Section ETF 60.60 - Conversion of life insurance coverage to pay premiums for health and long-term care insurance(1) PURPOSE. The purpose of this section is to interpret s. 40.72(4r), Stats., and to establish procedures to implement this statute.(2) DEFINITIONS. In this section: (a) "Company" means the insurer under contract with the State of Wisconsin group insurance board to provide the life insurance program under s. 40.72(1), Stats., and to administer the conversion accounts under s. 40.72(4r), Stats.(b) "Conversion" means the voluntary exchange of employer-provided group term life insurance under s. 40.72, Stats., for employer-provided health insurance or long-term care insurance, or both, administered under subch. IV of ch. 40, Stats.(c) "Conversion account" means the account established by the company to record the balance after conversion available to pay the health or long-term care insurance premiums of the insured who has elected conversion.(d) "Conversion effective date" means the first day of the first month for which the premium for health or long-term care insurance is fully or partially paid from the conversion account. The conversion effective date is determined as provided in sub. (4) (a) 3.(e) "Health insurance" means insurance which is provided under s. 40.51, Stats.(f) "Insured" means a person who has made, or who is eligible to make, the election provided in s. 40.72(4r), Stats., and this section.(g) "Life insurance" means insurance which is provided under s. 40.72(1), Stats., and which has been reduced to a final amount as provided in s. 40.72(2) and (3), Stats.(h) "Long-term care insurance" means insurance which is provided under s. 40.55, Stats., and which qualifies as an accident and health plan under section 106 of the internal revenue code. Note: This rule (CR 09-057) amends ss. ETF 60.60(2) (h) and 60.60(8) to conform to the definition of "internal revenue code" in s. 40.02(39m), Stats., added by 2007 Wis. Act 131 by deleting the former reference to s. 71.01(6), Stats. Section ETF 10.01 (intro.) already provides that definitions in s. 40.02, Stats., apply throughout all ETF chapters.
(i) "Policyholder" means the state of Wisconsin group insurance board.(j) "Present value of life insurance" means the sum which, if invested on the conversion effective date, would provide a death benefit equal to the face amount of the insured's life insurance coverage on the date of death of the insured, based on actuarial assumptions about future mortality rates and interest rates recommended by the company and approved by the department under sub. (5) (a).(3) ELECTION PROCESS. (a) An insured may elect to convert the present value of his or her life insurance to pay premiums for health or long-term care insurance, or both, by filing the form prescribed by the department provided that on the conversion effective date all of the following apply: 1. The insured meets the requirements of s. 40.72(4), Stats., to continue life insurance coverage after termination of employment.2. The insured has life insurance and either health insurance or long-term care insurance, or both, as defined in sub. (2).3. The face amount of the insured's life insurance has been reduced to its final amount as provided in s. 40.72(2) and (3), Stats. Note: Under present law, this will occur at age 70 if the insured is a participating employee with life insurance coverage, at age 66 if the insured is a retired employee of the state or of a participating employer which elected to provide post-retirement life insurance coverage at the 50% level, or otherwise at age 67.
