AS Title 39, Chapter 30: Insurance and Supplemental Employee Benefits

Article 1. Old Age and Survivors Insurance. Chapter 30. Insurance and Supplemental Employee Benefits. Sec. 39.30.010. Federal territorial agreement. (a) The director of finance, with the approval of the governor, may on behalf of the territory enter into an agreement with the Federal Security Administrator, consistent with AS 39.30.010 — 39.30.080, for the purpose of extending the benefits of the federal old age and survivors insurance system to employees of the territory or a political subdivision with respect to services specified in the agreement that constitute employment. (b) The agreement may contain provisions relating to coverage, benefits, contributions, effective date, modification and termination of the agreement, administration, and other appropriate provisions that the parties agree upon, but, except as may be otherwise required under the Social Security Act as to the services to be covered, the agreement shall provide in effect that (1) benefits will be provided for employees whose services are covered by the agreement, and their dependents and survivors, on the same basis as though the services constituted employment within the meaning of 42 U.S.C. 401 — 433 (Title II, Social Security Act); (2) the territory will pay to the secretary of the treasury, as may be prescribed under 42 U.S.C. 301 — 1397f (Social Security Act), contributions with respect to wages equal to the sum of the taxes that would be imposed by 26 U.S.C. 3101 and 3111 (Federal Insurance Contributions Act) if the services covered by the agreement constituted employment within the meaning of that act; (3) the agreement shall be effective with respect to services in employment covered by the agreement performed from the date specified in it or, as to services to which the agreement is extended by a modification to it, from the date specified in the modification; (4) all services that constitute employment and are performed in the employ of the territory by employees of the territory shall be covered by the agreement; and (5) all services which (A) constitute employment, (B) are performed in the employ of a political subdivision of the territory, and (C) are covered by a plan which conforms to the agreement and is approved as set out in AS 39.30.030 shall be covered by the agreement. Sec. 39.30.020. Contributions by employees. (a) An employee whose services are covered by an agreement under AS 39.30.010 shall pay for the period of coverage, into the state treasury, contributions equal to the amount of tax that would be imposed by 26 U.S.C. 3101 (Federal Insurance Contributions Act) if the services constituted employment within the meaning of that Act. (b) The contribution shall be collected by deducting the amount of the contribution from wages. Failure to make deduction does not relieve the employee from liability for the contribution. (c) If more or less than the correct amount of the contribution is paid or deducted, an adjustment or, if adjustment is impracticable, a refund shall be made without interest, in the manner prescribed by the department. Sec. 39.30.030. Plans for coverage of employees of political subdivisions. (a) A political subdivision of the state may submit for approval by the department a plan for extending the benefits of 42 U.S.C. 401 — 433 (Title II, Social Security Act) to its employees. A plan and an amendment to the plan shall be approved by the department if it finds that the plan or amendment (1) conforms with the requirements prescribed in regulations of the department; (2) conforms with the requirements of the Social Security Act and with the agreement entered into under AS 39.30.010 ; (3) provides that services that constitute employment and are performed in the employ of the political subdivision by employees are covered by it; (4) specifies the source from which the funds necessary to make the payments required by (d) and (e) of this section are expected to be derived and contains reasonable assurance that the source will be adequate for the purpose; (5) provides for those methods of administration of the plan by the political subdivision that the department finds are necessary for the proper and efficient administration of the plan; (6) provides that the political subdivision will make reports that the department requires, and will comply with requirements of the department or the Federal Security Administrator to assure the correctness and verification of the reports; and (7) authorizes the department to terminate the plan in its entirety in its discretion if it finds that there is a failure to comply substantially with a provision in the plan at the time and upon the notice and conditions provided by regulations of the department that are consistent with the Social Security Act. (b) The department may not refuse to approve a plan submitted by a political subdivision under (a) of this section, and may not terminate an approved plan, without reasonable notice and opportunity for hearing to the political subdivision affected. (c) A political subdivision that has an approved plan shall pay contributions into the state treasury at the rates specified in the agreement and at the time which the department prescribes by regulation. (d) A political