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HB 395: "An Act relating to participation of certain peace officers and firefighters in the defined benefit and defined contribution plans of the Public Employees' Retirement System of Alaska; relating to eligibility of peace officers and firefighters for medical benefits; and providing for an effective date."

00                             HOUSE BILL NO. 395                                                                          
01 "An Act relating to participation of certain peace officers and firefighters in the defined                             
02 benefit and defined contribution plans of the Public Employees' Retirement System of                                    
03 Alaska; relating to eligibility of peace officers and firefighters for medical benefits; and                            
04 providing for an effective date."                                                                                       
05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:                                                                
06    * Section 1. AS 37.10.220(a) is amended to read:                                                                   
07            (a)  The board shall                                                                                         
08                 (1)  hold regular and special meetings at the call of the chair or of at                                
09       least five members; meetings are open to the public, and the board shall keep a full                              
10       record of all its proceedings;                                                                                    
11                 (2)  after reviewing recommendations from the Department of                                             
12       Revenue, adopt investment policies for each of the funds entrusted to the board;                                  
13                 (3)  determine the appropriate investment objectives for the defined                                    
14       benefit plans established under the teachers' retirement system under AS 14.25 and the                            
01       public employees' retirement system under AS 39.35;                                                               
02                 (4)  assist in prescribing the policies for the proper operation of the                                 
03       systems and take other actions necessary to carry out the intent and purpose of the                               
04       systems in accordance with AS 37.10.210 - 37.10.390;                                                              
05                 (5)  provide a range of investment options and establish the rules by                                   
06       which participants can direct their investments among those options with respect to                               
07       accounts established under                                                                                        
08                      (A)  AS 14.25.340 - 14.25.350 (teachers' retirement system                                         
09            defined contribution individual accounts);                                                                   
10 (B)  AS 39.30.150 - 39.30.180 (State of Alaska Supplementary                                                            
11            Annuity Plan);                                                                                               
12 (C)  AS 39.35.730 - 39.35.750 (public employees' retirement                                                             
13            system defined contribution individual accounts); and                                                        
14 (D)  AS 39.45.010 - 39.45.060 (public employees' deferred                                                               
15            compensation program);                                                                                       
16 (6)  establish the rate of interest that shall be annually credited to each                                             
17 member's individual contribution account in accordance with AS 14.25.145 and                                            
18 AS 39.35.100 and the rate of interest that shall be annually credited to each member's                                  
19 account in the health reimbursement arrangement plan under AS 39.30.300 -                                               
20 39.30.495; the rate of interest shall be adopted on the basis of the probable effective                                 
21       rate of interest on a long-term basis, and the rate may be changed from time to time;                             
22 (7)  adopt a contribution surcharge as necessary under AS 39.35.160(c);                                                 
23 (8)  coordinate with the retirement system administrator to have an                                                     
24 annual actuarial valuation of each retirement system prepared to determine system                                       
25 assets, accrued liabilities, and funding ratios and to certify to the appropriate                                       
26       budgetary authority of each employer in the system                                                                
27                      (A)  an appropriate contribution rate for normal costs; and                                        
28 (B)  an appropriate contribution rate for liquidating any past                                                          
29 service liability; in this subparagraph, the appropriate contribution rate for                                          
30 liquidating the past service liability of the defined benefit retirement plan under                                     
31 AS 14.25.009 - 14.25.220 or the past service liability of the defined benefit                                           
01 retirement plan under AS 39.35.095 - 39.35.680 must be determined by a level                                            
02 percent of pay method based on amortization of the past service liability for a                                         
03            closed term of 25 years;                                                                                     
04 (9)  review actuarial assumptions prepared and certified by a member                                                    
05 of the American Academy of Actuaries and conduct experience analyses of the                                             
06 retirement systems not less than once every four years, except for health cost                                          
