KRS 61.702: Group hospital and medical insurance plan -- Inclusion in Kentucky

Employees Health Plan -- Employee and employer contributions -- Minimum

service requirements -- Members with service in other retirement systems --

Exemption from premium tax -- Administrative regulation.

(1) For purposes of this section:

(a) "Hospital and medical insurance plan" may include, at the board's discretion,

any one (1) or more of the following:

1. Any hospital and medical expense policy or certificate, provid er-

sponsored integrated health delivery network, self -insured medical plan,

health maintenance organization contract, or other health benefit plan;

2. Any health savings account as permitted by 26 U.S.C. sec. 223 or health

reimbursement arrangement or a similar account as may be permitted by

26 U.S.C. sec. 105 or 106. Such arrangement or account, at the board's

discretion, may reimburse any medical expense permissible under 26

U.S.C. sec. 213; or

3. A medical insurance reimbursement program established by t he board

through the promulgation of administrative regulation under which

members purchase individual health insurance coverage through a health

insurance exchange established under 42 U.S.C. sec. 18031 or 18041;

(b) "Monthly contribution rate" is the amo unt determined by the board based

upon the requirements of subsection (4)(a) to (d) of this section, except that

for members who began participating in the system on or after July 1, 2003,

the term shall mean the amount determined in subsection (4)(e) of t his

section; and

(c) "Months of service" means the total months of combined service used to

determine benefits under the system, except service added to determine

disability benefits or service otherwise prohibited from being used to

determine retiree heal th benefits under KRS 16.505 to 16.652 or 61.510 to

61.705 shall not be counted as "months of service." For current and former

employees of the Council on Postsecondary Education who were employed

prior to January 1, 1993, and who earn at least fifteen (15 ) years of service

credit in the Kentucky Employees Retirement System, "months of service"

shall also include vested service in another retirement system other than the

Kentucky Teachers' Retirement System sponsored by the Council on

Postsecondary Education.

(2) (a) 1. The board of trustees of the system shall arrange by appropriate contract

or on a self -insured basis to provide a group hospital and medical

insurance plan coverage for:

a. Present and future recipients of a retirement allowance from the

Kentucky Employees Retirement System and the State Police

Retirement System; and

b. The spouse and each qualified dependent of a recipient who is a

former member or the beneficiary, provided the spouse and

dependent meet the requirements to participate in the hospital and

medical insurance plans established, contracted, or authorized by

the system.

2. Any recipient who chooses coverage under a hospital and medical

insurance plan shall pay, by payroll deduction from the retirement

allowance, electronic funds transfer, or by another method, the

difference between the premium cost of the hospital and medical

insurance plan coverage selected and the monthly contribution rate to

which he or she would be entitled under this section.

(b) 1. For present and future recipients of a retirement allowance from the

system who are not eligible for Medicare and for those recipients

described in subparagraph 3.b. of this paragraph, the board may

authorize these participants to be included in the Kentucky Employees

Health Plan as provided by KRS 18A.225 to 18A.2287 and shall provide

benefits for recipients in the plan equal to those provided to state

employees having the same Medicare hospital and medical insuranc e

eligibility status. Notwithstanding the provisions of any other statute

except subparagraph 3.b. of this paragraph, system recipients shall be

included in the same class as current state employees for purposes of

determining medical insurance policies an d premiums in the Kentucky

Employees Health Plan as provided by KRS 18A.225 to 18A.2287.

2. Regardless of age, if a recipient or the spouse or dependent child of a

recipient who elects coverage becomes eligible for Medicare, he or she

shall participate in the plans offered by the systems for Medicare

eligible recipients. Individuals participating in the Medicare eligible

plans may be required to obtain and pay for Medicare Part A and Part B

coverage, in order to participate in the Medicare eligible plans of fered

by the system.

3. The system shall continue to provide the same hospital and medical

insurance plan coverage for recipients and qualifying dependents after

the age of sixty-five (65) as before the age of sixty-five (65), if:

a. The recipient is not eligible for Medicare coverage; or

b. The recipient would otherwise be eligible for Medicare coverage

but is subject to the Medicare Secondary Payer Act under 42

U.S.C. sec. 1395y(b) and has been reemployed by a participating

agency which offers the recipient a hospital and medical insurance

benefit or by a participating agency which is prevented from

offering or which does not offer a hospital and medical benefit to

the recipient as a condition of reemployment under KRS 70.293,

95.022, or 164.952. Individua ls who are eligible, pursuant to this

subdivision, to be included in the Kentucky Employees Health

Plan as provided by KRS 18A.225 to 18A.2287 may be rated as a

separate class from other eligible employees and retirees for the

purpose of determining medical insurance premiums.

