28.1 Prefunding of Postretirement Health Benefits

The State and Bargaining Unit 9 hereby agree to share in the responsibility toward the prefunding of post-retirement health benefits for members of Bargaining Unit 9; and, agree that the foregoing concepts will be implemented as a means to begin to offset the future financial liability for health benefits for retired members.

A. Beginning July 1, 2017, the State and Bargaining Unit 9 will prefund retiree healthcare, with the goal of reaching a 50 percent cost sharing of actuarially determined total normal costs for both employer and employees by July 1, 2019. The amount of employee and matching employer contributions required to prefund retiree healthcare shall increase by the following percentages of pensionable compensation:

  1. July 1, 2017: by 0.5 percent.
  2. July 1, 2018: by 0.5 percent, for a total of 1.0 percent.
  3. July 1, 2019: by 1.0 percent, for a total of 2 percent.

B. Employees Subject to Other Post Employment Benefit (OPEB) Prefunding

All bargaining unit members who are eligible for health benefits must contribute, including permanent intermittent employees. Bargaining unit members whose appointment tenure and/or time base make them ineligible for health benefits, such as: seasonal, temporary, and employees whose time base is less than half-time, do not contribute.  The employee prefunding contribution for a permanent intermittent employee shall be based on a ratio comparing their annual scheduled hours of work in comparison to those of a corresponding permanent employee for that position.  Bargaining unit members not subject to OPEB prefunding shall begin contributing upon attaining eligibly for health benefits.  New hires and employees transferring into Bargaining Unit 9 shall begin contributing immediately, unless they are not subject, as set forth above.

C. Withholding of Contributions

Contributions shall be withheld from employee salary on a pre-tax basis, except for employees on disability, in which case contributions will be withheld post-tax.  Positive pay employee contributions shall be taken in arrears, based on the prior months’ hours worked.  Positive pay employees paid semi-monthly, will have the whole month’s contributions withheld from the second warrant during each monthly pay period.

  1. Employees with a single hourly appointment shall have contributions withheld only up to the amount that would have been deducted had the employee held a full-time appointment.
  2. Employees with an appointment subject to OPEB prefunding and an additional appointment in a bargaining unit not subject to OPEB prefunding, shall have contributions withheld only from the appointment subject to OPEB prefunding.
  3. Employees with multiple appointments subject to OPEB prefunding shall have contributions computed by combining all subject appointments, provided the results do not exceed the amount earnable in full-time employment, as follows:

a. Employees with a full-time appointment and an additional appointment (e.g., hourly), shall have contributions withheld from the full-time appointment only.

b. Employees with multiple part-time or hourly appointments, shall have contributions withheld from any/all appointments, up to the amount that would have been deducted had the employee held a full-time appointment.

If an employee has multiple hourly appointments, the highest pay rate will be used to compute what the deduction would be if the employee held a full-time appointment at the pay rate.  For employees with a part-time and hourly appointment, the deduction amount will be computed based upon the part-time appointment’s pay rate.

D. Contributions paid pursuant to this agreement shall not be recoverable under any circumstances to an employee or his/her beneficiary or survivor.

E. The costs of administering payroll deductions and asset management shall be deducted from the contributions and/or account balance.

F. The parties agree to support any legislation necessary to facilitate and implement prefunding of retiree health care obligations.

28.2 Health Benefit Vesting

A. The following vesting schedule shall apply to state employees in Unit 9 first employed by the State on or after January 1, 2016.

B. The portion of the employer contribution toward post-retirement health benefits will be based on credited years of service at retirement per the following chart entitled “Health Benefits Vesting”. The minimum number of years of State service at retirement to establish eligibility for any portion of the employee contribution will be 15 years. This section will apply only to State employees who were under a service retirement.

C. State employees as defined in A above, who become BU 9 employees after January 1, 2016 shall not receive any portion of the employer’s contribution payable for annuitants unless those employees are credited with 15 years of State service as defined by law.

D. The percentage of employer contribution payable for post-retirement health benefits for an employee subject to this section is based on the member’s completed years of credited State service at retirement as shown in the following table:

Health Benefits Vesting

CREDITED YEARS
OF SERVICE

PERCENT OF EMPLOYER
CONTRIBUTION

15 50
16 55
17 60
18 65
19 70
20 75
21 80
22 85
23 90
24 95
25 or more 100

E. This section shall apply only to State employees who retire for service.

F. Benefits provided an employee by this section shall be applicable to all future State service.

G. For the purposes of this section, State service shall mean service rendered as an employee or officer (employed, appointed or elected) of the State for compensation.

28.3 Employer Contribution for Retiree Health Benefits

A. The employer contribution for each annuitant enrolled in a basic plan shall not exceed 80 percent of the weighted average of the Basic health benefit plan premiums for an employee or annuitant enrolled for self-alone, during the benefit year to which the formula is applied. For each employee or annuitant with enrolled family members, the employer contribution shall not exceed 80 percent of the weighted average of the additional premiums required for enrollment of those family members, during the benefit year to which the formula is applied.

  1. “Weighted average of the health benefit plan premiums” as used in this section shall consist of the four Basic health benefit plans that had the largest enrollment of active state employees, excluding family members, during the previous benefit year.
  2. This section shall apply to all employees and annuitants first hired on or after January 1, 2016.

B. The employer contribution for an annuitant enrolled in a Medicare Supplemental Plan in accordance with Government Code section 22844 shall not exceed 80 percent of the weighted average of the health benefit plan premiums for an annuitant enrolled in Medicare Supplemental Plan for self-alone, during the benefit year to which the formula is applied. For each employee or annuitant with enrolled family members, the employer contribution shall not exceed 80 percent of the weighted average of the additional premiums required for enrollment of those family members, during the benefit year to which the formula is applied.

  1. “Weighted average of the health benefit plan premiums” as used in this section shall consist of the four Medicare Supplemental Plans that had the largest enrollment of state annuitants, excluding family members, during the previous benefit year.
  2. The employer contribution shall not exceed the amount calculated under this section if the employee or annuitant is eligible for Medicare Part A, with or without cost, and Medicare Part B, regardless of whether the employee or annuitant is actually enrolled in Medicare Part A or Part B.
  3. This section shall apply to all employees and annuitants first hired on or after January 1, 2016.

C. State employees and annuitants in BU 9 hired on or after January 1, 2016 shall be ineligible to receive any portion of the employer’s contribution for annuitants towards Medicare Part B premiums, as defined in Government Code section 22879.

D. This section does not apply to:

  1. State employees previously employed before January 1, 2016, who return to state employment on or after January 1, 2016; and
  2. State employees on an approved leave of absence employed before January 1, 2016, who return to active employment on or after January 1, 2016.

E. The parties agree to support any legislation necessary to facilitate and implement this provision.