PRINTER'S NO. 1643
No. 1401 Session of 1999
INTRODUCED BY NICKOL, EVANS, ALLEN, ARGALL, BAKER, BATTISTO,
BELARDI, BELFANTI, BENNINGHOFF, BROWNE, CAPPABIANCA, CLARK,
CLYMER, L. I. COHEN, M. COHEN, COSTA, CURRY, DALLY, DeWEESE,
FAIRCHILD, FICHTER, FRANKEL, FREEMAN, GEIST, GEORGE, GORDNER,
GRUCELA, GRUITZA, HANNA, HERMAN, JOSEPHS, KAISER, KIRKLAND,
MAITLAND, MANDERINO, MANN, MARSICO, MASLAND, McCALL, McGILL,
MICHLOVIC, R. MILLER, S. MILLER, MUNDY, ORIE, PETRONE,
PLATTS, PRESTON, RAYMOND, ROSS, SAINATO, SANTONI, SAYLOR,
SCHULER, SEMMEL, SERAFINI, SEYFERT, B. SMITH, S. H. SMITH,
SOLOBAY, STERN, SURRA, TANGRETTI, E. Z. TAYLOR, TIGUE,
TRELLO, VAN HORNE, VANCE, WOGAN, WRIGHT, YEWCIC, YOUNGBLOOD
AND WOJNAROSKI, APRIL 28, 1999
REFERRED TO COMMITTEE ON EDUCATION, APRIL 28, 1999
AN ACT
1 Amending Title 24 (Education) of the Pennsylvania Consolidated
2 Statutes, providing for the sponsorship and administration of
3 a group health insurance program for certain public school
4 retirees and other persons; providing for powers and duties
5 of the Public School Employees' Retirement Board;
6 establishing the Public School Retirees' Health Insurance
7 Fund; providing for health insurance premium assistance; and
8 making editorial changes.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 Section 1. Section 8502.1 of Title 24 of the Pennsylvania
12 Consolidated Statutes is repealed.
13 Section 2. Section 8509 of Title 24 is amended to read:
14 § 8509. Health insurance premium assistance program.
15 (a) Contribution rate.--Effective July 1, 1991, the premium
16 assistance contribution rate established in section 8328(f)
1 (relating to actuarial cost method) shall be sufficient to
2 provide reserves in the health insurance account as of June 30,
3 1992, for the payment of premium assistance set forth in
4 [subsection (b)] Chapter 91 (relating to health insurance
5 premium assistance) during the fiscal year beginning July 1,
6 1992, for all eligible annuitants who by that date elect to be
7 participating eligible annuitants and all additional eligible
8 annuitants who elect to be participating eligible annuitants in
9 the health insurance premium assistance program during the
10 fiscal year beginning July 1, 1992. For each fiscal year
11 beginning after July 1, 1991, the premium assistance
12 contribution rate shall be established to provide reserves
13 sufficient, when combined with unexpended amounts from the
14 reserves set aside the previous fiscal year for health insurance
15 assistance payments, to provide premium assistance payments in
16 the subsequent fiscal year for all participating eligible
17 annuitants. The board is authorized to expend an amount not to
18 exceed 2% of the health insurance account each year to pay for
19 the direct expense of administering the health insurance premium
20 assistance program, which expenditure may be included in the
21 board's consideration when it establishes the premium assistance
22 contribution rate each year.
23 [(b) Amount of premium assistance.--Effective July 1, 1992,
24 participating eligible annuitants shall receive premium
25 assistance payments of $55 per month or the actual monthly
26 premium, whichever is less. Such payments shall be made by the
27 board to the participating eligible annuitants for their payment
28 directly to their approved insurance carriers. Such payments may
29 also be paid by the board, at the board's discretion, directly
30 to the participating eligible annuitants' approved insurance
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1 carriers. The board shall have the right to verify the
2 application and receipt of the payments by the participating
3 eligible annuitants and their approved insurance carriers.