subdivision required to make payments under (c) of this section may, in consideration of the employee's retention in, or entry into, employment after March 23, 1951, impose upon each of its employees, as to services that are covered by an approved plan, a contribution with respect to the employee's wages, not exceeding the amount of tax that would be imposed by 26 U.S.C. 3101 (Federal Insurance Contributions Act) if the services constituted employment within the meaning of that act, and may deduct the amount of this contribution from the employee's wages. Contributions so collected shall be paid into the state treasury in partial discharge of the liability of the political subdivision or instrumentality under (c) of this section. Failure to deduct the contribution does not relieve the employee or employer of liability for it. (e) A delinquent payment due under (c) of this section, with interest at the rate of six percent a year, may be recovered by action against the political subdivision liable for it or may, at the request of the department, be deducted from any other money payable to the political subdivision by a department or agency of the state. Sec. 39.30.040. Deposits and withdrawals. (a) Unless otherwise provided by law, there shall be deposited in the state treasury in trust all contributions collected under AS 39.30.010 — 39.30.080. (b) The department has power, authority, and jurisdiction over this trust and may perform all acts whether or not specifically designated that are necessary to the administration of this trust. (c) This trust shall be used and administered exclusively for the purpose of AS 39.30.010 — 39.30.080. Withdrawals may be made only for (1) payment of amounts required to be paid to the secretary of the treasury by an agreement entered into under AS 39.30.010 ; (2) payment of the refunds provided for in AS 39.30.020 (c); and (3) refunds of overpayments, not otherwise adjustable, made by a political subdivision or instrumentality. Sec. 39.30.050. Administrative costs. The department shall collect from each participating political subdivision its respective pro rata share of the expenses incurred in the administration of AS 39.30.010 — 39.30.080. The amounts collected from participating political subdivisions, together with money appropriated by the state for covering the state's share of administrative costs, shall be deposited in an FICA administration fund and are not allocable to any other purpose. Expenditures from the FICA administration fund shall be included in the governor's budget for each fiscal year and are subject to appropriation by the legislature. At the time of preparation of the governor's annual budget the department shall review the FICA administration fund and adjust the rate of assessment on political subdivisions so as to prevent the accumulation of more money than is needed to administer AS 39.30.010 — 39.30.080. Sec. 39.30.060. Regulations. The department shall adopt and publish the regulations not inconsistent with AS 39.30.010 — 39.30.080 that it finds necessary or appropriate to the efficient administration of its functions under AS 39.30.010 — 39.30.080. Sec. 39.30.070. Studies and reports. [Repealed, § 35 ch 126 SLA 1994.] Sec. 39.30.080. Definitions. In AS 39.30.010 — 39.30.080, (1) “department” means the Department of Administration; (2) “employee” includes an officer of a political subdivision of the state; (3) “employment” means any service performed by an employee of a political subdivision of the state, except (A) service that in the absence of an agreement entered into under AS 39.30.010 — 39.30.080 would constitute “employment” as defined in the Social Security Act; or (B) service that under the Social Security Act may not be included in an agreement between the state and the Federal Security Administrator entered into under AS 39.30.010 — 39.30.080; (4) “Federal Insurance Contributions Act” means subchapter A of chapter 9 of the Federal Internal Revenue Code as amended; (5) “Federal Security Administrator” includes an individual to whom the Federal Security Administrator has delegated any functions under the Social Security Act with respect to coverage under that act of employees of states and territories and their political subdivisions; (6) “political subdivision” includes an instrumentality of the state or of a political subdivision, or of the state and a political subdivision, but only if the instrumentality is a juristic entity legally separate and distinct from the state or the political subdivision and only if its employees are not, by virtue of their relation to the juristic entity, employees of the state or the political subdivision; (7) “Social Security Act” means the Act of Congress approved August 14, 1935, chapter 531, 49 Stat. 620, cited as the “Social Security Act,” including regulations and requirements issued under it, and its amendments; (8) “wages” means remuneration for employment, including the cash value of remuneration paid in any medium other than cash, except that “wages” does not include that part of remuneration that, even if it were for “employment” within the meaning of the Federal Insurance Contributions Act, would not constitute “wages” within the meaning of that Act. Article 2. Group Life and Health Insurance. Sec. 