RELATES TO:
KRS
161.420,
161.655,
161.675,
26 U.S.C. 152,
213(e),
401(h)
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
161.310(1) requires the
board of trustees to promulgate administrative regulations for the
administration of funds of the retirement system and for the transaction of
business.
KRS
161.716 requires the board of trustees to
promulgate administrative regulations as are necessary to remove any conflicts
with federal laws and to protect the interests of the members and survivors of
the members of the retirement system. Pursuant to the provisions of
KRS
161.420(5), this
administrative regulation confirms a separate 401(h) account established
pursuant to
26 U.S.C.
401(h).
Section 1. Definitions.
(1) "Dependent" is defined by
26 U.S.C.
152,
excluding subsections (b)(1), (b)(2), and (d)(1)(B).
(2) "Medical expense" is defined by
26 U.S.C.
213(e).
(3) "Retired", for purposes of eligibility to
receive medical benefits described in
26 U.S.C.
401(h), means:
(a) An employee is eligible to receive
benefits under the system;
(b) The
employee is not still employed by the employer; and
(c) A separation from employment has
occurred.
(4) "System"
means the retirement system administered by the Kentucky Teachers' Retirement
System.
Section 2. The
401(h) account established pursuant to
26 U.S.C.
401(h) shall pay part of the
subsidy for health benefits that are otherwise payable from the Medical
Insurance Fund.
Section 3. The
mandatory employee contribution established pursuant to
KRS
161.420(5) shall be
deposited in the Medical Insurance Fund.
Section
4. The health benefits shall be subordinate to the retirement
benefits provided by the system.
(1)Life
insurance protection shall not be provided by the system, except death benefits
payable pursuant to
KRS
161.655
(2) This requirement shall not be satisfied
unless the actual contributions to the 401(h) account established pursuant to
26 U.S.C.
401(h) do not exceed
twenty-five (25) percent of the total actual contributions to the system, other
than contributions to fund past service credits, determined on an aggregate
basis since the inception of the 401(h) account established pursuant to
26 U.S.C.
401(h).
Section 5.
(1) Amounts in the 401(h) account established
pursuant to
26 U.S.C.
401(h) shall be for the
exclusive purpose of paying medical expenses for a retiree, a retiree's spouse,
or any dependent.
(2) Amounts in
the 401(h) account established pursuant to
26 U.S.C. shall not be diverted for
another purpose.
Section
6. An amount in the 401(h) accounts established pursuant to
26 U.S.C.
401(h) shall revert to the
employer upon satisfaction of all liabilities for medical benefits.
Section 7. An employee shall not have an
individual interest in the 401(h) accounts established pursuant to
26 U.S.C.
401(h).
Section 8.
(1) The 401(h) account established pursuant
to
26 U.S.C.
401(h) may be commingled
with the pension assets of the trust fund for investment purposes.
(2) Investment earnings shall be credited to
the 401(h) account established pursuant to
26 U.S.C.
401(h) on a reasonable
basis.
Section 9.
Administrative and other expenses shall be charged to the 401(h) account
established pursuant to
26 U.S.C.
401(h) on a reasonable
basis.