Prefunding Retirement Benefit Contributions – Implementation for S06, M06 and other Excluded Employees

Posted: 9/16/2016 Tags: bargaining benefits legislation pension representation retirement salary Tags Views: 7245 Print:

On August 26, 2016, ACSS met with CalHR to discuss Other Post Employment Benefit (OPEB) Prefunding for supervisors and managers tied to Bargaining Unit 6 (Peace Officers).

Below are the important issues that were discussed at the meeting:

  • Excluded Employee General Salary Increases – In a previous article, ACSS reported that CalHR confirmed the 3% General Salary Increase (GSI) for all three years for excluded employees tied to Bargaining Unit 6 (classifications S06 and M06). During the meeting on August 26th, ACSS requested that CalHR guarantee all excluded employees the additional fiscal years of GSI increases to offset prefunding contributions. CalHR refused to guarantee GSI for all excluded employees and stated that the funding for the GSI comes from the budget item that gets approved each year. Excluded employees related to BU 5, 6, and 8 are under Government Code Section 19849.18 which states, “Supervisors of state employees represented by State Bargaining Unit 5, 6, or 8 shall receive salary and benefits changes that are at least generally equivalent to the salary and benefits granted to employees they supervise”.
  • Other Post Employment Benefit (OPEB) Prefunding Implementation – During the discussion regarding M06 and S06 receiving the 3% GSI, CalHR also talked about rolling out the implementation of OPEB prefunding for other excluded classifications. ACSS took the opportunity to inquire about OPEB for all other excluded employees. According to enacted 2016-17 California State Budget, the Brown Administration “remains focused on addressing the state’s $72 billion unfunded liability for retiree health benefits. The strategy for addressing the liability includes equal cost-sharing between the employee and employer to prefund retiree health benefits, and for new employees, extending the period to qualify for retiree health benefits, and reducing the employer subsidy for retiree health benefits.” The bottom line is that in addition to M06 and S06 classes, all excluded employees will see implementation of OPEB prefunding contribution.
  • Processing Prefunding Deductions – When prefunding for retirement benefits (OPEB) is implemented for excluded employees tied to BU6 for the September 2016 pay period, the State Controller’s Office (SCO) will be using a manual process. Due to this manual processing, the OPEB contributions for September will be taken out in arrears (e.g. September deduction will come out of October pay). During the manual processing period, OBEB will continue to be deducted in arrears and at no point during the manual processing period will deductions be duplicated in a single month. At some point in 2017, OPEB will become part of the automated payroll system. When automation goes live, deductions will no longer be taken in arrears, but will be taken out on current months. There will be a pay period where both current and arrear deductions happen in the same month. Therefore, one month of OPEB funding in 2016 will be skipped to prevent a double deduction. However, at this time, we do not know which month this will occur in 2017.
  • Delaying Prefunding – ACSS requested that OPEB implementation be pushed back to allow implementation for all excluded employees to be at the same time. BU 2, 7, 9, and 10 MOUs have contributions beginning in July 1, 2017. Representatives from the Department of Finance again refused to address a different funding plan for excluded employees. In conclusion, implementation could not be delayed.
  • Retirement Health Benefits and Vesting for New Employees – For S06 and M06 classifications, all employees hired on or after January 1, 2017, will receive an employer contribution for retiree health benefits based on an 80/80 formula. They will also be subject to an extended vesting schedule providing 50 percent of the employer contribution upon completion of 15 years of state service, increasing 5 percent for each additional year of service, until the employee is 100 percent vested at 25 years of state service. In addition, new hires will no longer be eligible to use the employer contribution for a retiree health benefit plan for Medicare Part B premiums.

Based on the information provided by CalHR at this meeting, CalHR will provide ACSS notice on OPEB for other excluded employees as agreements are reached with related bargaining units. As always, ACSS will inform members if or when we receive similar notices that affect excluded employees tied to other Bargaining Units.

Update: October 7, 2016

NEWS: Additional Updates for Salary and Pay Adjustments for Excluded Employees - Prefunding Implementation for M06 and S06

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