07 assumptions, which shall be reviewed annually; the results of all actuarial assumptions                                 
08 prepared under this paragraph shall be reviewed and certified by a second member of                                     
09       the American Academy of Actuaries before presentation to the board;                                               
10 (10)  contract for an independent audit of the state's actuary not less                                                 
11       than once every four years;                                                                                       
12 (11)  contract for an independent audit of the state's performance                                                      
13       consultant not less than once every four years;                                                                   
14 (12)  obtain an external performance review to evaluate the investment                                                  
15 policies of each fund entrusted to the board and report the results of the review to the                                
16       appropriate fund fiduciary;                                                                                       
17 (13)  by the first day of each regular legislative session, report to the                                               
18 governor, the legislature, and the individual employers participating in the state's                                    
19       retirement systems on the financial condition of the systems in regard to                                         
20                      (A)  the valuation of trust fund assets and liabilities;                                           
21                      (B)  current investment policies adopted by the board;                                             
22 (C)  a summary of assets held in trust listed by the categories of                                                      
23            investment;                                                                                                  
24                      (D)  the income and expenditures for the previous fiscal year;                                     
25                      (E)  the return projections for the next calendar year;                                            
26 (F)  one-year, three-year, five-year, and 10-year investment                                                            
27            performance for each of the funds entrusted to the board; and                                                
28 (G)  other statistical data necessary for a proper understanding                                                        
29            of the financial status of the systems;                                                                      
30 (14)  submit quarterly updates of the investment performance reports to                                                 
31       the Legislative Budget and Audit Committee;                                                                       
01                 (15)  develop an annual operating budget; [AND]                                                         
02                 (16)  administer pension forfeitures required under AS 37.10.310 using                                  
03       the procedures of AS 44.62 (Administrative Procedure Act); and                                                
04                 (17)  determine the amount of the monthly employer contribution                                     
05       under AS 39.35.257.                                                                                           
06    * Sec. 2. AS 37.10.220(b) is amended to read:                                                                      
07            (b)  The board may                                                                                           
08                 (1)  employ outside investment advisors to review investment policies;                                  
09                 (2)  enter into an agreement with the fiduciary of another state fund in                                
10       order to assume the management and investment of those assets;                                                    
11 (3)  contract for other services necessary to execute the board's powers                                                
12       and duties;                                                                                                       
13 (4)  enter into confidentiality agreements that would exempt records                                                    
14 from AS 40.25.110 and 40.25.120 if the records contain information that could affect                                    
15 the value of investment by the board or that could impair the ability of the board to                                   
16       acquire, maintain, or dispose of investments;                                                                 
17 (5)  adjust the amount of the increase in benefits payable to a peace                                               
18 officer or firefighter who first becomes a member after June 30, 2006, as                                           
19       provided under AS 39.35.475;                                                                                  
20                 (6)  adjust employee contribution rates under AS 39.35.160(e).                                    
21    * Sec. 3. AS 37.10.390 is amended by adding a new paragraph to read:                                               
22 (5)  "peace officer" or "firefighter" has the meaning given in                                                          
23       AS 39.35.680.                                                                                                     
24    * Sec. 4. AS 39.30.090(a) is amended to read:                                                                      
25 (a)  The Department of Administration may obtain a policy or policies of group                                          
26 insurance covering state employees, persons entitled to coverage under AS 14.25.168,                                    
27 14.25.480, AS 22.25.090, AS 39.35.535, 39.35.537, 39.35.880, or former                                              
28 AS 39.37.145, employees of other participating governmental units, or persons                                           
29       entitled to coverage under AS 23.15.136, subject to the following conditions:                                     
30 (1)  a group insurance policy shall provide one or more of the following                                                
