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Employers

Employer Bulletin

State Agencies
Vol. 21, State B
October 13, 2004

2003 WI Act 33 Changes Calculation of Accumulated Sick Leave Conversion Credits; Revised form – Accumulated Leave Certification, ET- 4306; Additional Information on Benefits for Permanent Layoffs


2003 Wisconsin Act 33

2003 WI Act 33, effective July 26, 2003, created major changes regarding the Accumulated Sick Leave Conversion Credit Program (ASLCC) and the Supplemental Health Insurance Conversion Credit Program (SHICC). These changes affect how agencies complete the Accumulated Leave Certification (ET-4306). The relevant Act 33 changes are:

  • Eligible employees’ accumulated sick leave is converted at their highest basic pay rate while employed by the state.

    The pay rate certified for purposes of ASLCC and SHICC may be different. As of this publication date, certification of SHICC for non-represented state employees and state employees covered by a 2003-2005 collective bargaining agreement is calculated at their highest basic pay rate received while employed by the state. For all other state employees, SHICC is calculated using the current basic pay rate or the average basic pay rate during the employee’s three highest years of earnings. The method of calculating SHICC for employees not yet covered by a 2003-2005 collective bargaining agreement may change when an agreement is reached.

    The Office of State Employment Relations (OSER) administers the SHICC program. Please consult Lynn Maulbetsch (267-5164) of OSER if you have questions when calculating the value of the accumulated sick leave for SHICC purposes on the Accumulated Leave Certification (ET-4306), since the rate and effective date of any change are dependent upon the employee’s contractual status with the state.

  • The definitions of “eligible employee” and “retired employee” now include any state employee who terminates creditable service after attaining 20 years of creditable service, remains a participant, and who is ineligible for an immediate annuity [See §40.02(25)(b)6e and §40.02(49), Wis. Stat., respectively].
  • The provisions for converting accumulated sick leave credits upon receipt of an employee’s application for retirement now include any state employees under §40.02(25)(b)6e, Wis. Stat., as defined above [see §40.05(4)(bc), Wis. Stat.].

    The revised Accumulated Leave Certification (ET-4306) contains a ‘WA 33’ check box in the ‘Reason for Termination’ section used to indicate you are certifying the accumulated sick leave of a state employee who terminates with 20 years of creditable service but has not yet reached minimum retirement age. In accordance with Wisconsin Statute §40.05(4)(bc), the Department of Employee Trust Funds (ETF) will preserve this certified information upon receipt of the Accumulated Leave Certification (ET-4306) but will not convert the sick leave to credits for the purpose of paying health insurance premiums until receipt of the employee’s application for a retirement annuity or lump sum payment under §40.25(1), Wis. Stat.

    In the event the employee returns to state service prior to filing a retirement application, the sick leave will be available for their use in accordance with OSER regulations, as it has not yet been converted to sick leave credits. Once the employee again terminates state service the unused sick leave, as well as any newly earned sick leave will, be re-certified to ETF by the employing agency; this re-certification will supercede the Accumulated Leave Certification (ET-4306) previously submitted to ETF.

ETF revised the Accumulated Leave Certification (ET-4306) to more accurately reflect these changes. Note: If you have submitted an Accumulated Leave Certification (ET-4306) since July 26, 2003, using an incorrect basic pay rate, you must submit a corrected copy. Please write “Revised” at the top of the corrected copy. Please ensure that payroll/benefit staff discard all Accumulated Leave Certification forms (ET-4306) with revision dates prior to September 2004. Use the Order Form attached to this Employer Bulletin or order on-line at ETF’s Internet site, http://etf.wi.gov, to request a supply.

Benefit Eligibility Status upon Termination due to Permanent 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 effect termination due to permanent layoff has on an employee’s eligibility for state benefit programs.

  • Wisconsin Retirement System: 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.

    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: 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 August 20, 2004, life insurance coverage will end on September 30, 2004.

    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. All other eligible employees wanting continued coverage must file a timely continuation or conversion application with Minnesota Life Insurance Company (MLIC) and MLIC will bill the terminated employee directly. 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: Income continuation insurance (ICI) coverage ends on the day of termination. Employees 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 plan language.
  • Health Insurance: Upon termination due to permanent layoff, health insurance coverage may be continued under §40.05(4), Wis. Stat. In addition, §40.05(4)(a)3, Wis. Stat., provides that all employees terminated due to permanent layoff 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 remitted in advance through normal payroll deduction.

    The following are provisions within §40.05(4), Wis. Stat., under which a state employee may use accumulated sick leave credits for payment of health insurance premiums upon termination from employment:

Conversion of Accumulated Sick Leave Under §40.05(4)(b), Wis. Stat.

This provision applies to a state employee terminated due to permanent layoff who:

  1. begins an immediate annuity or
  2. receives a lump sum annuity; or
  3. has 20 years of creditable service and is eligible to retire on an immediate annuity, but delays application.

These state employees are eligible to convert accumulated sick leave under the provisions of the ASLCC and SHICC programs as follows:

  • Accumulated unused sick leave is converted at the employee’s highest basic rate of pay while employed by the state (the SHICC conversion rate is dependent upon the employee’s contractual status with the state, as noted above). Upon receipt of the employer’s certification of the converted sick leave, ETF will convert the amount to sick leave credits for payment of health insurance premiums. Accumulated and Supplemental sick leave is converted and certified by use of the Accumulated Leave Certification (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, for the three additional months of employer paid premium as provided in §40.05(4)(a)3, Wis. Stat. After the three additional months of state contribution toward premium, the full amount of the premium will be deducted by ETF from the credits until the credits are exhausted.
  • 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 substantially equivalent to those of the standard health insurance plan established under §40.52(1), Wis. Stat.