39.30.090. Procurement of group insurance. (a) The Department of Administration may obtain a policy or policies of group insurance covering state employees, persons entitled to coverage under AS 14.25.168 , 14.25.480, AS 22.25.090 , AS 39.35.535 , 39.35.880, or former AS 39.37.145 , employees of other participating governmental units, or persons entitled to coverage under AS 23.15.136 , subject to the following conditions: (1) a group insurance policy shall provide one or more of the following benefits: life insurance, accidental death and dismemberment insurance, weekly indemnity insurance, hospital expense insurance, surgical expense insurance, dental expense insurance, audiovisual insurance, or other medical care insurance; (2) each eligible employee of the state, the spouse and the unmarried children chiefly dependent on the eligible employee for support, and each eligible employee of another participating governmental unit shall be covered by the group policy, unless exempt under regulations adopted by the commissioner of administration; (3) a governmental unit may participate under a group policy if (A) its governing body adopts a resolution authorizing participation and payment of required premiums; (B) a certified copy of the resolution is filed with the Department of Administration; and (C) the commissioner of administration approves the participation in writing; (4) in procuring a policy of group health or group life insurance as provided under this section or excess loss insurance as provided in AS 39.30.091 , the Department of Administration shall comply with the dual choice requirements of AS 21.86.310 , and shall obtain the insurance policy from an insurer authorized to transact business in the state under AS 21.09 , a hospital or medical service corporation authorized to transact business in this state under AS 21.87 , or a health maintenance organization authorized to operate in this state under AS 21.86 ; an excess loss insurance policy may be obtained from a life or health insurer authorized to transact business in this state under AS 21.09 or from a hospital or medical service corporation authorized to transact business in this state under AS 21.87 ; (5) the Department of Administration shall make available bid specifications for desired insurance benefits or for administration of benefit claims and payments to (A) all insurance carriers authorized to transact business in this state under AS 21.09 and all hospital or medical service corporations authorized to transact business under AS 21.87 who are qualified to provide the desired benefits; and (B) insurance carriers authorized to transact business in this state under AS 21.09 , hospital or medical service corporations authorized to transact business under AS 21.87 , and third-party administrators licensed to transact business in this state and qualified to provide administrative services; the specifications shall be made available at least once every five years; the lowest responsible bid submitted by an insurance carrier, hospital or medical service corporation, or third-party administrator with adequate servicing facilities shall govern selection of a carrier, hospital or medical service corporation, or third-party administrator under this section or the selection of an insurance carrier or a hospital or medical service corporation to provide excess loss insurance as provided in AS 39.30.091 ; (6) if the aggregate of dividends payable under the group insurance policy exceeds the governmental unit's share of the premium, the excess shall be applied by the governmental unit for the sole benefit of the employees; (7) a person receiving benefits under AS 14.25.110 , AS 22.25 , AS 39.35 , or former AS 39.37 may continue the life insurance coverage that was in effect under this section at the time of termination of employment with the state or participating governmental unit; (8) a person electing to have insurance under (7) of this subsection shall pay the cost of this insurance; (9) for each permanent part-time employee electing coverage under this section, the state shall contribute one-half the state contribution rate for permanent full-time state employees, and the permanent part-time employee shall contribute the other one-half; (10) a person receiving benefits under AS 14.25 , AS 22.25 , AS 39.35 , or former AS 39.37 may obtain auditory, visual, and dental insurance for that person and eligible dependents under this section; the level of coverage for persons over 65 shall be the same as that available before reaching age 65 except that the benefits payable shall be supplemental to any benefits provided under the federal old age, survivors, and disability insurance program; a person electing to have insurance under this paragraph shall pay the cost of the insurance; the commissioner of administration shall adopt regulations implementing this paragraph; (11) a person receiving benefits under AS 14.25 , AS 22.25 , AS 39.35 , or former AS 39.37 may obtain long-term care insurance for that person and eligible dependents under this section; a person who elects insurance under this paragraph shall pay the cost of the insurance premium; the commissioner of administration shall adopt regulations to implement this paragraph; (12) each licensee holding a current