State of California

  M E M O R A N D U M

  REFERENCE CODE:
  2004-035


  DATE:
  July 30, 2004


  TO:
  Employee Benefit Officers

  Personnel Officers

  Personnel Transactions Supervisors

  Personnel Transactions Staff


  FROM:
  Department of Personnel Administration
  Benefits Division


  SUBJECT:
  Supplemental Life Insurance for Excluded employees - 
  Demutualization Funds Premium Holiday Information


  CONTACT:
  Desi Rodrigues, Personnel Program Analyst

  (916) 324-9400, CALNET 454-9400

  FAX: (916) 322-3769

  Email: DesiRodrigues@dpa.ca.gov



  

  

  This memorandum is to provide you important information 
  regarding the "Demutualization Funds Premium Holiday" that 
  will be implemented effective September 1, 2004 (August pay 
  period) for eligible employees currently enrolled in the 
  Supplemental Life Insurance Program.  This is similar to 
  the Premium Holiday for the Long Term Disability Program 
  initiated on July 1, 2004.

  

  What are Demutualization Funds? 

  

  In recent years, a growing number of large insurance 
  companies have converted from mutual insurance companies 
  (owned by policyholders) to publicly held and traded stock 
  companies through a process known as demutualization.  
  Metropolitan Life Insurance Company's (MetLife) Board of 
  Directors adopted a demutualization plan.  The 
  demutualization plan was approved, and subsequently 
  approved by the New York State Superintendent of Insurance. 

   
  

  

  

  

  

  

  As a result of the approved demutualization, eligible group 
  insurance policyholders became eligible to receive 
  compensation in exchange for their extinguished mutual 
  "ownership" interest in MetLife.  When an insurer 
  demutualizes, its policyholders, including employers and 
  employees, receive a pro rata distribution of the new 
  insurance company's stock and/or cash.  

  

  DPA received cash from MetLife for premiums paid by DPA and 
  enrolled employees.  The demutualization proceeds have been 
  held in a special demutualization fund account by the State 
  Treasurer's Office until the funds could be distributed 
  accordingly.  After researching several options available 
  under IRS rules, DPA elected to refund premiums through the 
  Premium Holiday process.

  

  What is a Premium Holiday? 

  

  A Premium Holiday is a period of time that the employee 
  does not have to make a payment for a covered benefit.  In 
  this case per IRS rules, a Premium Holiday will be given to 
  all employees currently enrolled in the Supplemental Life 
  Insurance Program, until the funds provided by the 
  demutualization are exhausted.  It is estimated that 
  premiums will not be deducted for the months of September 
  (August pay period), October (September pay period), 
  November (October pay period), and December (November pay 
  period).

  

  DPA has been working closely with the State Controller's 
  Office and other State agencies to provide this Premium 
  Holiday.  The employee-paid premium deduction will resume 
  effective January 1, 2005 (December pay period).

  

  What happens to newly appointed employees? 

  

  Employees who are newly appointed to an excluded position 
  during the Premium Holiday, will be automatically enrolled 
  into the Basic Life Program.  The Supplemental Life 
  Insurance Program information will continue to be sent to 
  newly appointed employees offering them the option to 
  purchase additional coverage (Supplemental Life).  
  Supplemental Life Enrollment forms will be reviewed by 
  MetLife and if approved, coverage will begin with the 
  soonest effective date based on the approval date.  The 
  Supplemental Life Insurance deduction will not show on the 
  employee's pay warrant until January 1, 2005 (December pay 
  period) as a result of the premium holiday.

   
  

  

  

  

  

  

  Employees who are already eligible and did not elect 
  Supplemental Life Insurance at the time they first became 
  eligible will not be able to enroll in the Supplemental 
  Life Program to take advantage of the Premium Holiday.  
  MetLife will accept Supplemental Life Enrollment forms, 
  review them, and if approved, the employee will be billed 
  for the premiums during the Premium Holiday months.  The 
  Supplemental Life Insurance payroll deduction will begin 
  January 1, 2005 (December pay period). 

  

  Will DPA communicate information about the Premium Holiday 
  to eligible employees? 

  

  Yes. DPA and MetLife will be sending notices to the home 
  addresses of eligible/enrolled employees on August 2, 2004.  
  A copy of the letter to employees is attached for your 
  review.  We also encourage departments to communicate this 
  information to eligible/enrolled employees.

  

  If you have any questions regarding this information, 
  please contact Desi Rodrigues, Benefits Program Analyst, at 
  (916) 324-9400, or CALNET 454-9400.

  

  Sincerely,

  

  

  

  

  Debbie Endsley, Chief 
  Benefits Division

  

  

  

  

  

  Attachments will be distributed via mail.