KRS § 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. (Effective until July 15, 2026)

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. (Effective until July 15, 2026) (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. Effective: June 27, 2025 History: Amended 2025 Ky. Acts ch. 37, sec. 1, effective June 27, 2025. -- Amended 2024 Ky. Acts ch. 55, sec. 22, effective July 15, 2024. -- Amended 2022 Ky. Acts ch. 152, sec. 3, effective July 14, 2022; and ch. 216, sec. 23, effective April 14, 2022. -- Created 2021 Ky. Acts ch. 102, sec. 14, effective April 1, 2021. Legislative Research Commission Note (6/27/2025). The reviser of statutes has corrected an internal reference in subsection (4)(e)6. of this statute that was omitted during codification of 2022 Ky. Acts ch. 152, sec. 3, and ch. 216, sec. 23. Legislative Research Commission Note (6/27/2025). 2025 Ky. Acts ch. 37, sec. 3, provides that: "The amendments to the employee contribution provisions specified in subsection (3)(b) of Section 1 of this Act [this statute], shall apply to employee contributions payable on or after July 1, 2026." Legislative Research Commission Note (6/27/2025). 2025 Ky. Acts ch. 37, sec. 4, provides that: "The amendments to the monthly insurance contribution amounts specified in subsection (4)(e)2. of Section 1 of this Act [this statute] shall: (1) Be payable prospectively for insurance premiums for health plans beginning on or after January 1, 2026; (2) Be increased annually after January 1, 2026, in accordance with subsection (4)(e)6.a. of Section 1 of this Act [this statute]; and (3) For purposes of calculating the amounts that become payable on or after January 1, 2026, apply to the service as a participating employee accrued on or after July 1, 2003, for covered members and retirees, regardless of retirement date." Legislative Research Commission Note (7/14/2022). 2022 Ky. Acts ch. 152, sec. 4, provides that the amendments made to subsection (6) of this statute shall be applicable for retiree health plans offered to recipients on or after January 1, 2023.