operating agreement for a vending facility under AS 23.15.010 — 23.15.210 shall be covered by the group policy that applies to governmental units other than the state. (b) In this section, (1) “eligible employee” means (A) an employee who has served in permanent full-time or part-time employment with the same governmental unit for 30 days or more, except an emergency or temporary employee; (B) an elected or appointed official of a governmental unit, effective upon taking the oath of office; and (C) a contractual employee of the legislative branch of state government under AS 24.10.060 (f) if the employee's personal services contract provides that the employee is entitled to coverage; (2) “governmental unit” means the state, a municipality, school district, or other political subdivision of the state, and the North Pacific Fishery Management Council; (3) “insurance,” “insurance carrier,” and “insurance policy” include health care services, health care service contractors and contracts, and health maintenance organizations. Sec. 39.30.091. Authorization for self-insurance and excess loss insurance. Notwithstanding AS 21.86.310 or AS 39.30.090 , the Department of Administration may provide, by means of self-insurance, one or more of the benefits listed in AS 39.30.090 (a)(1) for state employees eligible for the benefits by law or under a collective bargaining agreement and for persons receiving benefits under AS 14.25 , AS 22.25 , AS 39.35 , or former AS 39.37 , and their dependents. The department shall procure any necessary excess loss insurance under AS 39.30.090 . Sec. 39.30.095. Group health and life benefits fund. (a) The commissioner of administration shall establish the group health and life benefits fund as a special account in the general fund to provide for group life and health insurance under AS 39.30.090 and 39.30.160 or for self-insurance arrangements under AS 39.30.091 . The commissioner shall maintain accounts and records for the fund. The fund consists of employer contributions, employee contributions, appropriations from the legislature, and income earned on investment of the fund as provided in (d) of this section. (b) After obtaining the advice of an actuary, the commissioner of administration shall determine the amount necessary to provide benefits under AS 39.30.090 , 39.30.091, and 39.30.160 and, subject to (e) of this section, shall set the rate of employer contribution and employee contribution, if any. With money in the fund, the commissioner of administration shall pay premiums, claims, and administrative costs required under the insurance policies in effect under AS 39.30.090 and 39.30.160, or required under self-insurance arrangements in effect under AS 39.30.091 . (c) The commissioner of administration or the designee of the commissioner is administrator of the fund. The commissioner may contract with (1) an insurer authorized to transact business in this state under AS 21.09 , or a hospital or medical service corporation authorized to transact business in this state under AS 21.87 to reimburse the state for the cost of administering group insurance provided under AS 39.30.090 and 39.30.160; and (2) a life or health insurer authorized to transact business in the state under AS 21.09 , a hospital or medical service corporation authorized to transact business in this state under AS 21.87 , or a third-party administrator licensed to transact business in this state for the administration of benefit claims and payments under AS 39.30.091 . (d) If the commissioner of administration determines that there is more money in the fund than the amount needed to pay premiums, benefits, and administrative costs for the current fiscal year, the surplus, or so much of it as the commissioner of administration considers advisable, may be invested by the commissioner of revenue in the same manner as retirement funds are invested under AS 37.10.220 . (e) Notwithstanding (b) of this section, the rate of employer contribution to provide hospital, surgical, dental, audiovisual, and other medical care benefits under AS 39.30.091 is $515 monthly beginning July 1, 2000; $575 monthly beginning July 1, 2001; and $630 monthly beginning July 1, 2002, for the following employees and officials: (1) employees in the executive branch of the state government, including the governor and lieutenant governor, who are not members of a collective bargaining unit established under the authority of AS 23.40.070 — 23.40.260 (Public Employment Relations Act); (2) officials and employees of the legislative branch of state government under AS 24 ; (3) employees in the judicial branch of state government, including magistrates and other judicial officers, who are not members of a collective bargaining unit established under AS 23.40.070 — 23.40.260 (Public Employment Relations Act). (f) In this section, “fund” means the group health and life benefits fund. Sec. 39.30.096. Accounting and disposition of fees. [Repealed, § 28 ch 90 SLA 1991.] Sec. 39.30.097. Alaska retiree health care trusts. (a) The commissioner of administration is authorized to prefund medical benefits provided by AS 14.25.168 , AS 22.25.090 , and AS 39.35.535 by establishing an irrevocable trust that is exempt from federal income tax under 26 U.S.C. 115 and subject to the