§ 3.87.060. Health reimbursement arrangement.

A.

Contributions by the municipality.

1.

The Municipality of Anchorage shall make a monthly contribution for the benefit of each member beginning with the first month in which the member becomes a member as described in section 3.87.040 of this chapter. Contributions shall end with the month in which the member dies. In the case of a member who is receiving a permanent disability retirement benefit under the police and fire retirement system, monthly contributions shall end with the earlier of the month in which the member dies or the month in which such disability retirement benefit ceases to be paid because the individual has been determined by the police and fire retirement board as no longer eligible to receive disability benefits. If and when such individual again qualifies as a member under section 3.98.040 of this chapter, monthly contributions will again commence under this subsection.

2.

The initial monthly contribution for the benefit of a member shall be $490.00. The municipality's monthly contribution for a member shall be adjusted each January 1, beginning with January 1, 1996, depending on the member's retirement age or service at appointment to retirement, whichever results in the greater annual adjustment, as provided in subsection A.4. of this section.

3.

For individuals who become members after January 1, 1995, the monthly contributions for the first year of membership in the program shall be determined as follows:

a.

For a member who retires with a normal, early or disability retirement, the monthly contribution for the first year of membership shall be equal to:

(i)

The monthly contribution that would have applied had the member retired on January 1, 1995, plus

(ii)

The applicable annual adjustment factors for the period beginning on January 1, 1995, and ending the first day of the calendar year in which the individual becomes a member.

b.

For a member who terminates employment with a deferred vested retirement benefit, the monthly contribution in the first year of membership shall be equal to the monthly contribution that was in effect for an employee with the same age who was appointed to retirement in the year that the deferred vested member separated from municipal service.

4.

The contribution amount shall be adjusted annually in accordance with the CPI factors described below:

Class	Retirement   Age	OR	Service at Retirement	Annual Adjustment
1.	60 or older		25 years	75 percent of medical CPI
2.	55—59			50 percent of medical CPI
3.	50—54		20—24 years	50 percent of medical CPI, with a maximum of 6 percent
4.	Less than 50		0—19 years	25 percent of medical CPI, with a maximum of 3 percent

 

"Medical CPI" means the annual percentage change in the medical components of the national consumer price index-W as measured by the index released for the end of the third calendar quarter by the Bureau of Labor Statistics.

The annual adjustment formula described above shall not be changed. Except as described in section 3.87.070, at no time shall the monthly contribution for the benefit of a member be less than the monthly contribution that was or would have been in effect with respect to the member on January 1, 1995.

5.

The municipality shall make an initial prefunding contribution to the trust of $2,000,000.00.

6.

If upon reaching the age of Medicare eligibility, a member is not eligible to participate in Medicare without paying the Medicare Part A Premium, the municipal contribution to the trust on behalf of that member will be increased by an amount equal to 50 percent of the Medicare Part A Premium that the member is required to pay for part A coverage, upon submission of proof of enrollment in Medicare.

B.

HRA account. A bookkeeping account shall be established for each member of the program. Each member's account shall be credited with the following amounts:

1.

The contribution by the municipality for the benefit of the member;

2.

A share of investment gains and losses of the trust described in section 3.87.030 of this chapter in such amounts as the board of trustees shall determine;

3.

A share of forfeitures arising under section 3.87.060G. of this chapter in such amounts as the board of trustees shall determine;

4.

A share of the expenses incurred by the board of trustees in the administration of the trust in such amounts as the board of trustees shall determine; and

5.

A share of any prefunded contributions to the trust made by the municipality in such amounts as the board of trustees shall determine.

6.

COBRA premiums.

A member's account shall be reduced by amounts used to pay for eligible medical expenses.

C.

Contributions, income, gains and assets to be held in trust. All contributions by the municipality, all income and gains on such contributions, and all other income, gains, and other assets funding the program shall be held in trust as described in section 3.87.030.

D.

