Employer Bulletin

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.).

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:

• Conversion of sick leave under this provision is administered by ETF.
• Accumulated unused sick leave (and any eligible additional sick leave provided under the Supplemental Health Insurance Conversion Credits program), upon certification from the employer to ETF, will be converted by ETF at the employee's current base pay rate to credits for payment of health insurance premiums. See Subchapter 903 of the Group Health Insurance Employer Administration Manual for instructions on completing the Accumulated Leave Certification form, ET-4306.

• Sick leave may be used to fund the employee's premium contribution effective the first of the month following the date the layoff begins if there is an employee contribution due. After the three additional months of state contribution toward premium, the full amount of the required employee premium will be deducted from the credits until the credits are exhausted.

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:

• Conversion of sick leave under this layoff provision is administered by each employing agency according to DER Bulletins CC-18 (May 1984) and CC-27 (September 1984).
• Accumulated unused sick leave may, upon request of the employee at the time the employee is subject to layoff (i.e., anytime between the date on which the employee receives notice of layoff and the layoff date), be converted by the employer at the employee's current base pay rate to credits for payment of health insurance premiums.

• Sick leave may be used to fund the employee's premium contribution effective the first of the month following the date the layoff begins if there is an employee contribution due. After the three additional months of State contribution toward premium, the employee is responsible for the full premium and sick leave credits may be used to pay the entire cost.

• An employee using sick leave credits under this provision who returns to state employment and is eligible for reinstatement, will have any unused sick leave hours reinstated.
• The full amount of the required employee premium shall be deducted from the credits until one of the following situations has occurred: a) The credits are exhausted, b) The employee is re-employed at any public or private job that makes him/her ineligible for unemployment compensation, c) Five years have elapsed from the layoff date.
• The use of sick leave conversion under § 40.05 (4) (bm) during layoff is the record keeping and funding responsibility of the employer. The employee is to be reported to ETF the same as any other employee participating in the group health insurance program.

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:

• Paying the remainder of the annual election amount on a pre-tax basis from the last paycheck(s) before layoff begins.
• Paying the remainder of the annual election amount out-of-pocket after layoff. Employees choosing this option must be given a Continuation of ERA Medical Expense Account Coverage form, ET-1518, within 14 days of their termination date.
• Filing a Change in Status form within 30 days of the layoff date. A Change in Status will allow an employee to reduce their annual election amount for the remainder of the plan year. The reduced contribution amount may be deducted from the last paycheck or paid out-of-pocket as noted above.

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.