4 (c) Participating eligible annuitants.--An eligible
5 annuitant may elect to participate in the health insurance
6 premium assistance program by filing an election to be covered
7 by a health insurance carrier approved by the board and to
8 participate in the health insurance premium assistance program.
9 Participation in the health insurance premium assistance program
10 shall begin upon the effective date of the health insurance
11 coverage provided by a health insurance carrier approved by the
12 board, but in no event before the effective date of retirement.]
13 Section 3. Title 24 is amended by adding a part to read:
14 PART V
15 HEALTH INSURANCE FOR RETIRED SCHOOL EMPLOYEES
16 Chapter
17 87. Preliminary Provisions
18 89. Group Health Insurance Program
19 91. Health Insurance Premium Assistance
20 93. Miscellaneous Provisions
21 CHAPTER 87
22 PRELIMINARY PROVISIONS
23 Sec.
24 8701. Short title of part.
25 8702. Definitions.
26 § 8701. Short title of part.
27 This part shall be known and may be cited as the Public
28 School Retirees' Health Insurance Act.
29 § 8702. Definitions.
30 (a) General rule.--Subject to additional definitions
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1 contained in subsequent provisions of this part which are
2 applicable to specific provisions of this part, the following
3 words and phrases when used in this part shall have the meanings
4 given to them in this section unless the context clearly
5 indicates otherwise:
6 "Eligible person." An individual who is an annuitant or
7 survivor annuitant, or the spouse or dependent of the annuitant.
8 "Fund." The Public School Retirees' Health Insurance Fund.
9 "Participating eligible annuitant." An eligible annuitant
10 who elects to participate in the health insurance premium
11 assistance program identified in section 8509 (relating to
12 health insurance premium assistance program).
13 "Plan year." The period July 1, 1999, through December 31,
14 1999, shall be the first plan year. After December 31, 1999, the
15 plan year shall be the calendar year.
16 "Program." The group health insurance program that may be
17 sponsored by the Public School Employees' Retirement Board under
18 this part.
19 (b) Additional terms.--Any term used in this part not
20 defined in subsection (a) shall be governed by the definitions
21 given in Part IV (relating to retirement for school employees)
22 and the definitions set forth in Part IV shall be deemed to be
23 incorporated into this part.
24 CHAPTER 89
25 GROUP HEALTH INSURANCE PROGRAM
26 Sec.
27 8901. Administration.
28 8902. Corporate powers.
29 8903. Public School Retirees' Health Insurance Fund.
30 8904. Management of fund.
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1 § 8901. Administration.
2 The board may sponsor a group health insurance program to be
3 funded by and for eligible persons. The board may administer the
4 program itself or through any legal entity authorized by law to
5 do so. The program may also be administered in whole or in part
6 on a fully insured or self-funded basis at the board's sole
7 discretion. In addition to the powers granted by other
8 provisions of this part, the board shall have the powers
9 necessary or convenient to carry out this part, including, but
10 not limited to, the power to:
11 (1) Set and adjust premium rates sufficient to maintain
12 the adequacy of the reserve established by this part and to
13 fully fund the benefits offered by and to pay for the
14 administrative expenses related to the program.
15 (2) Determine and make necessary changes to the benefit
16 structure for the program.
17 (3) Determine enrollment procedures.
18 (4) Impose and collect necessary fees and charges.
19 (5) Establish an annual budget for the program and to
20 make disbursements from the fund that are consistent with the
21 budget.
22 (6) Establish independent procurement and contracting
23 procedures and contract for goods, equipment and services,
24 provided that the procedures award the contracting of goods
25 and equipment on a system of competitive bidding and that no
26 member of the board, nor any of its employees, shall in any
27 way be interested in any purchase made for the program.
28 (7) Provide for an annual audit of the fund and program
29 by an independent certified public accounting firm.
30 (8) Terminate the program or any portion of the program,
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1 at any time if, in the board's discretion, it is prudent to
2 do so.