applicable financial reporting, disclosure, and actuarial requirements of the Governmental Accounting Standards Board. (b) The commissioner of administration is authorized to prefund medical benefits provided by AS 14.25.480 , AS 39.30.300 , and AS 39.35.880 by establishing an irrevocable trust that is exempt from federal income tax under 26 U.S.C. 115 and subject to the applicable financial reporting, disclosure, and actuarial requirements of the Governmental Accounting Standards Board. (c) The plans and assets of the Alaska retiree health care trusts shall be under the governance and investment authority of the Alaska Retirement Management Board, which shall serve as trustee of the trust as provided in AS 37.10.210 . The commissioner of administration or the commissioner's designee shall serve as administrator of the Alaska retiree health care trusts. (d) All employer contributions, appropriations, earnings, and reserves for the payment of retiree medical obligations shall be credited to the retiree health care trusts. The prefunded amounts shall be available without fiscal year limitations for retiree medical benefits and administration costs. The amounts remaining in the trusts, if any, after retiree medical benefits and administration costs have been paid in any year shall be retained in the trusts for future payments until the satisfaction of all employer liabilities under the trusts for retiree medical benefits. All prefunded amounts shall be used solely for the payment of retiree medical benefits and administration costs and for no other purpose. (e) The assets of the Alaska retiree health care trusts may be pooled, for investment purposes, with assets of the retirement systems, so long as such assets are accounted for separately. Sec. 39.30.098. Regulations. The commissioner of administration may adopt regulations to implement AS 39.30.090 — 39.30.097. Regulations adopted by the commissioner under this section relate to the internal management of state agencies, and their adoption is not subject to AS 44.62 (Administrative Procedure Act). Sec. 39.30.100. [Renumbered as AS 39.30.090 (b).] Article 3. Special Hazard Insurance. Sec. 39.30.130. Special hazard insurance. Upon the request of any state department, the Department of Administration may procure insurance, in addition to workers' compensation insurance, for employees of the department against accidental death or dismemberment occasioned by special hazards in connection with their employment. Article 4. Supplemental Employee Benefits on Withdrawal from Social Security. Sec. 39.30.150. Contributions. (a) In place of contributions to the federal social security system that would have been required on behalf of an employee had the participating employer belonged to the social security system, the participating employer shall contribute an amount equal to 6.13 percent of the wages of the employee up to the taxable wage base then in effect in the social security system. This contribution shall be paid into an individual employee annuity account in the Department of Administration under the terms of the State of Alaska Supplemental Annuity Plan. The department shall pay 6.13 percent of the wages of the employee up to the taxable wage base then in effect in the social security system into the individual employee annuity account established under this subsection. This wage reduction shall be treated as an employer contribution under 26 U.S.C. 414(h)(2). All costs of establishing and administering the programs established under AS 39.30.150 — 39.30.180 shall be paid from the contributions made to the individual employee annuity accounts under this section. (b) Employees of the division of marine transportation included in AS 39.35.095 — 39.35.680 through the process of collective bargaining under AS 39.35.680 (22)(D) may, under the terms of a collective bargaining agreement, utilize contributions made under (a) of this section on their behalf to offset the costs of inclusion in the public employees' retirement system; however, (1) the state is placed under no obligation to continue making contributions under this section if the state resumes participation in the federal social security system; (2) the bargaining agreement must provide a mechanism for satisfying any residual liabilities that might exist if the state resumes participation in the federal social security system; and (3) funds contributed under (a) of this section on behalf of employees who are not covered by maritime union contracts may not be obligated or expended to pay any costs associated with the inclusion of marine transportation employees in AS 39.35.095 — 39.35.680. (c) An employee may voluntarily elect additional wage reductions to be paid into special individual employee benefit accounts in the Department of Administration. Money in these accounts may only be used to purchase benefits selected by the employee under the supplemental benefits plan established by the administrator. Sec. 39.30.151. Administrator. The commissioner of administration or the commissioner's designee is the administrator of the system. Sec. 39.30.153. Repayment of contributions. Upon termination of employment the amount held on behalf of a terminating employee in the employee's individual employee annuity account shall be