|55 ELM STREET
Telephone: (860) 702-3480
|HEALTH CARE COST
|STATE OF CONNECTICUT
OFFICE OF THE STATE COMPTROLLER
HEALTHCARE POLICY & BENEFIT SERVICES DIVISION
MARCH 11, 2010
|ATTENTION:||Personnel and Payroll Officers|
|SUBJECT:||Administration of 3% Contributions for Retiree Health Coverage|
The 2009 SEBAC Agreement implements a new program for funding retiree health benefits. Beginning July 1, 2009, all new employees who are eligible for State-paid health insurance were required to contribute three percent (3%) of their compensation pre-tax for ten (10) years to the Retiree Health Fund to offset the cost of providing retiree health benefits. Effective July 1, 2010, all health-care eligible employees with less than five (5) years of actual State service will be required to contribute 3% of compensation pre-tax to the Retiree Health Fund until they complete 10 years of service or otherwise qualify for retiree health coverage.
This memorandum identifies those required to make the 3% contributions, the rules for determining when the 3% contributions will start and stop, and the effect of leaves of absence or other service interruptions on the duration of required contributions. A supplemental memorandum will be provided before July 1, 2010 regarding implementation of the 3% deductions for employees with less than 5 years actual service. EPM queries have been created and CORE-CT job aids will be issued in connection with this program.
II. EMPLOYEES SUBJECT TO 3 % CONTRIBUTION REQUIREMENT
A. New Employees
On or after July 1, 2009, all new, health-care eligible employees will be required to pay 3% of their total compensation to the Retiree Health Fund for 10 years to offset the cost of providing retiree health benefits.
B. Employees Rehired after 7/1/2009
Former State employees rehired after July 1, 2009, who are eligible for State-paid active health benefit coverage, will be subject to the 3% deduction for 10 years, less any period of prior State service during which they were eligible for active employee health benefits coverage. A rehired employee who has already completed sufficient State service to qualify for retiree healthcare upon retirement shall not be required to make a contribution during their rehire period.
C. Active Employees with Hire Dates before 7/1/2009
Any healthcare-eligible-employee who was an active State employee before July 1, 2009, and has less than 5 years of actual service as of July 1, 2010, will be required to make the 3% contribution until he or she has completed 10 years of service. Provided, however, that someone age 52 years or older who was actively employed by the State as of April 21, 2009 and has fewer than 5 years actual service on July 1, 2010, will be required to make the 3% contribution until the earlier of (a) the date on which he or she completes 5 years of actual State service and transitions directly from employment to retirement at age 62 or older or (b) the completion of 10 years actual service. Employees who were on leave as of July 1, 2009, will be considered active employees.
D. Safe Haven
Employees will be provided a "Safe Haven" of up to one year of unpaid time that will count towards determining their obligation to make the 3% contribution. This means that any employee returning to the payroll after June 30, 2009, with 11 or more years of previous healthcare-eligible service as of their return date is assumed to meet the 3% service requirement and does not need to be audited. Any employee on the payroll as of July 1, 2009 who would have 6 years of healthcare-eligible service as of July 1, 2010 would also be assumed to meet the 3% service requirement and does not need to be audited.
E. Employees Exempt from Requirement
The following employees are exempt from the requirement to contribute 3% of compensation to fund retiree healthcare costs:
F. Effect of Healthcare Waiver on 3% Contribution
Waiver of active employee health insurance shall have no impact on the entitlement to retiree healthcare coverage or the requirement to make the 3% contribution to the Retiree Health Fund, which shall be affected only by demonstrating the existence of alternative retiree health coverage, as set forth below.
III. RULES FOR CALCULATING CONTRIBUTIONS AND SERVICE
A. Compensation Included in 3% Contribution
The 3% contribution for retiree health insurance will be based upon earnings defined as salary in Section 5-154(h) of the Pension Agreement. In the event an employee has multiple part-time positions, which cumulatively make him or her eligible for healthcare coverage, the 3% deduction will be based on compensation from all positions.