31 benefits: life insurance, accidental death and dismemberment insurance, weekly                                          
01       indemnity insurance, hospital expense insurance, surgical expense insurance, dental                               
02       expense insurance, audiovisual insurance, or other medical care insurance;                                        
03 (2)  each eligible employee of the state, the spouse and the unmarried                                                  
04 children chiefly dependent on the eligible employee for support, and each eligible                                      
05 employee of another participating governmental unit shall be covered by the group                                       
06 policy, unless exempt under regulations adopted by the commissioner of                                                  
07       administration;                                                                                                   
08                 (3)  a governmental unit may participate under a group policy if                                        
09                      (A)  its governing body adopts a resolution authorizing                                            
10            participation and payment of required premiums;                                                              
11 (B)  a certified copy of the resolution is filed with the                                                               
12            Department of Administration; and                                                                            
13 (C)  the commissioner of administration approves the                                                                    
14            participation in writing;                                                                                    
15 (4)  in procuring a policy of group health or group life insurance as                                                   
16 provided under this section or excess loss insurance as provided in AS 39.30.091, the                                   
17 Department of Administration shall comply with the dual choice requirements of                                          
18 AS 21.86.310, and shall obtain the insurance policy from an insurer authorized to                                       
19 transact business in the state under AS 21.09, a hospital or medical service corporation                                
20 authorized to transact business in this state under AS 21.87, or a health maintenance                                   
21 organization authorized to operate in this state under AS 21.86; an excess loss                                         
22 insurance policy may be obtained from a life or health insurer authorized to transact                                   
23 business in this state under AS 21.09 or from a hospital or medical service corporation                                 
24       authorized to transact business in this state under AS 21.87;                                                     
25 (5)  the Department of Administration shall make available bid                                                          
26 specifications for desired insurance benefits or for administration of benefit claims and                               
27 payments to (A) all insurance carriers authorized to transact business in this state                                    
28 under AS 21.09 and all hospital or medical service corporations authorized to transact                                  
29 business under AS 21.87 who are qualified to provide the desired benefits; and (B)                                      
30 insurance carriers authorized to transact business in this state under AS 21.09, hospital                               
31 or medical service corporations authorized to transact business under AS 21.87, and                                     
01 third-party administrators licensed to transact business in this state and qualified to                                 
02 provide administrative services; the specifications shall be made available at least once                               
03 every five years; the lowest responsible bid submitted by an insurance carrier, hospital                                
04 or medical service corporation, or third-party administrator with adequate servicing                                    
05 facilities shall govern selection of a carrier, hospital or medical service corporation, or                             
06 third-party administrator under this section or the selection of an insurance carrier or a                              
07 hospital or medical service corporation to provide excess loss insurance as provided in                                 
08       AS 39.30.091;                                                                                                     
09 (6)  if the aggregate of dividends payable under the group insurance                                                    
10 policy exceeds the governmental unit's share of the premium, the excess shall be                                        
11       applied by the governmental unit for the sole benefit of the employees;                                           
12 (7)  a person receiving benefits under AS 14.25.110, AS 22.25,                                                          
13 AS 39.35, or former AS 39.37 may continue the life insurance coverage that was in                                       
14 effect under this section at the time of termination of employment with the state or                                    
15       participating governmental unit;                                                                                  
16 (8)  a person electing to have insurance under (7) of this subsection                                                   
17       shall pay the cost of this insurance;                                                                             
18 (9)  for each permanent part-time employee electing coverage under                                                      
19 this section, the state shall contribute one-half the state contribution rate for permanent                             
20 full-time state employees, and the permanent part-time employee shall contribute the                                    
21       other one-half;                                                                                                   
22 (10)  a person receiving benefits under AS 14.25, AS 22.25, AS 39.35,                                                   
23 or former AS 39.37 may obtain auditory, visual, and dental insurance for that person                                    