paid to the employee under the terms of the State of Alaska Supplemental Annuity Plan. Sec. 39.30.154. Powers and duties of the administrator. The administrator has the same powers and duties with regard to the plan as those set out in AS 14.25.003 and 14.25.004. Sec. 39.30.155. Management and investment of fund. The Alaska Retirement Management Board is the fiduciary of the fund and has the same powers and duties under this section in regard to the fund as are provided under AS 37.10.220 . Sec. 39.30.160. Benefits. (a) The Department of Administration shall, in accordance with policies prescribed by regulations adopted by the commissioner, provide to employees for whom special individual employee benefit accounts are established under AS 39.30.150 (c) the following benefit options: (1) supplemental health benefits; (2) supplemental death benefits; (3) supplemental disability benefits; and (4) supplemental dependent care benefits. (b) An employee may select the types and amounts of supplemental benefits to be purchased with the money deposited in the employee's special individual employee benefit accounts under AS 39.30.150 . The selection for employees described in AS 39.30.150 (a) must be from the benefit options listed in (a) of this section. (c) [Repealed, § 9 ch 55 SLA 1988.] (d) [Repealed, § 40 ch 146 SLA 1980.] (e) Regulations adopted by the commissioner implementing AS 39.30.150 and this section are not subject to AS 44.62 (Administrative Procedure Act). Sec. 39.30.162. Safeguard of money. (a) Except as provided in the State of Alaska Supplemental Annuity Plan, amounts held on behalf of, or payable to, an employee or other person who is or who might become eligible for benefits under the plan are not subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge of any kind, either voluntary or involuntary, before being received by the person entitled to the amount under the terms of the plan. An attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of a right to amounts held under the plan is void. (b) Except as provided in AS 09.38.065 , amounts held on behalf of, or payable to, an employee or other person who is or who might become eligible for benefits under the plan are exempt from garnishment, execution, or levy. Sec. 39.30.165. Appeals. A final decision made under AS 39.30.150 — 39.30.180 is subject to appeal under AS 44.64 . Sec. 39.30.170. Participation in program. (a) An employer may become a participating employer in the employee benefits program under AS 39.30.150 — 39.30.180, if (1) the employer participates as an employer in the public employees' retirement system under AS 39.35 ; and (2) the employer (A) is eligible for membership in but has never elected to become a member of the federal social security system; or (B) withdraws from membership in the federal social security system. (b) In order to become a participating employer, the employer shall file a request with the commissioner. The request may be made only after adoption of a resolution by the legislative body of a municipality, if the employer is a municipality, or by the board of directors, if the employer is a public organization, and after approval of the resolution by the official required by law to approve the resolution. A certified copy of the resolution shall be filed with the commissioner. (c) The commissioner shall approve the request if the commissioner finds that the employer has never participated in the federal social security system or has withdrawn from participation in the federal social security system. (d) The employer may begin participation as a participating employer covered by AS 39.30.150 — 39.30.180 on the date designated by the commissioner. Sec. 39.30.175. Investment of benefit program receipts. (a) The board is the fiduciary of the mandatory receipts, under AS 39.30.150 (a), of the employee benefits program established under AS 39.30.150 — 39.30.180 and has the same powers and duties concerning the management and investment in regard to those receipts as are provided under AS 37.10.220 . (b) The board may provide a range of investment options and permit a participant or beneficiary of the program to exercise control over the assets in the individual employee annuity account established under AS 39.30.150 (a). If the board offers investment options, and if a participant or beneficiary exercises control over the assets in the individual employee annuity account, (1) the participant or beneficiary is not considered a fiduciary for any reason on the basis of exercising that control; and (2) a person who is otherwise a fiduciary is not liable under this section for any loss, or by reason of any breach, that results from the individual's exercise of control. (c) If the board is considering entering into a contract or modifying an existing contract concerning the management or investment of the mandatory receipts of the supplemental employee benefits program, the board shall consult with the commissioner of administration before making a decision on the issue. (d) The board shall develop a contingency plan that addresses the board's response to possible future investment problems. (e) Except to the extent clearly set out in the terms of the plan document offered by the employer to the employee, the employer is not liable