3 (9) Solicit and accept gifts, grants, loans and other
4 aid from any person, corporation or other legal entity or
5 from the Federal, State or local government and participate
6 in any Federal, State or local government program if
7 necessary for prudent management of the program.
8 (10) Promulgate rules and regulations regarding the
9 program.
10 § 8902. Corporate powers.
11 Notwithstanding any other provision of law, including, but
12 not limited to, the act of April 9, 1929 (P.L.177, No.175),
13 known as The Administrative Code of 1929, and the act of April
14 9, 1929 (P.L.343, No.176), known as The Fiscal Code, the board
15 is hereby granted and shall have and may exercise, in its sole
16 discretion, all the powers necessary or convenient for the
17 carrying out of the purposes of this part, including, but not
18 limited to, the following rights and powers:
19 (1) All the power and privileges of a corporation.
20 (2) To adopt, use and alter at will a corporate seal.
21 (3) To make and alter bylaws for the management of its
22 affairs.
23 (4) To enter into contracts of all kinds and to execute
24 all instruments necessary or convenient for carrying on its
25 operations.
26 (5) To be a party litigant in any court having
27 jurisdiction according to law in any form of action
28 whatsoever.
29 (6) To acquire, hold and dispose of personal property,
30 tangible and intangible.
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1 (7) To acquire, hold and dispose of real property, or
2 any interest therein, to be used by the board for the
3 purposes of its offices and operations.
4 (8) Procure insurance against any loss in connection
5 with its property and operations in such amounts and from
6 such insurers as may be necessary and desirable for the
7 operation of the program.
8 (9) Appear in its own behalf before boards, commissions,
9 departments or other agencies of Federal, State or local
10 government.
11 (10) Procure office supplies, furniture and equipment,
12 including, but not limited to, telecommunication, computer
13 and other electronic data processing equipment, supplies,
14 materials, furnishings and fixtures, in such amounts and from
15 such vendors, as may be necessary and desirable for the
16 efficient operation of the program.
17 (11) Employ, appoint, promote, train, discharge, fix the
18 compensation of, authorize and prescribe the duties of such
19 officers and employees as may be appropriate for the proper
20 conduct of the work of the board.
21 (12) Contract for the services of a chief medical
22 examiner, an actuary, investment advisors, counselors, an
23 investment coordinator and such other professional personnel
24 as it deems advisable.
25 (13) Notwithstanding section 8501(e) (relating to public
26 school employees' retirement board) or the act of October 15,
27 1980 (P.L.950, No.164), known as the Commonwealth Attorneys
28 Act, contract for the services of an independent legal
29 counsel.
30 § 8903. Public School Retirees' Health Insurance Fund.
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1 (a) Establishment of fund.--The Public School Retirees'
2 Health Insurance Fund is established in the State Treasury. The
3 moneys of the fund are appropriated on a continuing basis and
4 shall be used exclusively for the purposes set forth in this
5 part. All of the assets of the fund shall be maintained and
6 accounted for separate from all other funds and moneys of the
7 Commonwealth and the Public School Employees' Retirement Fund
8 identified in section 8522 (relating to Public School Employees'
9 Retirement Fund).
10 (b) Reserve account.--
11 (1) A restricted account is established within the fund
12 for the purpose of establishing and maintaining a reserve
13 sufficient to pay not less than 50% of the expected claims
14 experience of the program on a self-funded basis each plan
15 year. The initial funding for the reserve account shall occur
16 in accordance with section 9303 (relating to initial funding
17 of reserve account). Beginning in plan year 2000, the board
18 shall annually establish through an actuary retained by the
19 board the amount necessary to maintain this reserve. Any
20 additional moneys needed to meet the reserve amount
21 established by this subsection shall be collected through the
22 adjustment of premium rates or through other available
23 sources.