(c) For recipients of a retirement allowance who are not eligible for the same

level of hospital and medical benefits as recipients living in Kentucky having

the same Medicare hospital and medical insurance eligibility status, the boa rd

shall provide a medical insurance reimbursement plan as described in

subsection (6) of this section.

(d) Notwithstanding anything in KRS Chapter 16 or 61 to the contrary, the board

of trustees, in its discretion, may take necessary steps to ensure compl iance

with 42 U.S.C. sec. 300bb-1 et seq.

(3) (a) Each employer participating in the Kentucky Employees Retirement System

or the State Police Retirement System as provided in KRS 16.505 to 16.652 or

61.510 to 61.705 shall contribute to the insurance trust fund established under

KRS 61.701 the amount necessary to provide the monthly contribution rate as

provided for under this section. Such employer contribution rate shall be

developed by appropriate actuarial method as a part of the determination of

each respective employer contribution rate determined under KRS 61.565.

(b) 1. Each employer described in paragraph (a) of this subsection shall deduct

from the creditable compensation of each member whose membership

date begins on or after September 1, 2008, an amount equal to one

percent (1%) of the member's creditable compensation. The deducted

amounts shall, at the discretion of the board, be credited to accounts

established pursuant to 26 U.S.C. sec. 401(h), within the funds

established in KRS 16.510 and 61.5 15, or the insurance trust fund

established under KRS 61.701. Notwithstanding the provisions of this

paragraph, a transfer of assets between the accounts established pursuant

to 26 U.S.C. sec. 401(h), within the funds established in KRS 16.510

and 61.515, and the insurance trust fund established under KRS 61.701

shall not be allowed.

2. The employer shall file the contributions as provided by subparagraph 1.

of this paragraph at the retirement office in accordance with KRS

61.675. Any interest or penalties paid on any delinquent contributions

shall be credited to accounts established pursuant to 26 U.S.C. sec.

401(h), within the funds established in KRS 16.510 and 61.515, or the

insurance trust fund established under KRS 61.701. Notwithstanding

any minimum c ompensation requirements provided by law, the

deductions provided by this paragraph shall be made, and the

compensation of the member shall be reduced accordingly.

3. Each employer shall submit payroll reports, contributions lists, and other

data as may be required by administrative regulation promulgated by the

board of trustees pursuant to KRS Chapter 13A.

4. Every member shall be deemed to consent and agree to the deductions

made pursuant to this paragraph, and the payment of salary or

compensation less the deductions shall be a full and complete discharge

of all claims for services rendered by the person during the period

covered by the payment, except as to any benefits provided by KRS

16.505 to 16.652 or 61.510 to 61.705. No member may elect whether to

participate in, or choose the contribution amount to accounts established

pursuant to 26 U.S.C. sec. 401(h) within the funds established in KRS

16.510 and 61.515, or the insurance trust fund established under KRS

61.701. The member shall have no option to receive the contribution

required by this paragraph directly instead of having the contribution

paid to accounts established pursuant to 26 U.S.C. sec. 401(h) within the

funds established in KRS 16.510 and 61.515, or the insurance trust fund

established u nder KRS 61.701. No member may receive a rebate or

refund of contributions. If a member establishes a membership date

prior to September 1, 2008, pursuant to KRS 61.552(2) or (3), then this

paragraph shall not apply to the member and all contributions previously

deducted in accordance with this paragraph shall be refunded to the

member without interest. The contribution made pursuant to this

paragraph shall not act as a reduction or offset to any other contribution

required of a member or recipient under KR S 16.505 to 16.652 or

61.510 to 61.705.

5. The board of trustees, at its discretion, may direct that the contributions

required by this paragraph be accounted for within accounts established

pursuant to 26 U.S.C. sec. 401(h) within the funds established in KRS

16.510 and 61.515, or the insurance trust fund established under KRS

61.701, through the use of separate accounts.