to the employee for investment losses if the prudent investment standard has been met. (f) [Repealed, § 132 ch 9 FSSLA 2005.] Sec. 39.30.180. Definitions. In AS 39.30.150 — 39.30.180, (1) “board” means the board of trustees of the Alaska Retirement Management Board established under AS 37.10.210 ; (2) “commissioner” means the commissioner of the Department of Administration; (3) “participating employer” means (A) the State of Alaska; and (B) an employer (i) who is an employer as defined in AS 39.35.680 ; (ii) who has never participated in or has withdrawn from participation in the federal social security system; and (iii) whose participation in the supplemental employee benefit program has been approved by the commissioner. Article 5. State of Alaska Teachers' and Public Employees' Retiree Health Reimbursement Arrangement Plan. Sec. 39.30.300. State of Alaska Teachers' and Public Employees' Retiree Health Reimbursement Arrangement Plan established. The State of Alaska Teachers' and Public Employees' Retiree Health Reimbursement Arrangement Plan is established for teachers who first become members of the defined contribution plan of the teachers' retirement system under AS 14.25.310 — 14.25.590 on or after July 1, 2006, and employees of the state, political subdivisions of the state, and public organizations of the state who first become members of the defined contribution plan of the public employees' retirement system under AS 39.35.700 — 39.35.990 on or after July 1, 2006. Sec. 39.30.310. Purpose and effective date. (a) The purpose of the plan is to allow medical care expenses to be reimbursed from individual savings accounts established for eligible persons. (b) The plan becomes effective July 1, 2006, at which time contributions by employers begin. Sec. 39.30.320. Attorney general. The attorney general of the state is the legal counsel for the plan and shall advise the administrator and represent the plan in a legal proceeding. Sec. 39.30.330. Administrator. The commissioner of administration or the commissioner's designee is the administrator of the plan. Sec. 39.30.335. Appeals. A final decision made under AS 39.30.300 — 39.30.495 is subject to appeal under AS 44.64 . Sec. 39.30.340. Powers and duties of the administrator. The administrator shall establish a teachers' and public employees' retiree health reimbursement arrangement plan trust fund in which the assets of the plan shall be deposited and held. The retiree health reimbursement arrangement plan trust fund may be a sub-trust of the Alaska retiree health care trust established under AS 39.30.097 (b). The administrator has the same powers and duties with regard to the plan and the trust fund as provided in AS 14.25.003 and 14.25.004. Sec. 39.30.350. Employer contribution fund. The fund established under AS 39.30.340 is an employer contribution fund. The value of the fund reflects employer contributions, expenses, and investment gains and losses. Employee contributions to the fund are not permitted. Sec. 39.30.360. Management and investment of the fund. The Alaska Retirement Management Board is the fiduciary of the fund and has the same powers and duties under this section in regard to the fund as are provided under AS 37.10.220 . Sec. 39.30.370. Contributions by employers. For each member of the plan, an employer shall contribute to the teachers' and public employees' retiree health reimbursement arrangement plan trust fund an amount equal to three percent of the average annual compensation of all employees of all employers in the teachers' retirement system and public employees' retirement system. The administrator shall maintain a record for each member to account for employer contributions on behalf of that member. The board shall establish by regulation the rate of interest to be applied annually to the amount in a member's individual account. Sec. 39.30.380. Termination of employment. A person who terminates employment before meeting the eligibility requirements of AS 14.25.470 or AS 39.35.870 loses any right to the contributions made on behalf of the person to the teachers' and public employees' retiree health reimbursement arrangement trust fund. If a person returns to employment with a participating employer by December 31 of the year in which the person reaches 65 years of age, the person's account balance shall be restored in the amount recorded on the date of termination from the trust, adjusted for inflation at the rate of the Consumer Price Index for Anchorage, Alaska. The earlier period of employment with a participating employer shall be credited toward eligibility for medical benefits. Sec. 39.30.390. Eligibility and reimbursement. Persons who meet the eligibility requirements of AS 14.25.470 and AS 39.35.870 are eligible for reimbursements from the individual account established for a member under the plan, except members do not have to retire directly from the system. A person who is the dependent child of an eligible member is eligible for reimbursements if the eligible member and surviving spouse have both died so long as the person meets the definition of dependent child. Sec. 39.30.400. Benefits payable from the individual account. (a) The administrator may deduct the cost of monthly premiums from the individual account for retiree major