24 (2) The moneys in the reserve account may be invested by
25 the board separate from other moneys of the fund. All
26 earnings derived from investment of the assets of the reserve
27 account shall be credited to the reserve account.
28 (c) Transfers.--The board may transfer moneys between the
29 various accounts of the fund, including the reserve account
30 established by subsection (b), as may be necessary to satisfy
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1 the provisions of this part. Transfers from the reserve account
2 may be made only for the payment of claims or expected claims as
3 determined by the actuary retained by the board.
4 (d) Administration.--The assets of the fund shall be
5 preserved, invested and expended solely pursuant to and for the
6 purposes set forth in this part.
7 (e) Composition.--The fund shall consist of:
8 (1) All payments made by eligible persons or received
9 from the health insurance account established by section 8526
10 (relating to health insurance account) and all interest,
11 earnings and additions thereto.
12 (2) Any other money, public or private, appropriated or
13 made available to the board for the fund or the restricted
14 account from any source and all interest, earnings and
15 additions thereto.
16 § 8904. Management of fund.
17 (a) Control and management of fund.--The members of the
18 board shall be the trustees of the fund. Regardless of any other
19 provision of law governing the investment of funds under the
20 control of an administrative board of the State government, the
21 trustees shall have exclusive control and management of the fund
22 and full power to invest the fund in accordance with the
23 provisions of this section, subject, however, to the exercise of
24 that degree of judgment, skill and care under the circumstances
25 then prevailing which persons of prudence, discretion and
26 intelligence who are familiar with such matters exercise in the
27 management of their own affairs not in regard to speculation,
28 but in regard to the permanent disposition of the fund,
29 considering the probable income to be derived therefrom as well
30 as the probable safety of their capital. The trustees shall have
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1 the power to hold, purchase, sell, lend, assign, transfer or
2 dispose of any of the securities and investments in which any of
3 the moneys in the fund shall have been invested, as well as of
4 the proceeds of the investments, including, but not limited to,
5 directed commissions which have accrued to the benefit of the
6 fund as a consequence of the investments and of the moneys
7 belonging to the fund, subject in every case to meeting the
8 standard of prudence set forth in this section.
9 (b) Custodian of fund.--The State Treasurer shall be the
10 custodian of the fund.
11 (c) Payment from fund.--All payments from the fund shall be
12 made by the State Treasurer in accordance with requisitions
13 signed by the secretary of the board or the secretary's
14 designees and ratified by resolution of the board. The board
15 shall reimburse the State Treasurer for the cost of making
16 disbursements from the fund in the manner provided by law.
17 CHAPTER 91
18 HEALTH INSURANCE PREMIUM ASSISTANCE
19 Sec.
20 9101. Premium assistance.
21 9102. Election to participate.
22 9103. Annual inflation adjustment contribution.
23 § 9101. Premium assistance.
24 (a) Amounts.--
25 (1) Effective July 1, 1992, a participating eligible
26 annuitant shall receive premium assistance payments of $55
27 per month or the actual monthly premium, whichever is less.
28 (2) Beginning with the monthly premium payment for
29 January 1, 2000, and continuing each month thereafter, a
30 participating eligible annuitant shall receive premium
19990H1401B1643 - 10 -
1 assistance payments of the lesser of:
2 (i) $55 per month plus the annual inflation
3 adjustment under subsection (b); or
4 (ii) the actual monthly premium.
5 (b) Annual inflation adjustment.--
6 (1) Beginning with the monthly premium assistance
7 payments for January 1, 2000, and continuing annually
8 thereafter, the amount of premium assistance payable may be
9 increased, in a manner to be determined by the board, in
10 consultation with the actuary, by equitably apportioning the
11 annual inflation adjustment contributions to be paid into the
12 fund under section 9103 (relating to annual inflation
13 adjustment contribution).
14 (2) The equitable apportionment of the annual inflation
15 adjustment shall be subject to the right of the board to
16 reserve a portion of the annual inflation adjustment for
17 apportionment in future plan years to ensure the financial
18 integrity of the program and the premium assistance benefit.
