KRS § 78.5536 — KY Code / Title IX / Chapter 78 / Section 78.5536
78.5536 Group hospital and medical insurance plan -- Medicare eligibility -- Reimbursement plan -- Employer contributions -- Payment of premiums -- Contribution rates -- Exemption from premium tax -- Administrative regulation
Status: in_force

78.5536 Group hospital and medical insurance plan -- Medicare eligibility --

Reimbursement plan -- Employer contributions -- Payment of premiums --

Contribution rates -- 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, provider-

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 the 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" shall be the amount 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 this

section; and

(c) "Months of service" shall mean 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 health benefits under KRS 78.510 to 78.852 shall not be

counted as "months of service."

(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

County Employees 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 insurance

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 and 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 offered 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 a hospital and medical benefit to the recipient as a

condition of reemployment under KRS 70.293, 95.022, or

164.952. Individuals 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 board

shall provide a medical insurance reimbursement plan as described in

subsection (6) of this section.

(d) Notwithstanding anything in KRS Chapter 78 to the contrary, the board of

trustees, in its discretion, may take necessary steps to ensure compliance with

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

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

provided in KRS 78.510 to 78.852 shall contribute to the insurance trust fund

established by 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 78.635.

(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 July 1, 2003, and who is subject to the benefits

provided under subsection (4)(e) of this section, an amount equal to one

percent (1%) of the member's creditable compensation if the member is

participating in a nonhazardous position and two percent (2%) of the

member's creditable compensation if the member is participating in a

hazardous position. 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 78.520, 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 78.520, 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

78.625. 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 78.520, or the insurance

trust fund established under KRS 61.701. Notwithstanding any

minimum compensation 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

78.510 to 78.852. 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 78.520, 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

78.520, or the insurance trust fund established under KRS 61.701. No

member may receive a rebate or refund of contributions. If a member

establishes a membership date prior to July 1, 2003, pursuant to KRS

61.552(2) or (3) or who is subject to the benefits provided under

subsection (4)(b) or (d) of this section, 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 KRS 78.510 to 78.852.

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

78.520, 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 from funds

contributed by:

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

or her retirement allowance, electronic funds transfer, or by other

method;

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

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

established in KRS 78.520;

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

administered by Kentucky Retirement Systems, under a reciprocal

arrangement, except that any portion of the premium paid from the

funds specified 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 County Employees

Retirement System. If the board provides 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 78.520, 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 child, 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 July 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 was disabled as a direct result of

an act in line of duty as defined in KRS 78.510(48) 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 than 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 allowance, 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 78.510

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 78.5524 as

a direct result of an act in line of duty as defined in KRS 78.510 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 78.510,

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

becomes totally and permanently disabled as defined in KRS 78.5524 as

a direct result of an act in line of duty as defined in KRS 78.510, 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 78.510, so long as the member remains eligible for a monthly

retirement benefit, unless deceased, and each dependent child

individually remains eligible under KRS 78.510.

(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 County

Employees 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 spouse 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 hazardous position using the

formula in paragraph (b) of this subsection, except that for any recipient

of a retirement allowance from the County Employees Retirement

System who was contributing to the system on January 1, 1998, for

service in a hazardous position, the percentage of the monthly

contribution shall be based on the total of hazardous service and any

nonhazardous service as a police or firefighter with the same agency, if

that agency was participating in the County Employees Retirement

System but did not offer hazardous duty coverage for its police and

firefighters at the time of initial participation.

(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 member 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

78.615(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 position, from the funds specified under paragraph (a)2. of

this subsection:

a. For members with service in a nonhazardous position who do not

meet the career threshold, 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 nonhazardous position who meet

the career threshold, a monthly insurance contribution towards the

health plans offered to retirees who are not eligible for Medicare

of forty dollars ($40) for each year of service as a participating

employee in a nonhazardous position and a monthly insurance

contribution towards the health plans offered to retirees who are

eligible for Medicare of ten dollars ($10) for each year of service

as a participating employee in a nonhazardous position. The

monthly insurance contribution payable to retirees eligible for

Medicare under this subdivision shall be adjusted as necessary so

that it is equivalent to the monthly contribution amount computed

under subdivision a. of this subparagraph as adjusted by

subparagraph 6.a. of this paragraph;

c. For members with service in a hazardous position who do not meet

the career threshold, a monthly insurance contribution of fifteen

dollars ($15) for each year of service as a participating employee

in a hazardous position;

d. For members with service in a hazardous position who meet the

career threshold, a monthly insurance contribution towards the

health plans offered to retirees who are not eligible for Medicare

of fifty dollars ($50) for each year of service as a participating

employee in a hazardous position and a monthly insurance

contribution towards the health plans offered to retirees who are

eligible for Medicare of fifteen dollars ($15) for each year of

service as a participating employee in a hazardous position. The

monthly insurance contribution payable to retirees eligible for

Medicare under this subdivision shall be adjusted as necessary so

that it is equivalent to the monthly contribution amount computed

under subdivision c. of this subparagraph as adjusted by

subparagraph 6.a. of this paragraph; and

e. 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 attained 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 disability that is a

direct result of an act in line of duty as defined in KRS 78.510(48) 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 61.621(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 member who dies as a direct result

of an act in line of duty as defined in KRS 78.510(48), who becomes

totally and permanently disabled as defined in KRS 78.5524 as a direct

result of an act in line of duty as defined in KRS 78.510, 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 the 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 78.510 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.b. and d. 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 recent 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 78.852. 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 Kentucky Retirement Systems 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; and

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 state-

administered retirement system and for a member with service in a

hazardous position means the service requirements specified by

KRS 78.5514(2)(a)2. or (3)(b), or 78.5516(6)(b), as applicable;

and

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

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 established 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 County Employees Retirement System 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 not 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 unless 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, except 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 eligible

for reimbursement of substantiated medical insurance premiums paid by the

recipient to obtain coverage for an amount not to exceed the total monthly

contribution rate determined under subsection (4) of this section. For

reimbursements provided under paragraph (a)2. of this subsection, the full

subsidy under subsection (4)(e)2. of this section shall be reimbursed by the

system to the recipient up to the amount individually paid by the recipient to

obtain coverage. In the case of recipients of a retirement allowance from a

nonhazardous position, the reimbursement shall be limited to the amount paid

by the recipient to obtain single coverage.

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

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

coverage as recipients living in Kentucky.