In anticipation of questions related to benefits available to employees subject to layoff, the Department of Employee Trust Funds (ETF) has prepared this bulletin to provide guidance and assistance to you and your employees. Please read this information carefully, as it does not appear in any current editions of ETF's employer administration manuals, bulletins or brochures.
To ensure the consistent handling of state employee layoff situations, ETF and the Department of Employment Relations (DER) held discussions regarding the employment status of an employee who is laid off as well as the benefits available to employees upon layoff. In the case of a "permanent" layoff (this does not include temporary layoffs as defined under the applicable collective bargaining agreement or administrative code, seasonal layoffs, school-year employee summer layoffs, or leaves of absence), it is DER's position that the layoff will result in a termination of employment.
Based on DER's position, ETF completed a comprehensive review of the Statutes, rules, contracts, and policies governing ETF administered benefit programs to determine the impact of termination due to layoff on ETF benefit program eligibility. The results of this review are shown in the two charts attached to this bulletin.
The chart entitled State Employee Benefits Upon Termination Due to Permanent Layoff depicts the impact on benefits when a state employee is terminated as a result of permanent layoff. The chart entitled, State Employee Benefits During Leave of Absence or Temporary Layoff, depicts the impact on benefits when a State employee is placed on a leave of absence or placed on temporary layoff (i.e., temporary layoff as defined under the applicable contract or rule, seasonal layoff, school-year employee summer layoff, etc.). These charts replace the chart in Subchapter 1801 of the Wisconsin Retirement System Administration Manual, ET-1127 (REV 5/99).
The remainder of this bulletin applies only to employees who are terminated from employment as a result of permanent layoff.
Benefit Eligibility Status upon Termination Due to Layoff
Other than for group health insurance purposes, a state employee whose employment is terminated due to permanent layoff is to be treated, for benefit purposes, like any other employee terminating state service. However, for group health insurance purposes, an employee terminated due to permanent layoff will be treated as if on a leave of absence per § 40.02(40) and § 40.05(4)(bm), Wis. Stat.
The following provides a summary of the impact that termination due to permanent layoff has on an employee's eligibility for State benefit programs.
Employer and employee contributions will end on the termination date or on the last day the employee receives earnings for services rendered (if earlier than the termination date).
Note: Employees terminated due to permanent layoff are eligible to take a separation benefit before age 55 (50 for protective employees), or a retirement benefit after reaching retirement age. Refer to the benefit presentation portion of this bulletin for ETF resources available to your employees.
An employee who returns to state service after taking a separation benefit will be treated as a new employee for all benefit purposes.
Life insurance coverage will continue through the end of the month following the month in which termination occurs. Example: If an employee is terminated on May 20, 2003, life insurance coverage will end on June 30, 2003.
Note: Employees insured for six or more continuous months at the time coverage ends may continue or convert life insurance coverage (depending on age and service circumstances). Employees who take a retirement benefit will be contacted by ETF regarding their life insurance upon retirement. For all others, Minnesota Life Insurance Company will bill eligible employees if they file a timely continuation or conversion application. Refer to subchapters 1603 and 1611 in the Group Life Insurance Administration Manual for details on life insurance continuation or conversion options, respectively.
Income continuation insurance (ICI) coverage ends on the day of termination. Employees who are receiving ICI benefits at the time of termination will continue to receive benefits for as long as they remain disabled under the terms of the ICI contract.
Upon termination due to permanent layoff, health insurance coverage may be continued under § 40.05 (4), Wis. Stat.
Specifically, § 40.05 (4) (b) provides that a state employee who retires on an immediate annuity (or who is eligible to retire on an immediate annuity and has 20 years of creditable service) shall have accumulated sick leave converted upon certification by the employer to ETF (see the section of this bulletin titled Conversion of Accumulated Sick Leave Under § 40.05 (4) (b), Wis. Stat.).
Employees who are not eligible to convert sick leave under § 40.05 (4) (b), Wis. Stat., may request that their employers convert accumulated sick leave for purposes of paying health premiums under § 40.05 (4) (bm), Wis. Stat. Also, § 40.05 (4) (a) 3, Wis. Stat., provides that these employees are entitled to an additional 3 months of state contribution toward the health insurance premium. This is in addition to the premiums that have already been deducted. This means that an employee who is terminated due to permanent layoff and who is not eligible for an immediate annuity (or who is eligible for an immediate annuity but has less than 20 years of creditable service) may receive up to 5 months of employer contribution towards premium after the termination date (i.e., 2 months of prepaid premium and 3 additional months). Any employee share must be paid in advance (by deduction from the employee's last check or by personal check) if the employee is not using converted sick leave (see the section of this bulletin titled Conversion of Accumulated Sick Leave Under § 40.05 (4) (bm), Wis. Stat.).
Conversion of Accumulated Sick Leave Under § 40.05 (4) (b), Wis. Stat.