24 and eligible dependents under this section; the level of coverage for persons over 65                                   
25 shall be the same as that available before reaching age 65 except that the benefits                                     
26 payable shall be supplemental to any benefits provided under the federal old age,                                       
27 survivors, and disability insurance program; a person electing to have insurance under                                  
28 this paragraph shall pay the cost of the insurance; the commissioner of administration                                  
29       shall adopt regulations implementing this paragraph;                                                              
30 (11)  a person receiving benefits under AS 14.25, AS 22.25, AS 39.35,                                                   
31 or former AS 39.37 may obtain long-term care insurance for that person and eligible                                     
01       dependents under this section; a person who elects insurance under this paragraph                                 
02       shall pay the cost of the insurance premium; the commissioner of administration shall                             
03       adopt regulations to implement this paragraph;                                                                    
04                 (12)  each licensee holding a current operating agreement for a vending                                 
05       facility under AS 23.15.010 - 23.15.210 shall be covered by the group policy that                                 
06       applies to governmental units other than the state.                                                               
07    * Sec. 5. AS 39.30.097(a) is amended to read:                                                                      
08            (a)  The commissioner of administration is authorized to prefund medical                                     
09       benefits provided by AS 14.25.168, AS 22.25.090, AS 39.35.535, and 39.35.537                                  
10 [AND AS 39.35.535] by establishing an irrevocable trust that is exempt from federal                                     
11 income tax under 26 U.S.C. 115 and subject to the applicable financial reporting,                                       
12 disclosure, and actuarial requirements of the Governmental Accounting Standards                                         
13       Board.                                                                                                            
14    * Sec. 6. AS 39.30.300 is amended to read:                                                                         
15 Sec. 39.30.300. State of Alaska Teachers' and Public Employees' Retiree                                               
16 Health Reimbursement Arrangement Plan established. The State of Alaska                                                
17 Teachers' and Public Employees' Retiree Health Reimbursement Arrangement Plan is                                        
18 established for teachers who first become members of the defined contribution plan of                                   
19 the teachers' retirement system under AS 14.25.310 - 14.25.590 on or after July 1,                                      
20 2006, and employees of the state, political subdivisions of the state, and public                                       
21 organizations of the state who first become members [OF THE DEFINED                                                     
22 CONTRIBUTION PLAN] of the Public Employees' Retirement System of Alaska                                             
23 (AS 39.35) [PUBLIC EMPLOYEES' RETIREMENT SYSTEM UNDER                                                               
24       AS 39.35.700 - 39.35.990] on or after July 1, 2006.                                                               
25    * Sec. 7. AS 39.30.380 is amended to read:                                                                         
26 Sec. 39.30.380. Termination of employment. A person who terminates                                                    
27 employment before meeting the eligibility requirements of AS 14.25.470,                                             
28 AS 39.35.537, or 39.35.870 [OR AS 39.35.870] loses any right to the contributions                                   
29 made on behalf of the person to the teachers' and public employees' retiree health                                      
30 reimbursement arrangement trust fund. If a person returns to employment with a                                          
31 participating employer by December 31 of the year in which the person reaches 65                                        
01 years of age, the person's account balance shall be restored in the amount recorded on                                  
02 the date of termination from the trust, adjusted for inflation at the rate of the Consumer                              
03 Price Index for Anchorage, Alaska. The earlier period of employment with a                                              
04       participating employer shall be credited toward eligibility for medical benefits.                                 
05    * Sec. 8. AS 39.30.390 is amended to read:                                                                         
06 Sec. 39.30.390. Eligibility and reimbursement. Persons who meet the                                                   
07 eligibility requirements of AS 14.25.470, AS 39.35.537, or 39.35.870 [AND                                           
08 AS 39.35.870] are eligible for reimbursements from the individual account established                                   
09 for a member under the plan, except members do not have to retire directly from the                                     
10 system. A person who is the dependent child of an eligible member is eligible for                                       
11 reimbursements if the eligible member and surviving spouse have both died so long as                                    
12       the person meets the definition of dependent child.                                                               
13    * Sec. 9. AS 39.30.400(a) is amended to read:                                                                      
14 (a)  The administrator may deduct the cost of monthly premiums from the                                                 
15 individual account for retiree major medical insurance on behalf of an eligible person                                  
16 who elected retiree major medical insurance under AS 14.25.480, AS 39.35.537, or                                    
17       39.35.880 [OR AS 39.35.880].                                                                                  