4. The insured is no longer required to pay life insurance premiums pursuant to s. 40.05(6) (b), Stats.5. The insured's credits, if any, in the accumulated unused sick leave account established under s. 40.05(4), Stats., are less than the insured's current monthly health insurance premium. This subdivision does not apply to elections to convert life insurance to pay long-term care insurance premiums.(b) The election form shall include all of the following:1. Estimates of the face amount and the present value of the insured's life insurance prepared by the department and based on the earliest possible conversion effective date at the time of preparation.2. The insured's designation of a health insurance plan or long-term care insurance plan, or both, for which premiums are to be paid from the conversion account.3. The insured's waiver of all benefits under the Wisconsin public employers group life insurance program based on the life insurance that is converted, in exchange for the benefits provided in this section.4. The signature of the insured or of the insured's representative as provided in par. (c).(c) A person holding the insured's durable power of attorney may sign in lieu of the insured under the provisions of s. ETF 10.75 if so authorized by the terms of the power of attorney. If a guardian or conservator of the insured's estate has been appointed, the guardian or conservator shall sign in lieu of the insured. The election is deemed not to have a long-term effect on the insured's rights and benefits, for purposes of s. 40.08(9m), Stats., and express court approval of the terms of the election is not required.(d) The entire face amount of insured's life insurance up to $50,000 shall be included in the conversion. Insurance over $50,000 may not be converted, and shall remain in force subject to the provisions of statute and contract.(e) As provided in s. 40.08(1), Stats., the life insurance benefits provided under s. 40.72, Stats., and this section are not assignable and are not subject to execution, levy, attachment, garnishment, or other legal process. The Department may not honor or otherwise enforce any order which conflicts with s. 40.08(1), Stats., specifically including but not limited to an order to convert or refrain from converting life insurance coverage, to satisfy claims of creditors other than the department, to apply for, obtain or retain a benefit or entitlement, and any order the department determines to be in violation of s. 40.08(1), Stats. Note: Form ET-2324, ``Election to Convert Life Insurance to Pay Health or Long-Term Care Insurance Premiums," may be obtained no charge by writing to: Department of Employee Trust Funds, P.O. Box 7931, Madison, WI 53707-7931, or by calling (608) 266-3285 or toll free at (877) 533-5020.
(4) APPROVAL OF THE ELECTION, CONVERSION EFFECTIVE DATE. (a) Upon receipt of the election form the department shall do all of the following:1. Verify that the election meets the requirements under sub. (3) and reject any election which does not meet the requirements.2. Verify the face amount of the insurance coverage.3. Determine the conversion effective date. The conversion effective date shall be the first day of the coverage month which is the later of the following: a. The third month which begins after the department receives the insured's election to convert life insurance.b. The first month in which the insured meets the requirements in sub. (3) (a). (b) If the department determines that the conversion effective date is 5 or more full calendar months after the date the department received the election, the department may reject the election without prejudice. The insured may file a new election at a later time.(c) The department shall provide the company with a copy of the approved election form and other necessary information including but not limited to: the insured's name, social security number, date of birth, verified face amount of life insurance coverage, the conversion effective date, and the type, carrier, and premium amount of the applicable health or long-term care insurance plan.(5) CONVERSION ACCOUNT. The company shall do all of the following: (a) Recommend and provide to the department a table of conversion factors by age in years and attained months, based on mortality experience within the life insurance plan and the interest rate established by the company for valuations of the post-retirement insurance program. The company may recommend revisions to the table from time to time. The factors may not be used until approved by the department.(b) Compute the present value of the insured's life insurance by multiplying the verified face amount, up to $50,000, by the conversion factor for the insured's age in years and attained months on the conversion effective date.(c) Establish a conversion account in the insured's name from the appropriate reserve, as determined by the company and the department, held by the company for the policyholder. The company shall credit the account with the present value computed in par. (b) and debit the account periodically by the premium amount and for the prescribed period certified by the department.(d) Notify the insured of the face amount converted and the initial conversion account balance within 20 days of receipt of the approved election form.(e) Notify the insured of the conversion account balance annually and when the balance in the conversion account falls below 4 times the monthly premium being debited. If the company does not have current address information it may request the department to mail the notification to the insured's current address.(f) Remit to the department from each conversion account, by the 20th of the month preceding the coverage period, the applicable premiums for health and long-term care insurance.(g) Annually report to the policyholder the number of conversion accounts opened and closed, the volume of premiums paid, and the amounts reverting to the reserves as provided in sub. (8) (c).