Welcome to the “Sick Leave Insurance Program, SLIP” presentation.
This presentation is an overview of the Sick Leave Insurance Program, SLIP.
The SLIP offers retirement-eligible employees an option for using their unused sick leave balance to pay the state share of their group health insurance premiums after they retire until they become eligible for Medicare (usually at age 65.)
The information in this presentation is current but subject to change in the future.
Let’s discuss some general information about retiree health and dental insurance benefits at retirement.
To be eligible for retiree health and dental coverage, you must be:
• Age 55 or older as of your retirement date.
• Apply to receive an IPERS monthly benefit.
• Be the contract holder of a State’s health and dental insurance plan.
There can be no break between your health and dental coverage as an employee and coverage as a State retiree.
Your health and dental coverage goes through the end of the month which you retired and your retiree health and dental coverage must begin the first of the month following your retirement date.
Your spouse is able to continue retiree health and dental coverage when you pass away.
Note: Your spouse must be enrolled in your retiree health and dental coverage at the time you pass away.
It is very important to remember if you drop the State of Iowa health or dental coverage as a retiree, there is no provision for rejoining the retiree group at a later date.
Now, let’s review the SLIP program
Retirees pay the total health insurance premium.
As health insurance premiums increase or decrease each year, the changes are passed along to retirees under the age of 65 in the same amount as employees’ premiums.
These are the 2019 monthly retiree health insurance premiums.
Iowa Choice is $699 per month for single coverage and $1,642 per month for family coverage.
National Choice is $769 per month for single coverage and $1,806 per month for family coverage.
The retiree premiums lead us to discuss the Sick Leave Insurance Program.
SLIP offers State retirees an option for using their unused sick leave balance to pay the State share of their group health insurance premiums.
As a SLIP retiree, your sick leave balance at retirement is converted into a SLIP account.
Funds from your SLIP account pay the State share of the health insurance premium.
You pay what active employees pay for health insurance.
Funds from your SLIP account can only be used to pay the State’s share of health insurance.
Funds from your SLIP account can only be used until you become eligible for Medicare.
Before discussing SLIP, on your last pay warrant, a retiree is paid for:
• Time worked during the last pay period.
• Accrued but unused vacation hours
• Up to $2,000 from their sick leave balance
The $2,000 sick leave payout is mandatory and is subject to federal, state, and FICA.
An option is to direct all or some of the sick leave payout and accrued vacation into your Retirement Investor’s Club or RIC account.
For more information about this option, attend the monthly DAS webcast “RIC Deferred Compensation - Ready to Retire and Take Income.”
Your sick leave balance is converted into your SLIP account based on your sick leave balance at the time of retirement.
If you have up to 750 sick leave hours, the conversion rate to SLIP is 60 percent.
If you have over 750 up to 1,500 sick leave hours, the conversion rate to SLIP is 80 percent.
Finally, if you have over 1,500 hours of sick leave, all of your sick leave is converted at 100 percent.
There is no maximum number of sick leave hours that can be converted into SLIP.
Let’s look at some examples.
In this example, the employee’s sick leave balance at retirement is 1,250 hours and her regular rate of pay at retirement is $40.00 per hour.
The first step in calculating SLIP is to multiply her sick leave hours by her regular rate of pay. 1,250 hours multiplied by $40 is $50,000.
Next, the $2,000 sick leave payout must be subtracted from the amount leaving $48,000.
Because the employee has 1,250 hours of sick leave, her conversion factor is 80 percent.
$48,000 multiplied by 80% is $38,400. This is her SLIP account balance.
In this example, the employee’s sick leave balance at retirement is 760 hours and his regular rate of pay at retirement is $30.00 per hour.
We multiply his sick leave hours (760) by his regular rate of pay ($30 per hour) which is $22,800.
Next, the $2,000 sick leave payout must be subtracted from the amount leaving $20,800.
Because this employee has only 760 sick leave hours, you might think the $2,000 sick leave payout would drop his conversion factor to 60 percent.
This is very important regarding calculating SLIP. When it comes to applying the conversion factor, the SLIP calculation does not look at dollars but at the total number of sick leave hours at retirement. In this case, the conversion factor would still be 80 percent.
$20,800 multiplied by 80 percent is $16,640 which is his SLIP account.
