Unused Sick Leave at Retirement. Understanding H.B. 213 which passed during the 2005 General Session. What should I know?

Transcription

1 Unused Sick Leave at Retirement Understanding H.B. 213 which passed during the 2005 General Session What should I know?

2 H.B. 213 Background Information P Rising costs PI.R.S. rules PPreservation of employee leave balances

3 Termination Pool Paid Benefits *FY 05 is estimated; $16,000,000 pools include: General, Public Safety, Education, and Transportation $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 0 Fiscal Years All Pools* $8,792,034 $10,719,970 $5,551,074 $5,404,883 $12,659,540 $5,792,872 $14,123,300 $5,097,206 $15,840,000 $5,960,000 $1,515,510 $1,440,191 $1,419,111 $1,313,105 $1,405,000 FY 01 FY 02 FY 03 FY 04 FY 05 Health Insurance Annual Leave 25% Sick Leave Prepared by the Office of Legislative Research and General Counsel, February 2005 Source: Division of Finance, 31-Jan-05

4 Unused Sick Leave Upon Retirement P Benefit only available to retiring employees PBridge to Medicare (age 65) PSick leave is not vested PCan t restore sick leave hours used PTo understand H.B. 213, follow the hours

5 Unused Sick Leave Upon Retirement Issues Historical Time Line 1979 SB 179 Utah Personnel Management Act As an incentive to reduce sick leave abuse, an employee that has 144 hours (18 days) of accumulated sick leave (at the end of the previous calendar year) may convert earned sick leave hours greater than 64 accumulated sick leave hours (8 days) (calculated at the end of the year) to: vacation for the next year; or at retirement convert the unused sick leave to paid-up medical insurance for one month premium for 8 hours (one day) unused sick leave Director of personnel management shall make rules to implement (Laws of Utah 1979 chap. 139) Employee death in the line of duty continuing health and dental insurance to surviving spouse and family (Laws of Utah 1988 chap. 46) 1983 SB 18 Early Retirement Incentives As an early retirement option Converted sick leave may be used as annual leave, sick leave, or as paid-up health and medical insurance at retirement Paid 25% of unused sick leave Gets up to 5 years health and life insurance 480 hours (60 days) is deducted from unused sick leave to continue coverage No coverage after death or age 65 Any costs or savings is borne by agencies not appropriated by the Legislature (Laws of Utah 1983 chap. 19) 1998 SB 138 Retirement -Use of Sick Leave Health and life coverage may continue for spouse until spouse is eligible for Medicare Medicare supplemental insurance may be purchased for employee or spouse eligible for Medicare Cash out may be deposited in a 401(k) (Laws of Utah 1998 chap. 138) Paid up to 25% of unused sick leave instead of 25% (Laws of Utah 2004 chap. 28) The same health and life insurance benefits the employee has at the time of retirement (underlined language added) Line of duty death benefit expanded to the entire unused sick leave program not just the cash out (Laws of Utah 1999 chap. 164) 2005 HB 213 Unused Sick Leave for State Employees (Laws of Utah 2005 chap. 15) Prepared by the Office of Legislative Research and General Counsel, January 2005

6 H.B. 213 Unused Sick Leave at Retirement Amendments H.B. 213 is applicable to state employees only Sick Leave Hours Earned P Program I hours EARNED before January 1, 2006 applys to all: unused sick leave; and converted sick leave P Program II hours EARNED beginning January 1, 2006 applys to all: unused sick leave; and converted sick leave Both programs apply to employees who have sick leave balances at retirement under both programs

7 Unused Sick Leave Upon Retirement State Employees Only ( through Utah Code Annotated 1953) PConverted Sick Leave Program PUnused Sick Leave Retirement Option Program PContinuation of Medical and Dental Insurance Benefits Program (employee death in the line of duty)

8 Sick Leave How is it accumulated for state employees? PSick leave earned: 4 hours for each two weeks worked (one day per four weeks) 104 hours (13 days) are possible each year if zero sick leave is used (4 X 26 = 104) PThe amount of accumulated sick leave is not limited 3,120 hours are possible in a 30 year career (104 X 30 = 3,120) Source: Utah Administrative Rule R

9 Unused Sick Leave to Converted Sick Leave What are the requirements to covert? P Employee must have 144 hours of accumulated sick leave (at the end of the previous calendar year) P Employee may convert earned sick leave hours greater than 64 accumulated sick leave hours (calculated at the end of the year) P40 converted hours are possible each year (if the employee uses zero sick leave during the year) P 320 maximum converted sick leave hours are allowed PAt retirement converted sick leave may be sold for cash or may be used in the unused sick leave program (but is not subject to the 480 hour deduction)