(h) Close the conversion account and restore the insured's life insurance coverage when so directed by the department pursuant to sub. (7) (c).(6) INTEREST ON CONVERSION ACCOUNTS. The conversion accounts may not accrue interest on the unexpended balances.(7) REVOCATION OF THE CONVERSION ELECTION. (a) An insured may not revoke an election to convert life insurance under this section unless: 1. The department receives the insured's written request to revoke prior to the conversion effective date; or2. The present value of the life insurance as computed by the company is less than 90% of the department's estimate, and the department receives the insured's written request to revoke within 21 days after the company mails notification of the initial conversion account balance to the insured.(b) If the insured dies within 60 days after the conversion effective date, the department shall deem that a timely revocation was received.(c) When the department determines that it received a timely revocation, the department shall do all of the following: 1. Direct the company to increase the insured's life insurance coverage by the face amount used to compute the present value under sub. (5) (b), less any deduction made pursuant to subd. 3.2. Recover and refund to the company the premiums which were disbursed from the conversion account. Premiums may be recovered by deduction from the insured's Wisconsin retirement system annuity check, by payment directly by the insured, or otherwise, as the department may determine.3. If the insured dies before the premiums are recovered, direct the company to reduce the insured's death benefit from the life insurance program by the amount of premiums disbursed.(8) BENEFITS FROM THE CONVERSION ACCOUNT. (a) The moneys credited to the conversion account may only be used to provide health or long-term care insurance premiums or death benefits. The insured may not receive the balance in the conversion account as a living benefit or in any form which would be included in the insured's gross income under applicable provisions of the internal revenue code. Note: This rule (CR 09-057) amends ss. ETF 60.60(2) (h) and 60.60(8) to conform to the definition of "internal revenue code" in s. 40.02(39m), Stats., added by 2007 Wis. Act 131 by deleting the former reference to s. 71.01(6), Stats. Section ETF 10.01 (intro.) already provides that definitions in s. 40.02, Stats., apply throughout all ETF chapters.
(b) Debits to the conversion account shall cease with the premium payment for the coverage month which is the earliest of any of the following: 1. The last month for which premiums can be fully or partially paid from the balance remaining in the conversion account.2. The month in which the insured dies.3. The month in which insurance terminates due to an employer's withdrawal from the health or long-term care insurance program.4. The month in which health or long-term care insurance terminates due to cancellation by the insured.5. The second month which begins after the month in which the department receives the insured's written request to discontinue premium payments from the conversion account.(c) The balance remaining in the account after premium payments cease is payable as a death benefit to the insured's beneficiaries as determined under s. 40.02(8), Stats. However, if payments ceased pursuant to par. (b) 4. or 5., balances of $25 or less shall revert to the reserve held by the company for the policyholder and may not be paid as death benefits.(d) An insured surviving spouse or dependent child may not continue payment of premiums from the conversion account after the death of the insured but may elect, if otherwise eligible, to continue coverage as provided in s. ETF 40.01.(9) CHANGES AND ADJUSTMENTS. (a) The department shall notify the company of annual changes in premium, health insurance and long-term care insurance plans made available, and other program changes at least 90 days in advance of the effective date of the change. The company shall make the required adjustments in remittances from all affected accounts.(b) The insured may discontinue premium payments from the conversion account, resume payments which were previously discontinued or change the allocation of conversion account payments from one type of insurance to another, by filing a written request with the department. The request shall be effective in the third month which begins after the department receives the request.(c) The department shall notify the company of an insured's change in coverage type, carrier, family status, allocation of premiums, or other relevant data. Changes reported to the company by the fifth day of a month shall be reflected in the premium remittance for the following coverage month.(d) If the insured reports a change of status which affects premium amounts previously paid from the conversion account, the company shall adjust the conversion account balance in cooperation with the department and the affected insurance carrier. However if all funds in the conversion account have been disbursed and the account has been closed at the time the company is notified, the department shall make the adjustments. All premium adjustments are subject to s. 40.08(10), Stats., and applicable contractual limitations on refund of premiums.Wis. Admin. Code Department of Employee Trust Funds ETF 60.60
Cr. Register, December, 1994, No. 468, eff. 1-1-95; CR 09-057: am. (2) (h) and (8) (a) Register May 2010 No. 653, eff. 6-1-10; EmR0938: emerg. am. (8) (d), eff. 1-1-10; CR 10-004: am. (8) (d) Register July 2010 No. 655, eff. 8-1-10.Amended by, CR 14-055: am. (5) (c), (f) Register May 2015 No. 713, eff. 6-1-15; correction in (3) (c) (Note) [deleted] made under s. 13.92(4) (b) or 35.17(2), Stats.,Register April 2017 No. 736, eff. 5/1/2017Amended by, CR 19-126: am. (8) (d) Register May 2021 No. 785, eff. 6/1/2021