Healthcare Policy & Benefit Services Division Memoranda
2019-03: Termination of Retiree Health Fund Contributions
Date: June 24, 2019
Healthcare Policy & Benefit Services Division
Memorandum 2019-03
TO THE HEADS OF ALL STATE AGENCIES
ATTENTION:
Personnel and Payroll Officers
SUBJECT:
Termination of Retiree Health Fund Contributions
I. INTRODUCTION
The SEBAC 2009 Agreement implemented a requirement that new hires and employees with fewer than 5 years of actual state service would contribute 3% of compensation to the Retiree Health Fund for up to 10 years in order to fund the cost of future retiree health benefits. That requirement was subsequently extended to all healthcare-eligible employees by the SEBAC 2011 Agreement, and the amount of the contribution for members of the Teachers Retirement System was reduced to 1.75% of compensation. Beginning in July 2017, the state began making matching contributions. Pursuant to the SEBAC 2017 Agreement, the duration of Retiree Health Fund contributions was extended to 15 years for those first hired on or after July 1, 2017.
Retiree Health Fund contributions for new hires began in July 2009, and those for shorter-term employees started in July 2010. The purpose of this memorandum is to explain the process that will be followed by the Comptroller’s Office to monitor termination of Retiree Health Fund contributions for those who have reached the ten-year limit.
II. DISCUSSION
When the Retiree Health Fund contributions were introduced, each employee subject to the requirement had an applicable start and stop date for the deduction. Over time, a program was developed within CORE-CT to track each employee’s contributions and to provide service credit toward completion of the requirement. In anticipation of a program to automatically terminate the deduction as each employee reached 10 years (or 120 months) of contributions, agencies were asked to remove the end dates for these deductions. In anticipation of the approaching ten-year deadline for some employees, the Division has received numerous requests for guidance in connection with termination of Retiree Health Fund contributions.
The Retiree Health Fund deduction codes currently in use are as follows:
OPEB:
3% of compensation, applicable to employees newly hired after 7/1/2009 and employees with less than 5 years of service as of that date;
OPE2:
3% of compensation, applicable to employees with more than 5 years of employment as of 7/1/2009, phased in beginning 7/2013;
OPE15
3% of compensation, applicable to employees newly hired after 7/1/2017, or rehired employees not in a pension plan before that date, required contribution is 15 years;
OTRS
1.75% of compensation, applicable to TRS members newly hired after 7/1/2009 and TRS members with less than 5 years of state service as of that date;
OTR2
1.75% of compensation, applicable to TRS members with more than 5 years of employment as of 7/1/2009, phased in beginning 7/1/2013; and
OTR15
1.75% of compensation, applicable to TRS members newly hired after 7/1/2017 or rehired employees not in a pension plan before that date, required contribution is 15 years.
The only deduction codes that will be subject to termination beginning in July 2019 will be OPEB and OTRS. The CORE-CT program for automatic termination of deductions has not yet been fully tested. Until the review process is completed, the Division will monitor the deduction status of all employees who began contributing to the Retiree Health Fund in 2009 and are still actively employed. If the Healthcare Policy Division determines that an employee’s deduction was not stopped by CORE-CT after 120 months of contributions were made the Division will email that employee’s agency with a direction to manually close the deduction code.
Please note some employees who began contributing to the Retiree Health Fund in 2009 may not be eligible for termination of deductions in 2019 due to gaps in service or missed contributions. For that reason, agencies are required to leave OPEB/OTRS deduction codes for their employees in place until a direction to terminate has been received. This practice will remain in effect until the CORE-CT program for monitoring service and terminating deductions is fully operational.
III. CONCLUSION
Personnel or payroll staff members with questions concerning the termination of Retiree Health Fund contributions should email the Employee Benefits Unit, osc.opeb@ct.gov.
Very truly yours,
Thomas C. Woodruff, Ph.D. Director
Healthcare Policy & Benefit Services Division
Memorandum 2019-03
TO THE HEADS OF ALL STATE AGENCIES
| ATTENTION: | Personnel and Payroll Officers |
|---|---|
| SUBJECT: | Termination of Retiree Health Fund Contributions |
I. INTRODUCTION
The SEBAC 2009 Agreement implemented a requirement that new hires and employees with fewer than 5 years of actual state service would contribute 3% of compensation to the Retiree Health Fund for up to 10 years in order to fund the cost of future retiree health benefits. That requirement was subsequently extended to all healthcare-eligible employees by the SEBAC 2011 Agreement, and the amount of the contribution for members of the Teachers Retirement System was reduced to 1.75% of compensation. Beginning in July 2017, the state began making matching contributions. Pursuant to the SEBAC 2017 Agreement, the duration of Retiree Health Fund contributions was extended to 15 years for those first hired on or after July 1, 2017.
Retiree Health Fund contributions for new hires began in July 2009, and those for shorter-term employees started in July 2010. The purpose of this memorandum is to explain the process that will be followed by the Comptroller’s Office to monitor termination of Retiree Health Fund contributions for those who have reached the ten-year limit.
II. DISCUSSION
When the Retiree Health Fund contributions were introduced, each employee subject to the requirement had an applicable start and stop date for the deduction. Over time, a program was developed within CORE-CT to track each employee’s contributions and to provide service credit toward completion of the requirement. In anticipation of a program to automatically terminate the deduction as each employee reached 10 years (or 120 months) of contributions, agencies were asked to remove the end dates for these deductions. In anticipation of the approaching ten-year deadline for some employees, the Division has received numerous requests for guidance in connection with termination of Retiree Health Fund contributions.
The Retiree Health Fund deduction codes currently in use are as follows:
| OPEB: | 3% of compensation, applicable to employees newly hired after 7/1/2009 and employees with less than 5 years of service as of that date; |
| OPE2: | 3% of compensation, applicable to employees with more than 5 years of employment as of 7/1/2009, phased in beginning 7/2013; |
| OPE15 | 3% of compensation, applicable to employees newly hired after 7/1/2017, or rehired employees not in a pension plan before that date, required contribution is 15 years; |
| OTRS | 1.75% of compensation, applicable to TRS members newly hired after 7/1/2009 and TRS members with less than 5 years of state service as of that date; |
| OTR2 | 1.75% of compensation, applicable to TRS members with more than 5 years of employment as of 7/1/2009, phased in beginning 7/1/2013; and |
| OTR15 | 1.75% of compensation, applicable to TRS members newly hired after 7/1/2017 or rehired employees not in a pension plan before that date, required contribution is 15 years. |
The only deduction codes that will be subject to termination beginning in July 2019 will be OPEB and OTRS. The CORE-CT program for automatic termination of deductions has not yet been fully tested. Until the review process is completed, the Division will monitor the deduction status of all employees who began contributing to the Retiree Health Fund in 2009 and are still actively employed. If the Healthcare Policy Division determines that an employee’s deduction was not stopped by CORE-CT after 120 months of contributions were made the Division will email that employee’s agency with a direction to manually close the deduction code.
Please note some employees who began contributing to the Retiree Health Fund in 2009 may not be eligible for termination of deductions in 2019 due to gaps in service or missed contributions. For that reason, agencies are required to leave OPEB/OTRS deduction codes for their employees in place until a direction to terminate has been received. This practice will remain in effect until the CORE-CT program for monitoring service and terminating deductions is fully operational.
III. CONCLUSION
Personnel or payroll staff members with questions concerning the termination of Retiree Health Fund contributions should email the Employee Benefits Unit, osc.opeb@ct.gov.
Very truly yours,
Thomas C. Woodruff, Ph.D. Director