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28.1 Prefunding of Post-Retirement 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.

    1. 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 2.0 percent.
    2. Notwithstanding Government Code Sections 22940, 22942, 22943, 22944, 22944.2, 22944.3, and 22944.5, the employees’ monthly contribution for prefunding other post-employment benefits for the 2020-21 and 2021-22 fiscal years, as described in paragraph A, is suspended and shall not be withheld from employees’ salaries beginning on the first day of the pay period following ratification, and ending on June 30, 2022.  The employer’s monthly contribution for prefunding other post-employment benefits will continue in the 2020-21 and 2021-22 fiscal years, as described in paragraph A.
    3. Notwithstanding Government Code Sections 22940, 22942, 22943, 22944, 22944.2, 22944.3, and 22944.5. the employees’ and employer’s monthly contribution of prefunding other postemployment benefits for the 2025-26 and 2026-27 fiscal years. as described in paragraph A, is suspended and shall not be withheld from employees’ salaries or contributed by the employer beginning on July 1, 2025, and ending on June 30. 2027.
    4. 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.  Bargaining unit members not subject to OPEB prefunding shall begin contributing upon attaining eligibility 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.

    5. Withholding of Contributions

      Contributions shall be withheld from employee salary on a pre-tax basis, except for employees on disability benefits that require contributions to be withheld post-tax as determined by the State Controller’s Office

    6. Contributions will be deposited in a designated state subaccount for BU 9 of the Annuitant’s Health Care Coverage Fund for the purpose of providing retiree health and dental benefits to state annuitants and dependents associated with BU 9.  As defined in Government Code Section 22940, a designated state subaccount is a “separate account maintained within the fund to identify prefunding contributions and assets attributable to a specified state collective bargaining unit or other state entity for the purpose of providing benefits to state annuitants and dependents associated with a specified collective bargaining unit or other state entity.”
    7. Contributions paid pursuant to this agreement shall not be recoverable under any circumstances to an employee or his/her beneficiary or survivor.
    8. The costs of administering payroll deductions and asset management shall be deducted from the contributions and/or account balance.
    9. The parties agree to support any legislation necessary to facilitate and implement prefunding of retiree health care obligations.