19 For plan year 2000 the maximum monthly premium assistance
20 payment, under subsection (a), after adjustment shall not be
21 less than $150 per month. The board shall publish its
22 determination of the annual inflation adjustment as a notice
23 in the Pennsylvania Bulletin.
24 (c) Funding.--The funding for premium assistance, including
25 the annual inflation adjustment provided for in subsection (b),
26 shall be in accordance with sections 8509(a) (relating to health
27 insurance premium assistance program) and 9103.
28 (d) Payments.--The payments under this section shall be made
29 by the board to participating eligible annuitants for their
30 payment directly to their approved insurance carriers or the
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1 fund, as the case may be. The payments may also be paid by the
2 board, at the board's discretion, directly to the participating
3 eligible annuitants' approved insurance carriers or the fund.
4 (e) Verification of payment.--The board shall have the right
5 to verify the application and receipt of the payments by the
6 participating eligible annuitants and their approved insurance
7 carriers. The board shall have the right to recoup from
8 participating eligible annuitants any payments that upon
9 verification were incorrectly paid by reason of the
10 participating eligible annuitants' actual cost of their health
11 insurance premiums, whether the incorrect payments occurred
12 through the fault of the participating eligible annuitants or
13 otherwise.
14 § 9102. Election to participate.
15 An eligible annuitant may elect to participate in the health
16 insurance premium assistance program identified in section 8509
17 (relating to health insurance premium assistance program) by
18 filing an election to be covered by a health insurance carrier
19 approved by the board and to participate in the health insurance
20 premium assistance program. Participation in the health
21 insurance premium assistance program shall begin upon the
22 effective date of the health insurance coverage provided by a
23 health insurance carrier approved by the board, but in no event
24 before the effective date of retirement.
25 § 9103. Annual inflation adjustment contribution.
26 (a) Payments by employers.--Beginning July 1, 2000, and
27 continuing annually thereafter, each employer identified in
28 section 8327 (relating to payments by employers) shall make
29 contributions to the Health Insurance Account of the Public
30 School Employees' Retirement Fund each quarter in an amount
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1 equal to .72% of the total compensation during the pay periods
2 in the preceding quarter for the employees who were members of
3 the Public School Employees' Retirement System during such
4 period, including members on activated military service leave,
5 subject to adjustment as provided in subsection (c).
6 (b) Reimbursement by Commonwealth.--For each school year
7 beginning with the 2000-2001 school year, each employer that is
8 a school entity shall be paid by the Commonwealth for
9 contributions paid under subsection (a) based upon school
10 service of active members of the system after June 30, 2000, as
11 follows:
12 (1) The Commonwealth shall pay each school entity for
13 contributions made to the fund based upon school service of
14 all active members, including members on activated military
15 service leave, whose effective dates of employment with their
16 school entities are after June 30, 1994, and who also had not
17 previously been employed by any school entity within this
18 Commonwealth an amount equal to one-half of the contributions
19 payable under subsection (a) as computed by the actuary and
20 certified by the board multiplied by the market value/income
21 aid ratio of the school entity. For no school year shall any
22 school entity receive less than the amount that would result
23 if the market value/income aid ratio as defined in section
24 2501(14.1) of the act of March 10, 1949 (P.L.30, No.14),
25 known as the Public School Code of 1949, was 0.50.
26 (2) The Commonwealth shall pay each school entity for
27 contributions made to the fund based upon school service of
28 all active members, including members on activated military
29 service leave, who are not described in paragraph (1), one-
30 half of the amount as computed by the actuary and certified
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1 by the board.
2 (3) School entities shall have up to five days after
3 receipt of the Commonwealth's portion of the employer's
4 liability to make payment to the fund.