An employee who has both a full-time position, which entitles him or her to healthcare coverage, and a part-time position will have contributions based on compensation for the full-time position only.
B. Calculation of Service Time
Only periods of actual service during which an employee is eligible for active employee health benefits will count towards determining whether he or she is subject to the 3% contribution requirement. Service time will be calculated in years and months. For purposes of this program, neither vesting service nor time purchased for retirement purposes will be counted, except as required by section 5-188(e) of the Pension Agreement or to the extent service is purchased for military service in time of war.
If a part-time employee is eligible for State-paid health benefit coverage, the obligation to make 3% contributions will be based on the duration of service and will not be pro-rated.
The calculation of service time for employees who work less than a 12 month calendar year but receive a full year of pension credit under the Pension Agreement shall be the same for retiree healthcare. For example, for higher education and vocational employees, and employees of the unified school districts and the Board of Education for the Blind, each academic year or equivalent during which an employee was eligible for State paid health insurance benefits will count as one year of service. Semesters shall count as one half year of service.
B. Effect of Leave on Contributions/Service Time
1. General Rule: For purposes of this program, any calendar month during which a healthcare-eligible employee receives a paycheck and has the 3% contribution collected will count towards fulfilling the employee's obligation. Any calendar month in which an employee is on unpaid leave and does not make a 3% contribution will extend the duration of the 3% payment obligation by one month, unless he or she elects to make up the missed contributions prior to retirement.
2. Unpaid Leave. The 3% contribution will be suspended during unpaid leave where an employee remains eligible for continued State-paid medical benefits coverage. Such periods include maternity leave, sabbatical leave, FMLA leave (State or federal), or non-FMLA medical or maternity leave. See separate rule below for Workers Compensation leave.
3. Paid Leave. The 3% contribution will be collected during paid leaves of absence where an employee receives his or her regular compensation or payments using accrued sick of vacation time. Such paid leaves will count towards fulfillment of the service and contribution requirements for retiree health coverage.
Employees classified as on paid Military Leave will have such service credited towards fulfillment of their obligation to contribute to the Retiree Health Fund, even if they do not receive a check from the State during that period. For those receiving compensation under the State's Military Pay Differential Leave, the 3% deduction will be collected from the Pay Differential amount paid by the State.
4. Workers Compensation Leave. Employees out on Workers Compensation leave shall have that time credited towards their 3% contribution requirement but shall not be required to make any contribution during such leave, except to the extent their Worker's Compensation pay is supplemented by sick or vacation time.
5. Disability Retirement. Employees who qualify for disability retirement under SERS (or its equivalent for State-employee members of the Teachers' Retirement System or members of ARP) shall be deemed to have fulfilled their obligation to contribute towards the Retiree Health Fund as of the time they are granted disability retirement or its equivalent. If such employee returns to State service, he or she shall resume any required but unpaid contribution towards retiree healthcare.
IV. AGENCY IMPLEMENTATION/AUDIT RESPONSIBILITIES
Except to the extent that employees are covered by the Safe Haven rule reflected above, it will be the responsibility of each agency's Human Resource/Payroll staff to document each new, rehired or active employee's status with regard to the 3% contribution. A new form, the CO-1300, will be used to enter start and stop dates for contributions to the Retiree Health Fund in CORE-CT or to record an exemption from the requirement. Compliance with the 3% deduction program will be monitored through CORE-CT. EPM queries and CORE-CT job aids have been created to assist agencies with this process.
A. New Procedures for 3% Deduction Plan
1. New Hires since 7/1/09. HR departments must contact all employees who were first hired after July 1, 2009, to have them fill out the CO-1300 and input the estimated end date for their 3% contributions in the CORE-CT General Deduction section. Any employee who was liable for but has not been paying the 3% contribution since July 1, 2009 should have the deduction started immediately. Such employees can be given the option of either paying the 3% for 10 years from the date deductions start or by electing to have the uncollected amount deducted over subsequent pay periods.
