UW System Position on Bills Introduced in the Legislature During the 2005-2006 Session
(Petrowski) Permits participants under the Wisconsin Retirement system to use accumulated unused sick leave credits and health insurance premium credits to purchase both health insurance and long-term care insurance if he or she is not using the credits for the payment of health insurance premiums under the state group health insurance plan and if the participants is covered by a comparable health insurance plan or policy.
Referred to: Committee on Insurance
UW System Position
OPPOSE: This bill could alter the tax free status of the accumulated sick leave conversation (SLC) program. The SLC program is intended solely to provide premium payment for state group health insurance premiums in retirement. As such under federal tax laws there is no constructive receipt and no tax consequences to the employee. If an employee has access to the SLC credits to use in some other manner, tax experts advise that constructive receipt has occurred and the value of the credits is taxable to all employees, regardless of whether they exercise the option to use the credit for some other purpose.
Most employees will need all and even more than their SLC credits to finance health insurance in retirement. Recent studies by Fidelity state that based on current health insurance costs, retirees today need in excess of $200,000 to finance health insurance in their retirement. Classified state and university employees retire with about 25% of what they will need in accumulated SLC credits.