(4) (a) The premium required to provide hospital and medical insurance plan

coverage under this section shall be paid wholly or partly f rom funds

contributed by:

1. The recipient of a retirement allowance, by payroll deduction from his

or her retirement allowance, or by other method;

2. The insurance trust fund established under KRS 61.701 or accounts

established pursuant to 26 U.S.C. sec . 401(h) within the funds

established in KRS 16.510 and 61.515;

3. Another state -administered retirement system, including the County

Employees Retirement System, under a reciprocal arrangement, except

that any portion of the premium paid from the funds sp ecified by

subparagraph 2. of this paragraph under a reciprocal agreement shall not

exceed the amount that would be payable under this section if all the

member's service were in the systems administered by the Kentucky

Retirement Systems. If the board pro vides for cross -referencing of

insurance premiums, the employer's contribution for the working

member or spouse shall be applied toward the premium, and the

insurance trust fund established under KRS 61.701 or accounts

established pursuant to 26 U.S.C. sec . 401(h) within the funds

established in KRS 16.510 and 61.515 shall pay the balance; or

4. A combination of the fund sources described by subparagraphs 1. to 3.

of this paragraph.

Group rates under the hospital and medical insurance plan shall be made

available to the spouse, each dependent child, and each disabled child,

regardless of the disabled child's age, of a recipient who is a former member

or the beneficiary, if the premium for the hospital and medical insurance for

the spouse, each dependent chi ld, and each disabled child, or beneficiary is

paid by payroll deduction from the retirement allowance, electronic funds

transfer, or by another method. For purposes of this subsection only, a child

shall be considered disabled if he or she has been determined to be eligible for

federal Social Security disability benefits or meets the dependent disability

standard established by the Department of Employee Insurance in the

Personnel Cabinet.

(b) For a member who began participating in the system prior to Jul y 1, 2003, the

monthly contribution rate shall be paid by the system from the funds specified

under paragraph (a)2. of this subsection and shall be equal to a percentage of

the single premium to cover the retired member as follows:

1. One hundred percent (100%) of the monthly premium for single

coverage shall be paid for a retired member who had two hundred forty

(240) months of service or more upon retirement or for a retired member

who when he or she was an employee became disabled as a direct result

of an act in line of duty as defined in KRS 16.505 or as a result of a

duty-related injury as defined in KRS 61.621;

2. Seventy-five percent (75%) of the monthly premium for single coverage

shall be paid for a retired member who had less t han two hundred forty

(240) months of service but at least one hundred eighty (180) months of

service upon retirement, provided such retired member agrees to pay the

remaining twenty-five percent (25%) by payroll deduction from his or

her retirement allowa nce, electronic funds transfer, or by another

method;

3. Fifty percent (50%) of the monthly premium for single coverage shall be

paid for a retired member who had less than one hundred eighty (180)

months of service but had at least one hundred twenty (120 ) months of

service upon retirement, provided such retired member agrees to pay the

remaining fifty percent (50%) by payroll deduction from his or her

retirement allowance, electronic funds transfer, or by another method; or

4. Twenty-five percent (25%) of the monthly premium for single coverage

shall be paid for a retired member who had less than one hundred twenty

(120) months of service but had at least forty -eight (48) months of

service upon retirement, provided such retired member agrees to pay the

remaining seventy-five percent (75%) by payroll deduction from his or

her retirement allowance, electronic funds transfer, or by another

method.

(c) Notwithstanding paragraph (b) of this subsection, for a member participating

in the system prior to July 1, 2003, who:

1. Dies as a direct result of an act in line of duty as defined in KRS 16.505

or dies as a result of a duty -related injury as defined in KRS 61.621, the

monthly premium shall be paid for his or her spouse so long as the

spouse remains eligible for a monthly retirement benefit;

2. Becomes totally and permanently disabled as defined in KRS 16.582 as

a direct result of an act in line of duty as defined in KRS 16.505 or

becomes disabled as a result of a duty -related injury as defined in KRS

61.621 and is eligible for the benefits provided by KRS 61.621(5)(a), the

monthly premium shall be paid for his or her spouse so long as the

member and the spouse individually remain eligible for a monthly

retirement benefit; and

3. Dies as a direct result of an act in line of duty as defined in KRS 16.505,

dies as a result of a duty -related injury as defined in KRS 61.621,

becomes totally and permanently disabled as defined in KRS 16.582 as a

direct result of an act in line of duty as defined in KRS 16.505, or

becomes disabled as a result of a duty -related injury as defined in KRS

61.621 and is eligible for the benefits provided by KRS 61.621(5)(a), the

monthly premium shall be paid for each dependent child as defined in

KRS 16.505, so long as the member remains eligi ble for a monthly

retirement benefit, unless deceased, and each dependent child

individually remains eligible under KRS 16.505.