Going forward all new healthcare-eligible employees should have the 3% contribution commence with the first paycheck, or as soon thereafter as administratively possible. At the time of hire, human resources should have each employee fill out the CO-1300 enrollment form, which will set the start and estimated stop dates for the employee's 3% contributions, which must be entered on the CORE-CT General Deduction page. Because future CORE-CT check dates are not set up 10 years in advance, the estimated stop date is shown by month and year only.
2. Employees Rehired After 7/1/09. Employees who have been rehired since July 1, 2009, must also complete the CO-1300 form. HR is responsible for verifying a rehired employee's service dates with the previous agency and entering an estimated deduction end point in CORE-CT. With the exception of Workers Compensation all unpaid leave (defined as any calendar month in which the employee did not receive a paycheck) should be excluded from the calculation of prior State service.
3. Active Employees with Fewer than 5 Years Service as of 7/1/10. The State will begin deducting 3% from the compensation of any State healthcare-eligible employee who has fewer than 5 years actual service as of July 1, 2010. On or before April 1, 2010, the Office of the State Comptroller will provide agencies with a preliminary list of employees who may be subject to the 3% deduction based on CORE-CT records. Employees so identified must fill out a CO-1300 that will be used to capture any prior State service not reflected in CORE-CT. It will be the agency's responsibility to verify prior service claims and to enter start and estimated stop dates for the 3% deduction in CORE-CT for all affected employees by July 1, 2010.
4. Identifying Exempt Employees. If an employee is exempt from the 3% deduction, HR/PY personnel should indicate the basis for the exemption on the CO-1300, retain the original, and forward a copy of the form to the Healthcare Policy & Benefit Services Division.
5. Exemptions Based on Alternative Retiree Coverage. Any exemption based on the availability of other retiree health insurance coverage must be supported by a signed Affidavit (CO-1303) from the plan sponsor. An employee who has provided an Affidavit substantiating the existence of alternative retiree health insurance coverage must also sign a Waiver of Retiree Health Coverage (CO-1304). This Waiver cannot be revoked unless the alternative retiree coverage that is the basis for exemption subsequently becomes unavailable-other than by reason of some action of the employee. A copy of the CO-1303 and CO-1304 must be sent (along with the CO-1300) to the Healthcare Policy & Benefit Services Division to support any exemption on this basis.
B. Adjusting End Date for Deductions after Unpaid Leave
The duration of 3% contribution may be extended by any period of unpaid leave. HR/PY should have any employee returning from unpaid leave fill out a new CO-1300 to indicate the length of unpaid leave and, if applicable, adjust the deduction period end date in CORE-CT. The original, signed CO-1300 must be retained in the employee's agency personnel file as it will be needed to audit fulfillment of the retiree healthcare funding requirement.
C. Rules for Refund of 3% Contributions
1. Erroneous Deductions. An employee who paid the 3% deduction in error and any employee who has demonstrated that he or she has alternative retiree healthcare coverage and provides a signed Affidavit and Waiver will be entitled to a return of 3% contributions paid.
2. Employees leaving State Service before Completing 3% Deduction Requirement. An employee who leaves State service before fulfilling his or her obligation to contribute to the Retiree Health Fund has the right to seek a refund of amounts paid. If such employee is subsequently rehired, any service during which the 3% deduction was previously collected will not count towards fulfillment of that employee's obligation to contribute to the Retiree Health Fund unless the employee repays the refunded amount in full. Payment must begin within 60 days of returning to work and must be completed within a period no longer than the duration of the original deduction. (See procedures in Section E below.)
Employees who separate from State service before completing the required period of 3% contributions may elect to leave their contributions in the Retiree Health Fund. If such employees return to State service their prior service time will be credited toward fulfillment of their 3% Retiree Health Fund contribution obligation.
3. Employees leaving State Service after Completing 3% Deduction Obligation. Employees who separate from State service after fulfilling their obligation to pay the 3% contribution are not eligible for a return of contributions.