The DAS Benefits website has a calculator which allows you to determine your SLIP account.
The easiest way to get to the DAS Benefits website is to enter benefits.iowa.gov in your search engine.
When you are at the DAS Benefits site, click on “Retirees.”
On the left side navigation, click “Sick Leave Insurance Program.”
At the “Sick Leave Insurance Program” web page is a link to the “Sick Leave Insurance Program (SLIP) Calculation Worksheet.”
What does the SLIP account do?
Funds from the SLIP account pays the State share of your health insurance and you pay what active employees pay.
If you go from single to family coverage or vice versa, funds from SLIP automatically pays the State share.
When the health insurance premiums change, funds from SLIP automatically adjust to pay the State share and you, the SLIP retiree, pays what employees pay for the year.
SLIP funds are not taxable to you.
The State pays Wellmark directly its share of the premium from your SLIP account.
You pay Wellmark the employee portion of the premium. Wellmark can send you an invoice or you can sign-up for electronic fund transfer.
Let’s see how SLIP works.
In this example, we calculated the retiree’s SLIP account at $38,400.
She retired at age 62 which means she has 36 months before being eligible for Medicare.
Also, we assume no increase in health insurance premiums.
The retiree is enrolled in Iowa Choice, family coverage.
The total monthly premium is $1,642. SLIP pays the State share which is $1,494.34 and the retiree pays $147.66. These payments go on for 25 months.
On month 26, her SLIP account is $1,041.50 which isn’t enough to cover the State share of $1,494.34. The retiree must make up the difference of $452.84 plus the retiree share of $147.66 for a total of $600.50.
The retiree’s SLIP account is now exhausted. She is still enrolled in the State’s retiree health insurance but now she must pay the total premium in order to continue coverage.
She pays $1,642 for Iowa Choice, family coverage for the next 10 months,
At the end of 36 months, her SLIP account paid 66 percent of the total premiums and she paid 34 percent of the total premiums.
Let’s look at another example.
We calculated this retiree’s SLIP account at $16,640.
He retired at age 63 which means he has 24 months before being eligible for Medicare.
Like the last example, we assume no increase in health insurance premiums.
He is enrolled in Iowa Choice, single coverage.
The total monthly premium is $699. SLIP pays the State share which is $659.74 and the retiree pays $39.26. This process goes on for 24 months.
After 24 months, the retiree is now eligible for Medicare and no longer eligible for SLIP.
He still has $806.24 left in his SLIP account. This amount is forfeited.
If a SLIP retiree returns to State employment in a permanent position, the retiree waives all his/her SLIP balance. The SLIP is not held for the retiree, it is forfeited.
A SLIP retiree may be hired by the State in a temporary position. Approval for the SLIP retiree must be approved by DAS. The length of time for the temporary assignment must be fixed and short term.
Finally, a SLIP retiree can perform services for the State if the retiree is:
• An independent contractor
• Works for an entity who contracts with the State, or
• Employed by the State’s temporary placement agency.
SLIP ends when you
• Deplete the SLIP account.
• Return to a State of Iowa permanent position.
• Become eligible for Medicare.
• Drop the State’s health plan.
• Fail to pay the retiree share of the premium.
• Die before you become Medicare-eligibility. Your spouse can continue coverage but your spouse can’t use your SLIP dollars.
When you are no longer eligible for SLIP, any remaining funds in your SLIP account are forfeited.
As we wrap-up, let’s review the key takeaways and resources.
The key takeaways from this presentation are:
In order to eligible for retiree health and dental coverage, you must be:
• Age 55 or older as of your retirement date.
• Apply to receive an IPERS monthly benefit.
• Be the contract holder of a State’s health and dental insurance plans.
Your sick leave balance at retirement is converted into a SLIP account.
Funds from the your SLIP account pay the State share of the health insurance premium.
You pay what active employees pay for health insurance.
Funds from your SLIP account can only be used to pay the State’s share of health insurance.
Funds from your SLIP account can only be used until you become eligible for Medicare.
Additional information about retiree benefits is available on the DAS Benefits website.
State retirees can continue health insurance coverage when they become Medicare-eligible.
There is a monthly webcast with information on continuing health insurance coverage when Medicare-eligible.
If you have additional questions, contact me at jim.pierson@iowa.gov.