(d) 1. For a member who began participating in the system prior to July 1,

2003, who was determined to be in a hazardous position in the Kentucky

Employees Retirement System or in a position in the State Police

Retirement System, or who is receiving a retirement allowance based on

General Assembly service, the funds specified under paragraph (a)2. of

this subsection shall also pay a percentage of the monthly contribution

rate sufficient to fund the premium costs for hospital and medical

insurance coverage for the spouse and for each dependent child of a

recipient.

2. The percentage of the monthly contribution rate paid for the spous e and

each dependent child of a recipient who was in a hazardous position or

who is receiving a retirement allowance based on General Assembly

service in accordance with subparagraph 1. of this paragraph shall be

based solely on the member's service in a h azardous position using the

formula in paragraph (b) of this subsection.

(e) For members who begin participating in the system on or after July 1, 2003:

1. Participation in the insurance benefits provided under this section shall

not be allowed until the m ember has earned at least one hundred twenty

(120) months of service in the state -administered retirement systems,

except that for members who begin participating in the system on or

after September 1, 2008, participation in the insurance benefits provided

under this section shall not be allowed until the member has earned at

least one hundred eighty (180) months of service credited under KRS

16.543(1) or 61.543(1), or another state-administered retirement system.

2. A member who meets the minimum service requirements as provided by

subparagraph 1. of this paragraph shall upon retirement be eligible for

the following monthly contribution rate to be paid on his or her behalf,

or on behalf of the spouse or dependent of a member with service in a

hazardous posi tion, from the funds specified under paragraph (a)2. of

this subsection:

a. For members with service in a nonhazardous position, a monthly

insurance contribution of ten dollars ($10) for each year of service

as a participating employee in a nonhazardous position;

b. For members with service in a hazardous position or who

participate in the State Police Retirement System, a monthly

insurance contribution of fifteen dollars ($15) for each year of

service as a participating employee in a hazardous position or the

State Police Retirement System; and

c. Upon the death of the retired member, the beneficiary, if the

beneficiary is the member's spouse, shall be entitled to a monthly

insurance contribution of ten dollars ($10) for each year of service

the member atta ined as a participating employee in a hazardous

position.

3. The minimum service requirement to participate in benefits as provided

by subparagraph 1. of this paragraph shall be waived for a member who

receives a satisfactory determination of a hazardous d isability that is a

direct result of an act in line of duty as defined in KRS 16.505, and the

member shall be entitled to the benefits payable under this subsection as

though the member had twenty (20) years of service in a hazardous

position.

4. The minimum service required to participate in benefits as provided by

subparagraph 1. of this paragraph shall be waived for a member who is

disabled as a result of a duty -related injury as defined in KRS 61.621

and is eligible for the benefits provided by KRS 61.6 21(5)(b), and the

member shall be entitled to the benefits payable under this subsection as

though the member had twenty (20) years of service in a nonhazardous

position.

5. Notwithstanding the provisions of this paragraph, the minimum service

requirement to participate in benefits as provided by subparagraph 1. of

this paragraph shall be waived for a for a member who dies as a direct

result of an act in line of duty as defined in KRS 16.505, who becomes

totally and permanently disabled as defined in KRS 16 .582 as a direct

result of an act in line of duty as defined in KRS 16.505, who dies as a

result of a duty -related injury as defined in KRS 61.621, or who

becomes disabled as a result of a duty -related injury as defined in KRS

61.621 and is eligible for th e benefits provided by KRS 61.621(5)(a),

and the premium for the member, the member's spouse, and for each

dependent child as defined in KRS 16.505 shall be paid in full by the

systems so long as the member, member's spouse, or dependent child

individually remains eligible for a monthly retirement benefit.

6. Except as provided by subparagraph 5. of this paragraph, the monthly

insurance contribution amount shall be increased:

a. On July 1 of each year by one and one -half percent (1.5%). The

increase shall be cumulative and shall continue to accrue after the

member's retirement for as long as a monthly insurance

contribution is payable to the retired member or beneficiary but

shall not apply to any increase in the contribution attributable to

the increase specified by subdivision b. of this subparagraph; and

b. On January 1 of each year by five dollars ($5) for members who

have accrued an additional full year of service as a participating

employee beyond the career threshold, subject to the following

restrictions:

i. The additional insurance contribution provided by this

subdivision shall only be applied to the monthly contribution

amounts provided under subparagraph 2.a. and b. of this

paragraph;

ii. The additional insurance contribution provided by this

subdivision shall only be payable towards the health plans

offered by the system to retirees who are not eligible for

Medicare or for reimbursements provided to retirees not

eligible for Medicare pursuant to subsection (6)(a)2. of this

section; and

iii. In order for the annual increase to occur as provided by this

subdivision, the funding level of retiree health benefits for

the system in which the employee is receiving the additional

insurance contribution shall be at least ninety percent (90%)

as of the most r ecent actuarial valuation and be projected by

the actuary to remain ninety percent (90%) for the year in

which the increase is provided.