5 (c) Minimum level of contributions.--
6 (1) If during any year commencing with the year that
7 begins July 1, 2001, the total compensation shall be less
8 than the total compensation from the previous year, the
9 percentage specified in subsection (a) shall be adjusted in
10 such a manner that the total employer contributions for
11 premium assistance under this section shall not be less than
12 the total contributions paid by the employers for premium
13 assistance for the previous year.
14 (2) Any adjustments to the percentages set forth in this
15 section shall be calculated by the actuary, certified by the
16 board and published as a notice in the Pennsylvania Bulletin.
17 The board's certification shall be final and not subject to
18 modification by the Secretary of the Budget.
19 (d) Collection of payments.--The board shall have the same
20 powers and duties to collect and receive all Commonwealth and
21 employer contributions and payments required under this part, as
22 those powers and duties set forth in Part IV (relating to
23 retirement for school employees).
24 CHAPTER 93
25 MISCELLANEOUS PROVISIONS
26 Sec.
27 9301. Status of program relative to Public School Employees'
28 Retirement Code.
29 9302. Construction of part.
30 9303. Initial funding of reserve account.
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1 § 9301. Status of program relative to Public School Employees'
2 Retirement Code.
3 (a) General rule.--The program shall be an approved health
4 insurance program for purposes of section 8505(i) (relating to
5 duties of board regarding applications and elections of members)
6 and shall be an approved insurance carrier for purposes of
7 section 8509 (relating to health insurance premium assistance
8 program).
9 (b) State guarantee.--The program shall not be subject to
10 the provisions of section 8531 (relating to State guarantee).
11 (c) Liability.--Neither the board, including its employees,
12 nor the assets of the Commonwealth or the Public School
13 Employees' Retirement Fund shall be liable for or used to pay
14 any expenses or claims incurred by the program, except as
15 otherwise provided by law.
16 § 9302. Construction of part.
17 (a) General rule.--No provision of this part shall be
18 construed as a cancellation of any existing health insurance
19 program operated by the board or referenced in section 32 of the
20 act of August 5, 1991 (P.L.183, No.23), entitled "An act
21 amending Titles 24 (Education) and 71 (State Government) of the
22 Pennsylvania Consolidated Statutes, further providing for the
23 Public School Employees' Retirement System and the State
24 Employees' Retirement System; adding and amending certain
25 definitions; further providing for membership in the systems,
26 for creditable nonschool and nonstate service and the purchase
27 of credit, for incentives for special early retirement, for
28 contributions to the retirement funds, for annuities and the
29 rights and duties of annuitants, for health insurance premium
30 assistance, for board membership and for the re-amortization and
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1 management of the retirement funds."
2 (b) Nature of rights.--Any termination or other modification
3 of the program, including, but not limited to, a change in
4 premium rates, benefit options or structure or insurance
5 providers, shall not give rise to any contractual rights or
6 claims by any eligible persons or any other person claiming an
7 interest, either directly or indirectly, in the program. No
8 provision of this part, nor any rule or regulation adopted
9 pursuant to this part, shall create in any person a contractual
10 right in that provision.
11 § 9303. Initial funding of reserve account.
12 For the purpose of providing the initial funding of the
13 reserve account established in section 8903(b) (relating to
14 Public School Retirees' Health Insurance Fund), the Commonwealth
15 shall make contributions into the reserve account of the fund in
16 an amount equal to .72% of the total compensation of all active
17 members during the period July 1, 1999, through June 30, 2000,
18 which amount shall be computed by the actuary and certified by
19 the board. The contributions required by this section shall be
20 paid on a quarterly basis beginning with the quarter ending
21 September 30, 1999. In the event the board does not administer
22 the group health insurance program authorized by this part on a
23 self-funded basis within five years of the effective date of
24 this part, then the remaining balance in the reserve fund shall
25 be returned by the board to the General Fund.
26 Section 4. All acts and parts of acts are repealed insofar
27 as they are inconsistent with this act.
28 Section 5. This act shall take effect immediately.
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