DRS Notice 23-004, Separation Dates for DRS and SEBB

Date: May 17, 2023
Notice 23-004
Applies to: School Districts, Charter Schools, Tribal Schools, Educational Service Districts
Subject: DRS Notice 23-004, Separation Dates for DRS and SEBB

As an employer, it’s important to know how the separation date reported to DRS affects your employees’ health insurance options in retirement. The timing of their resignation, and how and when to report their resignation and separation dates can make a difference.

We published an article for your employees that explains how their resignation date will affect their retirement and healthcare. It also informs them that they need to tell their employers which month they’ve chosen.

Resignation and separation timing

Those receiving health insurance through the Health Care Authority (HCA) School Employees Benefits Board (SEBB) Program may become eligible to enroll in Public Employees Benefits Board (PEBB) after they retire.

The separation date you report to the Department of Retirement Systems (DRS) and the SEBB Program will be identical, but you won’t necessarily report the dates at the same time (see the second example below). Once the employee has retired and ended the SEBB Program, they may be eligible to begin coverage through PEBB. These examples illustrate how it works:

A June separation with one final paycheck in June

An employee resigns their position effective June 30, and their last paycheck is in the same month:

1. The SEBB Program will discontinue the employee’s insurance coverage after June 30
2. You will report a June 30 separation date to the SEBB Program through your normal reporting process
3. The employee’s retirement date can be July 1 at the earliest (they won’t earn service credit for July and August)
4. You will report the June 30 separation date to DRS with your June transmittal

A June separation with one final paycheck in August

An employee resigns their position effective June 30, and receives July and August paychecks:

1. The SEBB Program will discontinue the employee’s insurance coverage after June 30
2. You will report a June 30 separation date to the SEBB Program through your normal reporting process
3. The employee’s retirement date can be July 1 at the earliest (there is no service credit for July and August)
4. You will report the June 30 separation date to DRS in your September transmittal. Here’s why:
   • B codes for July and August that are reported in the July or August transmittals will reject all the employee’s data if there is a June 30 separation date on file with DRS

An August separation with one final paycheck in August

An employee resigns their position effective Aug. 31, and their last paycheck is in the same month:

1. They’ll have health insurance coverage through the SEBB Program in July and August
2. You will report the Aug. 31 separation date to the SEBB Program through your normal reporting process
3. The employee will earn service credit for July and August (except for TRS Plan 1)
4. The employee’s retirement can be Sept. 1 at the earliest
5. You report the Aug. 31 separation date to DRS with your August transmittal

All employees should consider which option is best for them and clearly communicate their resignation date to their employer.

Example for TRS Plan 1 members:

Since a TRS Plan 1 retiree earns no additional service credit in July and August, it’s more likely the pension payments for July and August have a greater value than the difference in cost between the SEBB or PEBB Program insurance coverage for those two months. This means it could make more financial sense for your TRS Plan 1 employees to resign their positions at the end of June, then retire and begin PEBB retiree insurance coverage effective July 1. If you have any questions regarding this DRS Notice, please contact Employer Support Services at 360-664-7200, option 2, or 800-547-6657, option 6, option 2; or email us.