe benefits are very important, the low salaries paid to teachers and aides in particular often preclude their participation in health benefits or retirement plans at productive levels. Salaries are more important in attracting and retaining staff than arebenefits.Additional resources should therefore be directed toward the improvement of teacher, aide and home visitor staff salaries. 
• Head Start programs should be encouraged to maintain comprehensive fringe benefits packages for employees. They should be encouraged to add retirement programs with agency matching, long-term and short-term disability, and family and medical leave. Programs should explore providing benefits to part-time employees at the same rates as full-time employees or at compromise rates that do not require employees to pay full employer/employee premiums. Recognizing the value of supplementary benefits, such as free child care and training opportunities, programs should be encouraged to provide these types of benefits. 
• Efforts should be made at both national and local levels to identify health care plans with more affordable premiums, especially for professional and paraprofessional staff and for dependent coverage. The potential for developing a large health care policy pool with a major insurer which programs could purchase through local agents should be further explored. At the local level, programs should actively seek competitive bids for coverage to maximize benefits and minimize premiums. 
• Programs should be encouraged to improve their retirement packages by matching employee contributions and providing employees with a variety of investment vehicles so that investment strategies for staff can be tailored to their individual financial goals and family economic circumstances. 
• Head Start staff should be educated about: the importance of health care coverage for themselves and their dependents, both to maintain good health and to prevent family financial catastrophe in the event of major illnesses or accidents; the economics of retirement planning and saving, with actuarial examples of the implications of various levels of savings and the advantages of beginning early in life to maximize the benefits of saving; and the advantages and risks of various investment vehicles. 
• Program managers should be educated on the selection of benefits packages for their employees and on the importance of providing viable and appropriate options to their employees for health care, disability and retirement.

In summary, Head Start is generally providing a competitive and comprehensive program of benefits for employees. Implementation of these recommendations should strengthen the capacity of programs to attract and retain high quality staff and to improve their job satisfaction.
 
ADDENDUM
FEASIBILITY OF head START PROGRAM PARTICIPATION IN THE
FEDERAL EMPLOYEES' RETIREMENT SYSTEM

The Federal Employees' Retirement System (FERS), implemented January 1, 1987, provides retirement benefits to Federal employees hired after December 31, 1983. The FERS system is a three-tiered plan which includes the following components:

1. Social Security Benefits
2. Basic Benefit Plan
3. Thrift Savings Plan (TSP)

For the FERS basic benefit, employees currently contribute .8 percent of basic pay. The employer contributes the remaining costs, currently 10.7 percent of basic pay. Employee participation in TSP is optional, with a maximum contribution of 10 percent of basic pay. The employer contributes 1 percent to TSP even if the employee chooses not to contribute anything. In addition, the employer matches the first 3 percent contributed by the employee on a one-to-two basis and the next 2 percent on a one-to-two basis. Thus, in addition to Social Security, FERS costs the employer between 11.7 percent to 15.7 percent of basic pay.

HHS believes it would not be feasible to extend the FERS program to Head Start employees. FERS works for Federal employees because the employer (the Federal government) is a single entity with one set of personnel policies applicable to its employees. It will remain in existence to meet its future retirement obligations. There are over 2,000 Head Start programs, each with its own personnel policies which are subject to frequent review and revision. Each year 1-2 percent of Head Start agencies on average cease operations for various reasons. Staff in these programs, even if offered continued employment by another Head Start agency, would in effect work for a new employer with its own set of personnel policies and possibly a different retirement plan. HHS believes that employees in these situations could be at risk under a retirement system such as FERS which presupposes no change in employer-employee relationships.

Through consultation with the Office of Personnel Management, HHS found that if Head Start employees had no retirement benefits it would be technically feasible to include them in a uniform retirement system. But, because Head Start employees currently do have retirement benefits which vary greatly from program to program, it would be a very complex process to establish a new retirement program for Head Start. Furthermore, including non-Federal employees in the Federal retirement system may establish a precedent that is not in the best interests of all parties affected.

In conclusion, HHS believes that FERS coverage for Head Start employees would be neither feasible nor desirable.