UW Staff Benefits University of Wisconsin- Extension Payroll and Benefits Office

UW Staff Benefits

University of Wisconsin-Extension

Payroll and Benefits Office

State Health Insurance Accumulated Sick Leave Program

Studies show that employees consider heath insurance the Number 1 benefit of importance

Retirement benefits come in a distant second


Wisconsin’s State Group Health Insurance plan is excellent

Sick leave credits may be used to pay for future health insurance premiums at retirement-unique to Wisconsin• Employees who terminate with 20 years of service do not

lose sick leave credits

Health insurance is the number one expense for most retirees


To be eligible for post-retirement sick leave credits you must participate in the State of Wisconsin Group Health Insurance plan as a subscriber or a dependent of a state/UW employee and:

• Retire and receive a lump sum benefit or

• Begin a WRS annuity immediately after termination or

• Terminate employment with 20 years of WRS creditable State Service but defer application for retirement benefit


The sick leave you accumulate over your working career will help pay your health insurance premiums after you retire

Three components:• Highest hourly rate

• Hours of unused sick leave

• Supplemental sick leave credits linked to your years of continuous state service


What are Supplemental Sick Leave Credits?• Credits are computed at retirement

• To qualify, you must have 15 years of adjusted continuous UW and/or other state service

• For each full year of service up to 24 years you receive 52 hours of supplemental credits

• For each full year of service over 24 years you receive 104 additional hours

• Total supplemental hours cannot exceed your accumulated sick leave balance


Supplemental Sick Leave Credit Maximums15 years = 780 hours 21 years = 1092 hours

16 years = 832 hours 22 years = 1144 hours




20 years = 1040 hoursFor each full year up to 24, you receive 52 hours

For each full year over 24, you receive 104 hours


Sick Leave Credits (classified)

Example 1

Hours Earned Bi-Weekly 5

Pay Periods per Year 26

Hours Earned Per Year 130

Years of Employment x 10

Total Sick Leave Hours 1,300


Financial Value


Hourly Rate of Pay X $ 16.50

Value $ 21,450.00


Sick Leave Credits (classified)

Example 2

Hours Earned Bi-Weekly 5

Pay Periods Per Year 26

Hours Earned Per Year 130

Years of Employment x 20



Financial Value


Supplemental Hours

52 hrs x 20 years 1,040

Total Hours 3,640

Hourly Rate of Pay x $ 16.50

Value $60,060.00


Example 3 30 years of service Sick Leave Balance 2,850 hrs Match 52 hrs/yr. for yrs 1-24 1,248 Match 104 hrs/yr. >24 years 624

Total Hours 4,722

Hourly Rate of Pay $ 26/hr

Value $122,772


Sick Leave’s Real Value

$122,772/2850 hours = $43.09 per hour

IT’S A TAX FREE BENEFIT TOO!!!


How long will it last?

Sick Leave Value $ 122,772

Family Premium $ 1,700/month

Coverage in Months 72 months

Coverage in Years 6 years


How long will it last? The answer depends on the type of

coverage you have (family or single, Medicare eligible or not), the plan you select and inflation

Your insured dependents can continue to use your credits after your death


You are eligible continue the state health insurance plan for as long as you live

Premiums: From your accumulated sick leave account until it is

exhausted Deducted from your retirement annuity Pay directly to the insurance carrier who will bill you

for the premiums


If your spouse is a state or university employee:• You may elect to transfer your family health

insurance coverage to your spouse

• Your sick leave credits will be placed in an inactive account until your spouse retires and depletes his/her sick leave credits

• Your sick leave credits will then be used


If your spouse is NOT a state or university employee• If your spouse’s health insurance plan has

comparable coverage, you are eligible to escrow (delay using) your sick leave credits indefinitely

• To escrow, submit a Sick Leave Escrow Application to the Department of Employee Trust Funds at the time of retirement.


You may defer the use of your sick leave credits indefinitely by applying to “escrow” the credits. You may escrow sick leave at any time if you have comparable health insurance coverage elsewhere, e.g. from another job or through a spouse

To “unescrow” sick leave credits, you must apply during the annual fall Dual Choice period unless your comparable coverage is involuntarily lost

State Health Insurance Medicare in retirement

When you are retired and turn 65, you become eligible for Medicare Part B• IF you have the State Group Health insurance,

you must sign up for Medicare Part B Health coverage remains the same as before

Medicare coverage became effective• State Group Health insurance is designed to

supplement, not duplicate the Medicare coverage

Medicare Part D

State Health Insurance Medicare in retirement

Failure to enroll in Medicare Part B will result in termination of State Group Health insurance coverage

Medicare Part B premium is $96.40/month• But the cost of State Group Health is reduced as well

Non Medicare Rate Medicare Rate

Single Family Single Family 2 Family 1

$555.80 $1385.80 $397.40 $792.30 $950.70

Types of Retirement Income

Wisconsin Retirement System (WRS) Annuity Tax Sheltered Annuity/Wisconsin Deferred