medical insurance on behalf of an eligible person who elected retiree major medical insurance under AS 14.25.480 or AS 39.35.880 . (b) Upon application of an eligible person, the administrator shall reimburse to the eligible person the costs for medical care expenses as defined in 26 U.S.C. 213(d). Reimbursement is limited to the medical expenses of (1) an eligible member, the spouse of an eligible member, and the dependent children of an eligible member; or (2) a surviving spouse and the dependent children of an eligible member dependent on the surviving spouse. (c) When the member's individual account balance is exhausted, the insurance premium deductions under (a) of this section and the reimbursement of medical care expenses under (b) of this section end. (d) If all eligible persons die before exhausting the member's individual account, the account balance shall revert to the plan. Sec. 39.30.410. Exemption from taxation and process. (a) Contributions and other amounts held in the plan on behalf of a member or other person who is or may become eligible for benefits under the plan may be used only to reimburse eligible medical expenses, are exempt from Alaska state and municipal taxes and federal taxes to the extent allowed under the Internal Revenue Code, and are not subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge of any kind, either voluntary or involuntary, before they are received by the person entitled to the amount under the terms of the plan. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to amounts accrued in the plan is void. However, a member's right to receive benefits may be assigned (1) under a qualified domestic relations order; or (2) to a trust or similar legal device that meets the requirements for a Medicaid-qualifying trust under AS 47.07.020 (f) and 42 U.S.C. 1396p(d)(4). (b) Notwithstanding AS 09.38.065 , contributions and other amounts held in the plan and benefits payable under this plan are exempt from garnishment, execution, or levy. Sec. 39.30.420. Amendment and termination of plan. (a) The state has the right to amend the plan at any time and from time to time, in whole or in part, including the right to make retroactive amendments referred to in 26 U.S.C. 401(b). (b) The plan administrator may not modify or amend the plan retroactively in such a manner as to reduce the benefits of any member accrued to date under the plan by reason of contributions made before the modification or amendment except to the extent that the reduction is permitted by the Internal Revenue Code. (c) The state may, in its discretion, terminate the plan in whole or part at any time without liability for the termination. If the plan is terminated, all investments remain in force until all individual accounts have been completely distributed under the plan, and, after all plan liabilities are satisfied, excess assets revert to the employer. (d) Any contribution made by an employer to the plan because of a mistake of fact must be returned to the employer by the administrator within one year after the contribution or discovery, whichever is later. Sec. 39.30.430. Exclusive benefit. (a) The corpus or income of the assets held in trust as required by the plan may not be diverted or used for other than the exclusive benefit of the participants. (b) The assets of the plan may not be used to pay premiums or contributions of the employer under another plan maintained by the employer. Sec. 39.30.440. Report to the Legislature on Health Care Cost-Saving Measures. The Department of Administration shall provide an annual report to the legislature regarding the cost-saving measures it has implemented by regulation appropriate to current and future retirees in the health care system. Sec. 39.30.495. Definitions. Unless the context requires otherwise, in AS 39.30.300 — 39.30.495, (1) “administrator” means the commissioner of administration or the commissioner's designee; (2) “board” means the Alaska Retirement Management Board established under AS 37.10.210 ; (3) “compensation” has the meaning given in AS 14.25.590 ; (4) “dependent child” has the meaning given in AS 39.35.680 ; (5) “eligible person” means a person who meets the eligibility requirements of AS 14.25.470 or AS 39.35.870 ; (6) “employer” has the meaning given in AS 14.25.590 for employers of teachers in the defined contribution plan established in AS 14.25.310 — 14.25.590 and has the meaning given in AS 39.35.990 for employers of public employees in the defined contribution plan established in AS 39.35.700 — 39.35.990; (7) “fund” means the assets of the teachers' and public employees' retiree health reimbursement arrangement plan trust fund; (8) “individual account” means the record established by the administrator for individual employees under the teachers' and public employees' retiree health reimbursement arrangement plan; (9) “member” means a member of the defined contribution plan of the teachers' retirement system in AS 14.25.310 — 14.25.590 or a member of the public employees' retirement system in AS 39.35.700 — 39.35.990; (10) “plan” means the State of Alaska Teachers' and Public Employees' Retiree Health Reimbursement Arrangement Plan established in AS 39.30.300 ; (11) “qualified domestic relations order” has the meaning given in AS 14.25.220 .