Eligible medical expense. The term "eligible medical expenses" means those medical expenses eligible under section 213 of the Internal Revenue Code, but only to the extent that such coverage is eligible for the exclusion from income under section 106 of the United States Internal Revenue Code and benefits and reimbursements provided under such coverage are excludable from income under section 105(c) of the United States Internal Revenue Code. Expenses are not eligible unless they are incurred by the member, the member's spouse, and/or the member's dependents, as defined under section 152 of the United States Internal Revenue Code. Notwithstanding the preceding, expenses are not eligible to the extent that the member or member's spouse or dependents is/are not eligible for such coverage on account of the terms and conditions of such coverage and/or the entity providing such coverage. To the extent that the various conditions of this subsection are satisfied, eligible expenses shall include, but shall not be limited to, the following:

1.

The cost of coverage in the active municipal police or fire health insurance plan. Enrollment in such plan shall be subject to the restrictions in section 3.87.050 of this chapter.

2.

The cost of coverage under a health plan available on the open market, including for example a Medicare supplemental plan.

3.

The cost of coverage under a health plan available to the member through another employer.

4.

The cost of coverage under a health plan available to the member's spouse or dependents through such spouse's or dependents' employer(s).

5.

The cost of coverage under Medicare Part A and B.

6.

The cost of coverage under any other health plan that the board of trustees may decide to make available under the program.

7.

The cost of COBRA coverage for qualified beneficiaries.

8.

The cost of long-term care premiums.

E.

Qualified reimbursements.

1.

Reimbursements to the member (or surviving spouse or dependents) may be made only upon submission to the administrator of information adequate to substantiate that the member (or surviving spouse or dependent) has actually incurred and/or paid for expense, including a premium payment or contribution for the eligible coverage.

2.

The amounts paid for eligible medical expenses shall be deducted from the member's account.

3.

If a member ceases to receive a disability retirement benefit under the police and fire retirement system because the member is considered no longer eligible, such member will continue to be treated as a member solely for purposes of requesting qualified payments to the extent that amounts remain credited under the premium account.

4.

If a member dies while amounts remain credited under the member's premium account, the member's surviving spouse may request that qualified payments be made on his/her behalf to the extent that amounts remain credited under the premium account. However, the surviving spouse shall cease to be eligible to request qualified payments at such time as the surviving spouse is no longer eligible to receive benefits under the police and fire retirement system.

5.

If the member dies without a surviving spouse or if both the member and the surviving spouse die while amounts remain credited under the member's premium account, the member's eligible surviving dependents may request that qualified payments be made on his/her/their behalf to the extent that amounts remain credited under the premium account. However, surviving dependents shall cease to be eligible to request qualified payments at such time as the surviving dependents are no longer eligible to receive benefits under the police and fire retirement system.

6.

In the event that a member's permanent disability benefits are awarded retroactively, and the member enrolled in eligible health coverage (including municipal COBRA coverage) following separation from municipal employment, the member may claim reimbursement for any past premium payments from the funding program.

F.

Eligible employee benefit coverage. The term "eligible employee benefit coverage" shall mean coverage under any employee benefit plan, other than a health plan, that the board of trustees may, in its sole discretion, elect to treat as eligible employee benefit coverage under the program. However, in no case may the board of trustees cause coverage under any employee benefit plan to be treated as eligible employee benefit coverage unless such coverage and any reimbursements and benefits provided under such coverage are excludable from income under the United States Internal Revenue Code. An example of employee benefit coverage that the board of trustees may elect to treat as eligible employee benefit coverage is coverage and benefits under a group term life insurance plan that are excludable from income under sections 79 and 101 of the United States Internal Revenue Code.

G.

Forfeitures and account adjustments.

1.

Upon a member's death without a surviving spouse or surviving dependents, the member's HRA account balance shall be forfeited to the trust. If, after a member's death, the member's surviving spouse and/or surviving dependents are eligible to request qualified payments under the program, any amounts remaining in the member's HRA account when neither the surviving spouse nor any surviving dependent remains eligible to request qualified payments, whether by death or otherwise, shall be forfeited to the trust.

2.

The aggregate of all amounts forfeited shall, at the discretion of the board of trustees, either be used to pay the administrative expenses of the trust or be applied to pay for benefits.

H.

Special rule for members disabled in the line of duty.

1.

Any person meeting the definition of totally and permanently disabled as defined herein may irrevocably elect to a member of this program or may elect to be covered under subsections H.2. through 4 of this section.

2.

