University of Wisconsin–Milwaukee

Impact of Budget Repair Bill on Employee Benefits

As of March 21, 2011, may change due to pending legal action

The budget repair bill has financial implications for all UWM employees whose appointment is in the Wisconsin Retirement System (WRS). If you are unsure about whether your position is covered under WRS and whether the following applies to you or not, please contact the personnel representative for your employing unit. For a list of Personnel Representatives, see http://www4.uwm.edu/hr/prep_ubr/prep_ubr.cfm.

The bill was signed by Governor Walker on March 11, 2011 but has not yet been published. The Secretary of State initially indicated that he planned to publish the law on March 25, 2011 and the law would become effective on March 26, 2011. Due to pending legal action, the publication of the law may be delayed. The provisions in this document do not go into effect until the day after the law is published. The following is based on the version of the bill that has been approved by the legislature and signed by the governor as of March 18, 2011. When more definitive information is available, updates will be posted. It is important for UWM faculty, staff, and graduate assistants to understand, plan and prepare for the financial impact if the current version of the budget repair bill becomes effective.

  1. Impact on health insurance:
    1. Your health insurance premiums will increase starting with the April 29 paycheck.
    2. New 2011 monthly premium rates for full-time appointment in as faculty, academic staff, classified staff or graduate assistant:
      Table 1 Faculty, Academic Staff, Classified Staff Graduate Assistant
      Plan Single Family Single Family
      Tier 1 $84 $208 $42 $104
      Tier 2 $122 $307 $61 $153.50
      Tier 3 $226 $567 $113 $283.50
    3. March earnings paid on March 31 should have deductions at current rates.
    4. For those on academic year appointments, 4 health insurance premium deductions are taken in the June 1 paycheck (May pay period). This is referred to as the “May multiple deductions”. This is because the monthly premium for health insurance has to be paid in advance. Those faculty and staff who have summer appointments will not have health insurance premiums deducted from summer paychecks.
    5. The multiple deductions in the June 1 paycheck cover health insurance premiums for June, July, August and September.
    6. Health insurance premium deductions on the June 1 paycheck are only for those on academic year (9 month) appointments:
      Table 2 Faculty, Academic Staff, Classified Staff Graduate Assistant
      Plan Single Family Single Family
      Tier 1 $336 $832 $168 $416
      Tier 2 $488 $1,228 $244 $614
      Tier 3 $904 $2,268 $452 $1,134
    7. If you are on a regular annual appointment (12 month), your health insurance premium deduction will be at the values given in Table 1 for each month of 2011.
    8. By default, health insurance premiums are deducted pre-tax. This would be the situation for every UWM employee unless the employee requested a change to post-tax deduction.
  2. Impact on pension contributions:
    1. If your appointment is eligible for WRS pension benefits, you will be assessed a post-tax deduction for your contribution to pension. If you are unsure if this applies to you, please contact your personnel representative. If you need to learn about WRS, please visit http://www.uwsa.edu/hr/benefits/retsav/wrs.htm.
    2. In 2011, Employee Trust Fund (ETF) had set an employee contribution of 0.2% of your gross salary for WRS. This deduction entry shows up in your monthly earnings statement as “Retirement BAC”. You can find your monthly earnings statement by logging in with your ePanther id and password at http://my.wisconsin.edu.
    3. The budget repair bill requires employee contributions to be at 5.8%. This will be based on your gross earnings but the deduction will be post-tax. ETF has stated that this contribution to retirement funds will not be taxed twice, i.e. at the time you withdraw your annuity, the portion of that payment based on post-tax contributions will not be taxed.
    4. For those on academic year appointments, there are no multiple deductions for WRS on June 1. WRS contribution is directly proportional to your gross income. If you have a summer appointment, WRS deductions will be made from summer paychecks.
  3. Example of financial impact for a fictitious employee

    The following table (Table 3) shows an example of the total impact of the health insurance premium increases and WRS contributions on the monthly net earnings for academic year appointees for the 2010-11 fiscal year. Disclaimer: This calculation is only provided for illustration purposes using one particular scenario. The actual numbers for your individual situation may be quite different from those shown here.

    1. Scenario: John is on a full-time academic year (9-month) appointment as a faculty member. In 2010-11, John’s salary is $60,000 for a gross monthly salary of $6,666.67. A 3.065% furlough deduction is applied each month of this fiscal year. John is enrolled in a Tier 1 health insurance plan with family coverage (with pre-tax deduction for health insurance premium), and has a 20% withholding rate for taxes. John has no other deductions from his paycheck.
      Table 3 Example of impact on a fictional academic year appointee
      Table 3 Paycheck paid on Current Apr 29 June 1 (with multiple health insurance deductions as in Table 2)
      Monthly gross earnings 6666.67 6666.67 6666.67
      Furlough deduction 204.33 204.33 204.33
      Net after furlough deduction 6462.33 6462.33 6462.33
      Health insurance premium 89.00 208.00 832.00
      Retirement BAC 13.33 0.00 0.00
      Net after pre-tax deductions 6360.00 6254.33 5630.33
      Tax withholding (at 20% of above sum) 1272.00 1250.87 1126.07
      Net after-tax amount 5088.00 5003.47 4504.27
      WRS contributions (5.8% of gross amount)   386.67 386.67
      Net take-home amount 5088.00 4616.80 4117.60
      Difference from current take-home amount   471.20 970.40
    2. What happens beyond June 30?