An employee who is terminated due to permanent layoff and who begins an immediate annuity (or is eligible to begin an immediate annuity and has 20 years of creditable service), is eligible to convert accumulated sick leave under the provisions of § 40.05 (4) (b), Wis. Stat., as follows:
Note: For purposes of calculating basic pay rate, Wisconsin Administrative Code ETF 10.01 (1m) provides that "Current basic pay rate means…the hourly rate, or its equivalent, excluding any overtime or supplementary compensation, at which the employee is paid at the time of termination of employment." However, the calculation for converting sick leave under § 40.05 (4) (b), provides one exception to the definition as follows: " . . . any supplemental compensation that is paid to a state employee who is classified under the state classified civil service as a teacher, teacher supervisor, or education director for the employee's completion of educational courses that have been approved by the employee's employer is considered as part of the employee's basic pay . . . "
Note: Under § 40.05 (4) (b), Wis. Stat., the employee may elect to delay using converted sick leave credits if the employee is covered under a comparable health insurance plan. Comparable health insurance means a plan or policy that provides hospital and medical benefits that are substantially equivalent to the standard health insurance plan established under § 40.52 (1).
Conversion of Accumulated Sick Leave Under §40.05 (4) (bm), Wis. Stat.
An employee who is not eligible for an immediate annuity (or who is eligible to begin an immediate annuity but who does not have 20 years of creditable service) at the time of termination due to layoff is eligible for accumulated sick leave conversion through their employer under § 40.05 (4) (bm) as follows:
Note: For purposes of calculating basic pay rate, Wisconsin Administrative Code ETF 10.01 (1m) provides that "Current basic pay rate means…the hourly rate, or its equivalent, excluding any overtime or supplementary compensation, at which the employee is paid at the time of termination of employment." However, the calculation for converting sick leave under § 40.05 (4) (bm), provides one exception to the definition as follows: " . . . any supplemental compensation that is paid to a state employee who is classified under the state classified civil service as a teacher, teacher supervisor, or education director for the employee's completion of educational courses that have been approved by the employee's employer is considered as part of the employee's basic pay . . . "
Note: The Supplemental Health Insurance Conversion Credits (SHICC) program is not available to employees terminated due to layoff who are not eligible for an immediate annuity. SHICC program benefits apply only to employees: a) who are retiring on an immediate annuity, or b) who are eligible to retire on an immediate annuity and have 20 years of creditable service.
Note: For an employee utilizing sick leave conversion under this provision (i.e. due to layoff), the employer will not submit an Accumulated Leave Certification Form, ET-4306.
Health insurance continuation coverage (in compliance with COBRA) using the Continuation-Conversion Notice, ET-2311, must be offered when the available sick leave contribution toward premium ends.
If an employee participates in a medical expense reimbursement account under the ERA program, he or she may continue the account (through the end of the plan year) upon layoff by:
Note: If payments are not continued, costs incurred after the end of the pay period following the pay period when the last contribution was made will not be reimbursed.
If employees participate in a dependent care reimbursement account, contributions end with the last paycheck, but employees may continue to claim eligible expenses until the dependent care account is exhausted.
Employer and employee questions on ERA program coverage in a permanent layoff situation can be directed to Bill Aye with Fringe Benefits Management Company at (608) 829-0435.
Employees at risk for layoff should be reminded to make changes to their Commuter Benefits election by the 10th of the month prior to the coverage month to avoid being charged for parking or transit benefits they may not want after the layoff. Contact Bill Aye with Fringe Benefits Management Company at (608) 829-0435 for questions about Commuter Benefits coverage in a permanent layoff situation.
Contributions will cease upon termination. Employer and employee questions regarding options under the Wisconsin Deferred Compensation program should be directed to Sue Oelke or Mike Jeffery at (608) 256-6200, or toll free at 1-800-257-4457.
Continuation should be offered to all terminated employees currently covered by EPIC. Continuation applications are available from EPIC Life Insurance Corporation at (800) 520-5750. Continuation coverage should be offered for 36 months with an effective date beginning the first of the month following the month through which premium is already paid. If you have specific continuation questions, contact Wendy Sanders-Travis at (608) 226-7857.
ETF to Offer Onsite Benefit Presentations
ETF will conduct special onsite benefit presentations for state agencies to help get WRS benefit information to employees subject to layoff. A minimum of 25 people will be required to schedule an onsite presentation. You may contact other agencies about holding a combined session if your agency is unable to meet the minimum attendance requirement.
To schedule a benefits presentation for your employees contact Luana Schneider, Field Services Coordinator, at (608) 266-3463. You will need an approximate count of the number of attendees and how many are at or near retirement age (over 50). ETF is willing to host sessions or present them at your agency. Employees and their spouses are encouraged to attend the presentations.
ETF will also have individual counseling appointments available for employees being laid off. Employees should contact the Madison office at (608) 266-5717, or the Milwaukee office at (414) 227-4294 to make an appointment. It is important that employees identify themselves as subject to state layoff when requesting appointments and/or their retirement estimate packets.
Employees within one year of minimum retirement age must have their WRS retirement benefit estimates in hand prior to their appointment. Employees may request their estimate and appointment on the same day. Employees can receive estimates by: