Some state workers will receive refunds of up to $324 in their mid-January paychecks.
The state has agreed to repay the extra $54 a month it began deducting from Alaska State Employees Association workers' checks in July and stop taking out the extra money.
The state had said it needed to deduct the additional money, above what had been agreed to by contract, because health-care costs were rising.
After months of arguing about the issue, including an unfair labor practice complaint filed by the union, the state agreed to stop the additional deduction and repay the money, said ASEA Business Manager Chuck O'Connell.
``We each have (insurance) consultants and the consultants were able to reach agreement that the plan didn't need any additional money,'' O'Connell said.
ASEA is the largest of a dozen state employee unions. It has about 7,000 members, including about 2,000 in Juneau.
The state and the union disagreed about the financial health of the insurance fund that pays members' health-care bills. The state said health costs were rising and the fund needed more money to be on sound financial footing. The union said there were adequate reserves in the fund to cover members' health costs.
The added deduction raised workers' contributions to their health-care plans from $84.50 to $138.50 a month.
Department of Administration Commissioner Bob Poe informed the union of the state's decision Wednesday.
Poe said the original projections about rising health costs were made in March 1999. The state's actuarial consultant took another look at trends in health claims late in the year and determined costs hadn't risen as much as predicted.
The state now estimates that even without the extra $54 monthly per employee, the ASEA health fund should end the year with a $3.7 million reserve, Poe said. The union estimates there will be a $4.6 million cushion left in the fund.
The state would prefer to have a $5 million reserve.
``There's a certain discomfort level here, but that's the nature of compromise,'' Poe said. ``We still think it will cover claims fluctuations.''
The union filed an unfair labor practice complaint with the Alaska Labor Relations Agency, which ruled in the union's favor in December. That ruling, however, would only have remained effective through the end of 1999.
The union's contract expired in July, but members have been working under the terms of the expired contract while negotiations continue on a new agreement.