Conversion of Accumulated Sick Leave Under §40.05(4)(bc), Wis. Stat.

This provision applies to a state employee terminated due to permanent layoff who:

  1. has attained 20 years of creditable service,
  2. remains a participant (i.e., does not take a separation benefit from the WRS), and
  3. is not eligible for an immediate annuity.

Upon becoming eligible to apply for a retirement annuity or lump sum retirement annuity, these state employees are eligible to convert accumulated sick leave under the provisions of the ASLCC program and if eligible, the SHICC program, effective the date on which the department receives the employee’s retirement application as follows:

  • Accumulated unused sick leave is converted at the employee’s highest basic rate of pay while employed by the state (the SHICC conversion rate, if applicable, is dependent upon the employee’s contractual status with the state, as noted above). Upon receipt of the employee’s retirement application, ETF will convert the amount to sick leave credits for payment of health insurance premiums. Accumulated and Supplemental sick leave is converted by use of the Accumulated Leave Certification (ET-4306), certified by the employer upon the employee’s termination.
  • At the request of the employee, the employer must convert accumulated sick leave to fund the employee’s premium contribution, if any, effective the first of the month following the date the layoff begins under the provisions of §40.05(4)(a)3, Wis. Stat. After the three additional months of state contribution toward premium, the employer will certify the remaining unused sick leave balance to ETF, unless the employee requests that the employer continue converting accumulated sick leave under §40.05(4)(bm) [see below]. In this situation, the employer would then certify any remaining unused sick leave balance using the Accumulated Leave Certification (ET-4306).
  • The employee whose sick leave has been preserved under §40.05(4)(bc), Wis. Stat., may elect, at the time they are eligible for an annuity and submit a retirement application, to delay using the converted sick leave credits per §40.05(4)(b), Wis. Stat., if they are 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), Wis. Stat.

Conversion of Accumulated Sick Leave Under §40.05(4)(bm), Wis. Stat.

This provision applies to a state employee terminated due to permanent layoff, including those who are:

  1. not eligible for an immediate annuity; or
  2. eligible to begin an immediate annuity but defer application.

These state employees may, upon their request to the employer, have the employer convert their accumulated sick leave for the purpose of paying health insurance premiums, as detailed below. Note: It is the employer’s responsibility to notify employees subject to permanent layoff of the following provisions:

  • 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 employing agency at the employee’s highest basic rate of pay while employed by the state, for payment of health insurance premiums.

    Note: The SHICC program is only available to the following employees who qualify under ASLCC provisions and meet the requirements of §40.95, Wis. Stat.:

    1. a retired state employee who was formerly insured, is not a participating employee, and is retired on an immediate annuity [ASLCC eligibility per §40.05(b)];
    2. a state employee who terminates creditable service after attaining 20 years of creditable service and is eligible for an immediate annuity but defers application [ASLCC eligibility per §40.05(b)];
    3. a state employee who terminates creditable service after attaining 20 years of creditable service, remains a participant (i.e., does not take a separation benefit), and is not eligible for an immediate annuity [ASLCC eligibility per §40.05(bc), Wis. Stat.].
  • 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 employee and employer premium and sick leave credits may be converted by the employer 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 premium shall be deducted from the credits until the first of the following: a) the credits are exhausted; b) the 1st of the month following the employee’s acceptance of other employment with a comparable health insurance policy or plan (even if the employee declines the coverage); or c) five years have elapsed from the layoff date.
  • The use of sick leave conversion under §40.05(4)(bm), Wis. Stat., during layoff is the record keeping and funding responsibility of the employing agency. The employee premium is to be remitted to ETF in the same manner as other active employees participating in the group health insurance program.

    Note: An Accumulated Leave Certification (ET- 4306) is not completed or submitted to ETF for employees only eligible for sick leave conversion under §40.05(4)(bm), Wis. Stat. (i.e., termination due to layoff).

Health insurance continuation coverage (in compliance with COBRA) using the Continuation-Conversion Notice (ET-2311) must be offered when the available sick leave premium contribution ends.

The following chart provides some basic information regarding sick leave conversion at the time of a state employee’s permanent layoff, including the changes resulting from WI Act 33, based upon their particular status at the time of the layoff. CHART

  • Employee Reimbursement Accounts (ERA): An employee participating in a medical expense reimbursement account under the ERA program 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, available on the Department’s Internet site at http://etf.wi.gov/publications/era.htm, within 30 days of the layoff date. A Change in Status will allow an employee to reduce the 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.

      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.

    For employees participating in dependent care reimbursement accounts, contributions end with the last paycheck; however, 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.

  • Commuter Benefits Program: 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 Benefit Management Company at (608) 829-0435 for questions about Commuter Benefits coverage in a permanent layoff situation.
  • Wisconsin Deferred Compensation: 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.
  • EPIC Supplemental Benefit Plan: 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.

Benefits Upon Termination Due to Permanent Layoff

Benefits During Unpaid Leave or Temporary Layoff


Employers with questions regarding completion of the Accumulated Leave Certification (ET-4306) or other information contained within this bulletin may contact the Employer Communication Center at (608) 264-7900.

Employees with questions related to their benefits upon termination due to layoff may contact the Member Services Call Center toll free at (877) 533-5020.

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