Compensation Individual Retirement Account (IRA) Social Security Retirement plan from other employers Post-retirement employment-30 day break in

service if WRS employer

Wisconsin Retirement System

Eligibility for Retirement At least age 55 Termination of all WRS covered employment Must not be on a leave of absence or temporary

layoff Must submit a completed retirement application to

the Department of Employee Trust Funds


WRS Retirement Benefit Calculation• Two methods

• Formula Calculation

• Money Purchase Calculation

WRS automatically pays the higher of the two amounts

Lump sum availability is restrictedMinimum $171- Maximum $348


Formula Calculation:• Calculated by multiplying four factors:

• “Final Average” monthly earnings

• Years of creditable service

• Age at retirement

• “Formula Multiplier” which is set by statute

• 1.765% pre-2000 years of service

• 1.6% post-1999 years of service


WRS Terms to Understand:• Final Average Earnings(FAE): average of 3 highest

years earnings

• Formula Factor: established by statute• .016 for years after 1999

• .01765 for years prior to 2000

• Years of creditable service: amount of WRS service based on number of hours worked in a year

• Age Reduction Factor: factor based on age and years of service

• Option Conversion Factor: a figure used to calculate annuity options after basic benefit is determined


Sample Formula Benefit Calculation for Employee age 56 and 25 years of service

(20 pre-2000 and 5 post-1999)Final Average Earnings $ 2500 $ 2500

Formula Multiplier x 1.765% x 1.6%

Creditable Service x 20 x 5

Age Reduction Factor x .952 x .952

$840.14 + $190.40

Life Annuity Option $1030.54


Formula Calculation• Increases in monthly earnings

• Increases in creditable service• Buying separated (forfeited) service

• Buying qualifying service

• Buying other governmental service

• Active military service


Money Purchase Calculation• Calculated by multiplying the Employee

contributions plus the matching Employer contributions by an actuarial factor based on your age when the annuity begins


Sample Money Purchase Benefit Calculation

Age 56 years and 8 months

Money Purchase Balance $220,000

Money Purchase Factor x .00590

Life Annuity Option $1,298.00


Retirement BenefitCompare:

Formula Benefit Calculation = $1030.54

Money Purchase Calculation = $1298.00

Always get the larger of the two calculated amounts


Female retires at age 56 Lives to age 85 or 29 years Monthly Benefit $ 1,298 Months Paid (29 x 12) 348 Total Benefit Paid $451,704*

• * Without Dividends• Dividends have averaged 2% per year over past 10

years• Currently 602 retirees are over age 95


• Variable Fund

• Comprised wholly of stocks

• In most situations, if enrolled in Variable Fund, half of all contributions are invested in Variable Fund and other half to Core Fund

• Interest is credited once per year but there is no smoothing mechanism like the Core Fund. Investment returns are fully recognized each year

• Investment gains/losses will have a much larger and more immediate impact on those who participate in Variable Fund

Wisconsin Retirement System• There is an “ongoing” variable excess or deficiency amount recorded

on account of current variable participants. Calculated by comparing actual account balance to what balance would be if participant had never participated in the Variable Fund. The variable excess/deficiency balance changes each year, based on contributions to the account and the investment returns of the Core and Variable Funds.

• At retirement the variable excess/deficiency is used to increase or decrease formula retirement benefit. Variable investment results are already reflected in money purchase balance.

• The variable excess/deficiency is shown on the annual ETF Statement of Benefits.


Variable Fund• Formula Calculation

• Excess/Deficiency: increases or decreases calculated amount

• Money Purchase Calculation

• Variable investment results are already reflected in money purchase balance


Choosing a WRS Annuity Option

• 7 annuity options available

• Accelerated options if under age 62

• All options are payable for your lifetime

• Selected annuity option determines death

benefit

Wisconsin Retirement System Annuity Options Annuitants Life Only Life Annuity – 60 payments guaranteed Life Annuity – 180 payments guaranteed Joint Survivor Annuity – 75% continued to named joint

survivor Joint Survivor Annuity – 100% continued to named joint

survivor Joint Survivor Annuity – reduced 25% on death of

annuitant or named joint survivor Joint Survivor Annuity – 100% continued to named joint

survivor with 180 payments guaranteed


WRS "Accelerated" Payment Option• Retire prior to age 62

• Higher WRS benefit until age 62

• WRS benefit reduced month after 62nd birthday

• Reduction in WRS benefit approximately equal to age 62 social security benefit


Considerations For Choosing an Annuity Option• Your (spouse/dependent) age

• Marital status

• Health considerations

• Other pensions and/or investments

• Estate considerations

• Taxes


Post Retirement Changes May change option selected up to 60

days after date of first payment Annuity Payment Statements Annual Adjustments-Dividends

• Based on investment earnings

• No cost of living adjustments

• Will vary depending on Core/Variable participation


Taxability of Annuity Taxable as ordinary income for federal and

state taxes May change tax withholding at any time Receive 1099R form in January for tax

purposes

QUESTIONS????

Please contact the UW Extension Payroll and Benefits Office if:• you note a discrepancy

• need forms

• want to enroll in additional benefit plans

• want general information

• want retirement information

Telephone (608)262-4857 or (608)262-0531 Email [email protected]

Documents

UW Staff Benefits University of Wisconsin- Extension Payroll and Benefits Office