10 Unused Sick Leave to Converted Sick Leave What are the requirements to covert? P Employee must have 144 hours of accumulated sick leave (at the end of the previous calendar year) P[Employee] Until January 1, 2014 an employee may convert earned sick leave hours greater than 64 accumulated sick leave hours (calculated at the end of the year) P40 converted hours are possible each year (if the employee uses zero sick leave during the year) P 320 maximum converted sick leave hours are allowed PAt retirement converted sick leave [may be sold for cash or may] shall be used in the unused sick leave program (but is not subject to the 480 hour deduction)

11 Unused Sick Leave to Converted Sick Leave How does the conversion formula work?

12 Unused Sick Leave Retirement Option Program What are the program provisions? (Pre - H.B. 213) PA state employee who retires with the state may participate PUp to 25% of unused accumulated sick leave is paid at the retiring employee s current salary P 480 hours of unused accumulated sick leave is deducted from any balance for all retiring employees P Medical and life insurance is provided to all retiring employees for 5 years (or until the employee is eligible for Medicare whichever is first) P Any remaining balance of unused accumulated sick leave may be used to purchase additional months of coverage (or supplemental coverage if the employee is eligible for Medicare)

13 Unused Sick Leave Retirement Option Program One What are the program provisions? (Post H.B. 213) P A state employee who earns sick leave hours prior to January 1, 2006 and who retires with the state may participate P [Up to] 25% of unused accumulated sick leave is paid at the retiring employee s current salary P A five year phase out is provided for the 480 hours of unused accumulated sick leave [is] deducted from any balance for all retiring employees P[Medical] A five year phase out is provided for the automatic medical and life insurance [is] provided to all retiring employees for 5 years (or until the employee is eligible for Medicare whichever is first) P Any remaining balance of unused accumulated sick leave may be used to purchase additional months of coverage (or supplemental coverage if the employee is eligible for Medicare)

14 Phase-out of State Provided Medical Coverage and Manatory Deduction of Sick Leave Under Program I How does the phase-out work? *Benefit provided until the earlier of the age eligible for Medicare and the date provided #Deduction taken regardless of age

15 Unused Sick Leave Program Examples Section et. seq Utah Code Annotated 1953

16 Unused Sick Leave Program I Examples Section et. seq Utah Code Annotated 1953 Retirement date of 2011 or later is assumed under numbers shown

17 Unused Sick Leave Program II Examples Section et. seq Utah Code Annotated 1953

18 H.B. 213 Unused Sick Leave at Retirement Amendments H.B. 213 is applicable to state employees only PCurrent Unused Sick Leave Program at Retirement from the State Up to 25% as cash which may be deposited into 401(k) 480 hours of unused sick leave is deducted from any balance for all retiring employees Medical insurance is provided to all retiring employees for 5 years (or until the employee is eligible for Medicare whichever is first) Any remaining balance of unused sick leave can be used to purchase additional months of medical coverage (or supplemental coverage if the employee is eligible for Medicare) PProgram I At retirement unused sick leave* hours EARNED before January 1, % into 401(k) (paid at the retiring employee s current salary) remainder as medical insurance at the rate of 8 hours of sick leave for one month of medical coverage Sick Leave Hours Earned P Key Provisions of H.B. 213 Honor unused sick leave hours earned prior to January 1, 2006 under existing retirement provisions with some adjustments Unused sick leave hours earned beginning January 1, 2006 will be under a new program Unused Sick Leave Retirement Program II 5-year phase-out of: 480 hour deduction of unused sick leave from any balance for all retiring employees State paid medical coverage for up to five years (or until the employee is eligible for Medicare whichever is first) Unused sick leave can be changed to converted sick leave for 8 more years PProgram II At retirement unused sick leave* hours EARNED beginning January 1, % into 401(k) (paid at the retiring employee s current salary) remainder in a medical reimbursement benefit plan (paid at the retiring employee s current salary) PNotes Sick Leave Generally All unused sick leave except converted sick leave is forfeited if an employee leaves state employment prior to retirement A state employee earns sick leave at the rate of 4 hours for each two weeks worked 104 hours are possible to accumulate each year if zero sick leave is used (4 hours X 26 pay periods = 104) The amount of accumulated sick leave is not limited Both programs apply to employees who have unused sick leave hours earned under both programs Prepared by the Office of Legislative Research and General Counsel, January 2005 PNotes Converted Sick Leave (one change) Employee must have 144 hours of unused sick leave (at the end of the previous calendar year) Until 2014 an employee may convert earned sick leave hours greater than 64 unused sick leave hours (calculated at the end of the year) 40 converted hours are possible each year (if the employee uses zero sick leave during the year) 320 maximum converted sick leave hours are allowed *At retirement all unused sick leave including converted sick leave will be treated the same