7. The benefits of this paragraph provided to a member whose participation

begins on or after July 1, 2003, shall not be considered as benefits

protected by the inviolable contract provisions of KRS 16.652 or

61.692. The General Assembly reserves the right to suspend or reduce

the benefits conferred in this paragraph if in its judgment the welfare of

the Commonwealth so demands.

8. An employee whose membership date is on or after September 1, 2008,

who retires and is reemployed in a regular full -time position required to

participate in the system or the County Employees Retirement System

shall not be eligible for health insurance coverage or benefits provided

by this section and shall take coverage with his or her employing agency

during the period of reemployment in a regular full-time position.

9. For purposes of this paragraph:

a. "Career threshold" for a member with service in a nonhazardous

position means twenty -seven (27) years of service credited under

KRS 16.543(1), 61.543(1), 78.615(1), or another stat e-

administered retirement system and for a member with service in a

hazardous position means the service requirements specified by

KRS 16.577(2) or (3) or 16.583(6)(b), as applicable; and

b. "Funding level" means the actuarial value of assets divided by th e

actuarially accrued liability expressed as a percentage that is

determined and reported by the system's actuary in the annual

actuarial valuation.

(f) For members with service in another state -administered retirement system

who select hospital and medical insurance plan coverage through the system:

1. The system shall compute the member's combined service, including

service credit in another state -administered retirement system, and

calculate the portion of the member's premium monthly contribution rate

to be paid by the funds specified under paragraph (a)2. of this subsection

according to the criteria established in paragraphs (a) to (e) of this

subsection. Each state -administered retirement system shall pay

annually to the insurance trust fund establish ed under KRS 61.701 the

portion of the system's cost of the retiree's monthly contribution for

single coverage for hospital and medical insurance plan which shall be

equal to the percentage of the member's number of months of service in

the other state -administered retirement plan divided by his or her total

combined service and in conjunction with the reciprocal agreement

established between the system and the other state -administered

retirement systems. The amounts paid by the other state -administered

retirement plans and by the Kentucky Retirement Systems from funds

specified under paragraph (a)2. of this subsection shall not be more than

one hundred percent (100%) of the monthly contribution adopted by the

respective boards of trustees;

2. A member may n ot elect coverage for hospital and medical benefits

through more than one (1) of the state -administered retirement systems;

and

3. A state -administered retirement system shall not pay any portion of a

member's monthly contribution for medical insurance unl ess the

member is a recipient or annuitant of the plan.

(5) Premiums paid for hospital and medical insurance coverage procured under

authority of this section shall be exempt from any premium tax which might

otherwise be required under KRS Chapter 136. The payment of premiums by the

funds described by subsection (4)(a)2. of this section shall not constitute taxable

income to an insured recipient. No commission shall be paid for hospital and

medical insurance procured under authority of this section.

(6) (a) The board shall promulgate an administrative regulation to establish a medical

insurance reimbursement plan to provide reimbursement for hospital and

medical insurance plan premiums of recipients of a retirement allowance who:

1. Are not eligible for the same level of hospital and medical benefits as

recipients living in Kentucky and having the same Medicare hospital

and medical insurance eligibility status; or

2. Are eligible for retiree health subsidies as provided by subsection (4)(e)

of this section, e xcept for those recipients eligible for full premium

subsidies under subsection (4)(e)5. of this section. The reimbursement

program as provided by this subparagraph shall be available to the

recipient regardless of the hospital and medical insurance plans offered

by the systems.

(b) An eligible recipient shall file proof of payment for hospital and medical

insurance plan coverage with the retirement office. Reimbursement to eligible

recipients shall be made on a quarterly basis. The recipient shall be eligi ble

for reimbursement of substantiated medical insurance premiums for an

amount not to exceed the total monthly contribution rate determined under

subsection (4) of this section.

(c) For purposes of recipients described by paragraph (a)1. of this subsectio n, the

plan shall not be made available if all recipients are eligible for the same

coverage as recipients living in Kentucky.