D. Processing Returns of 3% Contributions
The only circumstances under which returns will be paid are as follows: the employee was exempt from the obligation to pay the 3% contribution, and deductions were made in error; deductions were collected beyond the required end date, or the employee has requested a refund after separating from State service without completing the period of required 3% contributions to the Retiree Health Fund.
The employee seeking a refund must fill out a CO-1301, and HR/PY must confirm that a refund is permitted. The agency should run an EPM Query to determine the amount to be refunded and enter that amount on the Deduction Override spreadsheet. The agency should send the completed CO-1301 to the Healthcare Policy & Benefit Services Division. CORE-CT will not process any refund until the Division has approved the payment.
Note: The returned amount will equal the amount deducted from the employee's compensation and will be reported as income in the year received. Any return of 3% contributions made to a separating employee will be paid from General Fund-not from the Retiree Health Fund. No interest will be payable, except to the extent the State delays repayment of the contributions by a period of more than 60 days after the CO-1301 has been received by the Healthcare Policy & Benefit Services Division. The State shall make every effort to return the contributions within 21 days, except to the extent returns are delayed pursuant to Section E, 2, e of SEBAC 2009.
E. Rehired Employees' Limited Right to Obtain Prior Service Credit after Refund
A rehired employee who received a refund of his or her 3% contributions is not entitled to credit for any prior State service during which those deductions were taken, unless such employee elects to and commences repaying the entire refunded amount (either in periodic payments or a lump sum) within 60 days after rehire.
When completing the CO-1300 for a rehired employee, the hiring agency HR/PY must run an EPM query to determine whether that employee has received a refund of Retiree Health Fund payments. If so, the employee must be given the option of repaying those amounts or waiving the right to have that prior service credited for purposes of retiree health care eligibility.
The repayment of refunded 3% contributions is initiated by completion of the CO-1302. An employee may elect to repay required 3% deductions in a lump sum or over time. Periodic repayments must commence within 60 days of returning to work and will be collected over the same number of pay periods in which the deduction was previously taken. A lump sum payment can only be made with post-tax funds.
Employees declining to repay refunded Retiree Health Fund contributions must sign a waiver form (CO-1305) acknowledging that decision. For purposes of retiree healthcare eligibility, a rehired employee who fails to make a repayment election within 60 days of returning to State service will be forever barred from obtaining credit towards retiree health coverage for that period of prior State service.
F. 3% Contributions to Qualify for Retiree Health Care
1. Individuals who have accrued sufficient actual service to qualify for retiree healthcare coverage but who did not make 3% deductions for the required period of time may be given the opportunity-prior to retirement-to contribute amounts due to the Retiree Health Fund in lieu of extending their employment for an additional period. This option is not available to rehired employees who waived their right to repay refunded amounts within 60 days of returning to State service.
2. An adjunct faculty member who has completed sufficient State service to qualify for retiree health coverage will be required to pay an amount equal to 3% of his or her compensation for the full 10-year period (or such lesser time as may be required of those actively employed by the State before July 1, 2009). If an adjunct faculty member dies before retirement but after completing sufficient State service to qualify for retiree health benefits his or her surviving spouse will not be entitled to such coverage unless there is an arrangement in place for payment of the entire amount that the deceased adjunct would have been required to contribute to the Retiree Health Fund to retiree coverage had he or she survived.
3. An employee who previously waived his or her right to retiree health insurance based on alternative retiree health coverage that has subsequently become unavailable other than as a result of the employee's action will be required to pay an amount equal to 3% of his or her compensation for the full 10-year period (or such lesser time as may be required of those actively employed by the State before July 1, 2009).
Individual employees with questions regarding their service accruals are directed to agency HR/PY personnel. Agency personnel with questions regarding implementation of the program should call the Healthcare Policy & Benefit Services Division at 860-702-3486.
NANCY WYMAN, STATE COMPTROLLER
By: Thomas C. Woodruff, Ph.D., Director
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