19 Unused Sick Leave Upon Retirement Issues Historical Time Line 1979 SB 179 Utah Personnel Management Act As an incentive to reduce sick leave abuse, an employee that has 144 hours (18 days) of accumulated sick leave (at the end of the previous calendar year) may convert earned sick leave hours greater than 64 accumulated sick leave hours (8 days) (calculated at the end of the year) to: vacation for the next year; or at retirement convert the unused sick leave to paid-up medical insurance for one month premium for 8 hours (one day) unused sick leave Director of personnel management shall make rules to implement (Laws of Utah 1979 chap. 139) Employee death in the line of duty continuing health and dental insurance to surviving spouse and family (Laws of Utah 1988 chap. 46) 1983 SB 18 Early Retirement Incentives As an early retirement option Converted sick leave may be used as annual leave, sick leave, or as paid-up health and medical insurance at retirement Paid 25% of unused sick leave Gets up to 5 years health and life insurance 480 hours (60 days) is deducted from unused sick leave to continue coverage No coverage after death or age 65 Any costs or savings is borne by agencies not appropriated by the Legislature (Laws of Utah 1983 chap. 19) 1998 SB 138 Retirement -Use of Sick Leave Health and life coverage may continue for spouse until spouse is eligible for Medicare Medicare supplemental insurance may be purchased for employee or spouse eligible for Medicare Cash out may be deposited in a 401(k) (Laws of Utah 1998 chap. 138) Paid up to 25% of unused sick leave instead of 25% (Laws of Utah 2004 chap. 28) The same health and life insurance benefits the employee has at the time of retirement (underlined language added) Line of duty death benefit expanded to the entire unused sick leave program not just the cash out (Laws of Utah 1999 chap. 164) 2005 HB 213 Unused Sick Leave for State Employees (Laws of Utah 2005 chap. 15) Prepared by the Office of Legislative Research and General Counsel, January 2005

20 Unused Sick Leave at Retirement: For more information, visit the Department of Human Resource Management Website: P

21 Unused Sick Leave Upon Retirement Issues Historical Time Line As an incentive to reduce sick leave abuse, an employee that has 144 hours (18 days) of accumulated sick leave (at the end of the previous calendar year) may convert earned sick leave hours greater than 64 accumulated sick leave hours (8 days) (calculated at the end of the year) to: vacation for the next year; or at retirement convert the unused sick leave to paid-up health and medical insurance for one month premium for 8 hours (one days) unused sick leave Director of personnel management shall make rules to implement (Laws of Utah 1979 chap. 139) Converted sick leave may be used as annual leave, sick leave or as paid-up health and medical insurance at retirement As an early retirement option Paid 25% of unused sick leave Gets up to 5 years health and life insurance 480 hours (60 days) is deducted from unused sick leave to continue coverage No coverage after death or age 65 Any costs or savings is borne by agencies not appropriated by the Legislature (Laws of Utah 1983 chap. 19) Prepared by the Office of Legislative Research and General Counsel, January 2005 Employee death in the line of duty continuing health and dental insurance to surviving spouse and family Up to 5 years or until spouse reaches age 65 whichever comes first 25% cash out of unused sick leave allowed (Laws of Utah 1988 chap. 46) Reaches age 65" changed to becomes eligible for Medicare throughout (Laws of Utah 1993 chap. 164) effective July 1, 1994 Cash out may be deposited in a 401(k) Health and life coverage may continue for spouse until spouse is eligible for Medicare Medicare supplemental insurance may be purchased for employee or spouse eligible for Medicare (Laws of Utah 1998 chap. 138) The same health and life insurance benefits the employee has at the time of retirement (underlined language added) Line of duty benefit expanded to the entire unused sick leave program not just the cash out (Laws of Utah 1999 chap. 164) Paid up to 25% of unused sick leave instead of 25% (Laws of Utah 2004 chap. 28)