If the qualified member elects to be covered under subsections H.2. through 4 of this section, the monthly contributions described in subsection C of this section shall not be made for the benefit of a member who is totally and permanently disabled during the performance of his/her duties with the municipality. An employee of the municipality who is determined to be totally and permanently disabled by the state worker's compensation board shall presumptively be considered to have been totally and permanently disabled in the performance of his/her duties.

3.

In lieu of making monthly contributions described in subsection C of this section on behalf of members disabled in the line of duty, the municipality shall continue coverage for such members in the active police or fire health insurance plan and be responsible for paying the full premium cost for the member and the member's spouse and dependents.

4.

The municipality shall make the first premium payment for the month following appointment to retirement under the police and fire retirement system and ending with the month in which the member dies or the month in which the member is determined by the state worker's compensation board to be no longer totally and permanently disabled. If the member is receiving or becomes eligible for a normal, early or disability retirement benefit, he/she may requalify as a member in accordance with the rules of subsection A of this section. Should the member die with a surviving spouse and/or dependents, the municipality shall continue to make health plan premium payments on their behalf as long as they are eligible to receive a benefit from the police and fire retirement system.

5.

Members retired due to permanent occupational disability or reclassed as permanent occupational disability, as defined in chapter 3.85, shall be entitled to Class 1 benefits to remediate the diminution of benefits a member would have been entitled to if the member had continued in service until normal retirement age.

I.

Special rule for the spouse and dependents of a member suffering a line-of-duty death.

1.

In the event of a member's line-of-duty death, the municipality shall continue to provide the member's spouse with coverage in such member's active police or fire health insurance plan and shall pay the full cost of the health plan premium for the member's spouse and the member's eligible dependent children. The municipality shall make the first premium payment for the month following the member's line-of-duty death and shall continue to make premium payments as long as the spouse is eligible to receive a benefit from the police and fire retirement system.

2.

In the event of a member's line-of-duty death, the municipality shall continue to provide the member's eligible dependent children with coverage in such member's active police or fire health insurance plan and shall pay the full premium cost for those eligible dependent children. The municipality shall make the first premium payment for the month following the member's line-of-duty death and shall continue to make premium payments as long as such dependent children are eligible to receive a benefit from the police and fire retirement system.

J.

Eligible expense reimbursements. The health reimbursement arrangement shall reimburse members (and, as applicable, surviving spouses and dependents) for medical expenses eligible under Section 213 of the Internal Revenue Code, including eligible long-term care premiums, only if such expenses are not reimbursed under any other health plan. The program will not reimburse an expense incurred before the date the HRA is in existence, nor reimburse an expense that is incurred before the date an employee first becomes enrolled in the HRA. The maximum dollar amount reimbursable shall not exceed the balance in the member's account.

K.

Maximum amount of reimbursement available. A member may be reimbursed for medical expenses incurred while the member was enrolled in the HRA account up to the balance currently credited to the member's account.

L.

Carry forward. Any remaining amounts in the HRA account at the end of the plan year shall be carried forward to subsequent plan years.

M.

Death of the member. Subject to the provisions of section 3.87.060E.4, upon the death of a member, no further contributions to the HRA shall be made. Medical expenses incurred by the member's surviving spouse and dependents after the date of death of the member are eligible for reimbursement to the extent funds remain in the member's HRA account unless COBRA coverage is elected. If COBRA coverage is elected, the qualified beneficiary will be billed for the applicable maximum including the administrative fee for the subsequent period of COBRA coverage.

N.

Federal tax treatment. Coverage under the HRA is intended to qualify as health coverage that is excludable from income under section 106 of the United States Internal Revenue Code and expense reimbursements under the plan are intended to qualify as excludable from income under section 105(b) of the United States Internal Revenue Code. If a member's expense reimbursements are determined not to qualify for tax exemptions, and if a change in the United States Internal Revenue Code should cause expense reimbursements to cease to be excludable from income under section 106 or 105(b) of the United States Internal Revenue Code, the board of trustees may terminate the Program or the plan or treat such reimbursements as taxable income to the member.

(AO No. 94-222(S-1), § 1, 12-28-94; AO No. 96-158(S), § 2, 1-1-96; AO No. 97-104, § 3, 8-19-97; AO No. 2003-141, § 1, 10-21-03; AO No. 2005-153, § 3, 11-8-05; AO No. 2008-100(S), § 3, 1-10-10)

Note— Formerly §§ 3.87.050 and 3.87.070.