State of California

  M E M O R A N D U M

  REFERENCE CODE:
  2001-027

  DATE:
  June 26, 2001

  TO:
  Employee Relations Officers
  Personnel Officers

  FROM:
  Department of Personnel Administration
  Labor Relations Division

  SUBJECT:
  Retroactive Health Premium Adjustments for CSEA Units

  CONTACT:
  Wayne Heine, Assistant Chief of Labor Relations
  (916) 324-0476, CALNET 454-0476
  FAX: (916) 322-0765


  The July pay warrant, issued in August, for rank and file 
  employees in bargaining units 1, 3, 4, 11, 14, 15, 17, 20, 
  and 21 will include a lump-sum payment for the additional 
  employer health premium that the State agreed to pay for 
  the period January 1, 2001, through June 30, 2001.
  
  The California State Employees Association (CSEA), which 
  represents these nine units, agreed on March 15, 2001, to 
  accept the State's offer to pick up half of the average 9.2 
  percent HMO premium increase that went into effect January 
  1, 2001, with the same dollar amount paid to employees in 
  the PPO plans (PERS Care and PERS Choice).  
  
  The agreement, which covered the six-month period from 
  January 1, 2001, through June 30, 2001, was approved by the 
  Legislature June 14, 2001, and signed by the Governor June 
  25, 2001 (SB 1022, Soto, Chapter 22, Statutes of 2001).
  
  Because this additional employer contribution will be an 
  after-tax adjustment, it will be subject to all applicable 
  payroll taxes.  Consequently, the added payment received by 
  the affected employees in their July pay warrant will be 
  offset by state, federal, Social Security, and Medicare 
  taxes.
  
  Employees in the other bargaining units, as well as all 
  excluded employees, already have received the additional 
  employer health contribution for this six-month period.  
  This is because the other units signed the same agreement 
  with the State earlier than CSEA and their agreement was 
  approved by the Legislature and signed into law on February 
  14, 2001 (SB 67, Burton, Chapter 1, Statutes of 2001).
  
  The amount of the additional employer contribution for this 
  six-month period, before the tax adjustment, was:
  
  $8/mo. for a single-party enrollment, for a total monthly 
  employer contribution of $182;
  
  $16/mo. for a two-party enrollment, for a total monthly 
  employer contribution of $362; and,
  
  $21/mo. for a family enrollment, for a total employer 
  contribution of $473.
  
  The amount of the employer contribution for employee health 
  premiums for the period after June 30, 2001, is currently 
  being bargained with each unit, including the nine units 
  listed above.  The negotiation process will determine 
  contribution levels that will be implemented when successor 
  agreements to the 1999-2001 labor contracts are reached and 
  an appropriation is approved.
  
  Unfortunately, employees covered by the nine bargaining 
  units cited above will not receive the full pre-tax benefit 
  of the health premium adjustments because their retroactive 
  payment is subject to taxation.  Therefore, questions from 
  employees in these units regarding why their total payment 
  is lower than what employees in non-CSEA units received can 
  be answered by explaining that the retroactive payment was 
  taxable. (As noted in PML 2001-010, the additional health 
  premium contribution for all excluded employees and 
  employees in non-CSEA units was subject to taxation for 
  only two months of retroactive payments; the additional 
  employer health contribution for the remaining four months 
  for employees covered by PML 2001-010 was pre-tax.)
  
  
  
  Gloria Moore Andrews
  Chief of Labor Relations