      Since the biennial budget and the 2011-13 compensation plan have not been established, it is not known how benefits will change beyond July 1 and so it is not possible to provide any examples at this time. The biennial budget for 2011-13 does not include furlough, so we do not expect any furlough deductions beyond June 30, 2011. If, after June 30, the salary and the premium rates remain the same as proposed in the budget repair bill, the monthly statement will be similar to that for the April 29 paycheck in the above table except for the furlough deduction.

    3. What about those on annual (12 month) appointment?

      For those on annual appointment, there are no multiple deductions for health insurance on June 1. If the gross monthly salary is same as above and if the furlough is distributed uniformly each month, and if the rest of the scenario above applies, the June 1 and July 1 paychecks should be same as April 29 paycheck.

  4. What can one do to mitigate the financial impact?
    1. If you need to change your monthly cash flow situation, you can make some changes to the benefits plans that you currently participate in. The above example did not include deductions for contributions towards Tax-Sheltered Annuities (TSA), Wisconsin Deferred Compensation (WDC), group life insurance premiums, accidental death and dismemberment insurance, and other optional insurance programs such as vision care, dental, etc. You may be able to make some changes mid-year, reduce your contributions to, or cancel, some of these programs as well as to group health insurance. All of these actions have consequences and you need to understand them clearly and make informed decisions. Please consult with your benefits specialist in the Department of Human Resources before you make any changes.
    2. Options with respect to health insurance:
      • The default health insurance premium deduction is pre-tax. Because of this, Internal Revenue Services (IRS) rules determine what can be done midyear. Health insurance programs run on calendar year basis and so the proposed changes to premiums will be in effect until December 2011.
      • Some changes can be made to health insurance plans midyear because of the increase in premium rates. In order to avoid repeating information, please see responses to questions 7 to 12 on the UW System FAQ webpage at http://www.uwsa.edu/hr/benefits/repairbillfaq.pdf. Certain changes can be made that cost less for the family while maintaining coverage at the same level. Please read the FAQ document at the above link carefully to evaluate what changes you can make. Please consult with your benefits specialist in the Department of Human Resources before you make any changes. Because of the various federal and state laws that apply to this, it can be very complex and you need to make sure that you do not unintentionally lose coverage.
      • ETF and UW System Administration will provide guidelines to campus on the dates and the process to be used to make changes to health insurance coverage after the bill becomes law. Information will be sent to all employees once the campus receives the guidelines.
    3. Options with respect to other benefit plans
    4. Plans that can be changed

      You can stop or change contributions to

    5. Other insurance plans (http://www.uwsa.edu/hr/benefits/ins/lintro.htm)
      • You can make reductions to or cancel participation in these:
        1. State Group Life insurance
        2. Individual and Family Group Life insurance
        3. UW Employees Life Insurance
        4. Accidental Death and Dismemberment Insurance
      • Changes will be effective end of the month following application receipt.
      • Consequences: If you cancel, you may only re-enroll in life insurance with Medical Evidence of Insurability. Acceptance is not guaranteed.
    6. Income continuation insurance
      • You can reduce your premium by going to longer waiting period. There is no premium for 180-day waiting period. If you cancel income continuation insurance, you can only re-enroll with Medical Evidence of Insurability. Acceptance is not guaranteed.
      • In some years, a deferred enrollment opportunity may be available for re-enrollment without any conditions. But it is not a guarantee that such opportunity will be available.
  5. Sick leave conversion:
    1. Accumulated Sick Leave Conversion Credit (ASLCC) program is based in WI statutes. To learn more about this, visit http://www.bussvc.wisc.edu/ecbs/lev-aslcc-shicc-information-chart-uw1048.pdf.


      No changes to this have been included either in the budget repair bill or in the biennial budget bill to this program.

    2. Supplemental sick leave benefit, or the Supplemental Health Insurance Conversion Credit (SHICC) is not based in the statutes. To learn more about this program, visit http://www.bussvc.wisc.edu/ecbs/lev-aslcc-shicc-information-chart-uw1048.pdf
      • This program is included in the compensation plan for each biennium
      • Office of State Employment Relations (OSER) has stated that SHICC will continue until June 30, 2011 without change.
      • There is no definitive information about the future of SHICC beyond June 30, 2011. Updates will be provided when more is known about the future of this program.
  6. Before you make any changes to your benefits, talk to the Benefits Office first.
    1. Determination of eligibility to make changes to benefits plans is complex due to a myriad of state and federal regulations
    2. These also depend on every individual’s specific situation
    3. Consult with the Benefits Office (Engelmann 125) before making changes to your health insurance plans
  7. Important Links:
    1. UW System FAQ page:
      http://www.uwsa.edu/hr/benefits/repairbillfaq.pdf
    2. UW System Calculator for Impact on paycheck:
      http://www.uwsa.edu/hr/benefits/budgetBillEstimator/index.php
    3. Employee Trust Fund page:
      http://etf.wi.gov/news/Budget_Repair_Bill_Whats_New.pdf
    4. OSER page:
      http://oser.state.wi.us/docview.asp?docid=7209