18    * Sec. 10. AS 39.30.495(5) is amended to read:                                                                     
19 (5)  "eligible person" means a person who meets the eligibility                                                         
20       requirements of AS 14.25.470, AS 39.35.537, or 39.35.870 [OR AS 39.35.870];                                   
21    * Sec. 11. AS 39.35.095 is amended to read:                                                                        
22 Sec. 39.35.095. Applicability of AS 39.35.095 - 39.35.680. The following                                              
23 provisions of this chapter apply only to members first hired before July 1, 2006, and,                              
24 regardless of the date of hire, members who are peace officers or firefighters:                                     
25       AS 39.35.095 - 39.35.680.                                                                                         
26    * Sec. 12. AS 39.35.160(a) is amended to read:                                                                     
27 (a)  Subject to (e) of this section, beginning [BEGINNING] January 1, 1987,                                         
28 each peace officer or firefighter shall contribute to the plan an amount equal to seven                                 
29 and one-half percent of the peace officer's or firefighter's compensation. Except as                                    
30 provided in (d) and (e) of this section, beginning January 1, 1987, each other                                      
31 employee shall contribute to the plan an amount equal to six and three-quarters percent                                 
01 of the employee's compensation. [THE CONTRIBUTIONS SHALL BE DEDUCTED                                                    
02 BY THE EMPLOYER AT THE END OF EACH PAYROLL PERIOD. THE                                                                  
03 CONTRIBUTIONS SHALL BE DEDUCTED FROM EMPLOYEE                                                                           
04 COMPENSATION BEFORE COMPUTATION OF APPLICABLE FEDERAL                                                                   
05 TAXES, AND THE CONTRIBUTIONS SHALL BE TREATED AS EMPLOYER                                                               
06 CONTRIBUTIONS UNDER 26 U.S.C. 414(h)(2). A MEMBER MAY NOT HAVE                                                          
07 THE OPTION OF MAKING THE PAYROLL DEDUCTION DIRECTLY INSTEAD                                                             
08       OF HAVING THE CONTRIBUTION PICKED UP BY THE EMPLOYER.]                                                            
09    * Sec. 13. AS 39.35.160 is amended by adding new subsections to read:                                              
10 (e)  Except as provided in (a) of this section, a peace officer or firefighter who                                      
11 first participates in the plan after June 30, 2006, shall contribute to the plan an amount                              
12 equal to eight percent of the employee's compensation. The board may, from time to                                      
13       time, adjust the employee contribution under this subsection to an amount that is                                 
14                 (1)  not less than eight percent of the employee's compensation; and                                    
15                 (2)  not more than 10 percent of the employee's compensation.                                           
16 (f)  Contributions under (a) and (e) of this section shall be deducted by the                                           
17 employer at the end of each payroll period. The contributions shall be deducted from                                    
18 employee compensation before computation of applicable federal taxes, and the                                           
19 contributions shall be treated as employer contributions under 26 U.S.C. 414(h)(2). A                                   
20 member may not have the option of making the payroll deduction directly instead of                                      
21       having the contribution picked up by the employer.                                                                
22    * Sec. 14. AS 39.35.255 is amended by adding a new subsection to read:                                             
23 (i)  The requirements of this section are in addition to the requirements under                                         
24       AS 39.35.257.                                                                                                     
25    * Sec. 15. AS 39.35 is amended by adding a new section to read:                                                    
26 Sec. 39.35.257. Employer contributions for peace officers and firefighters.                                           
27 An employer that employs a peace officer or firefighter who first participates in the                                   
28 plan after June 30, 2006, shall contribute monthly to the plan a per capita amount,                                     
29       determined by the board, that is equal to                                                                         
30 (1)  not less than 12 percent of the total monthly compensation that the                                                
31       employer pays to all peace officers and firefighters combined;                                                    
01 (2)  not more than 22 percent of the total monthly compensation that                                                    
02       the employer pays to all peace officers and firefighters combined.                                                
03    * Sec. 16. AS 39.35.282 is amended to read:                                                                        
04 Sec. 39.35.282. Contributions for medical benefits. Contributions made by                                             
05 an employer under AS 39.35.255 and 39.35.280 must [SHALL] be separately                                             
06 computed for benefits provided by AS 39.35.535 and 39.35.537. The contributions                                     
07 computed for benefits provided by AS 39.35.535 must [AND SHALL] be deposited                                        
08 in the Alaska retiree health care trust established under AS 39.30.097(a), and the                                  
09 contributions computed for benefits provided by AS 39.35.537 must be deposited                                      
10 in the teachers' and public employees' retiree health reimbursement arrangement                                     
11       plan trust fund established under AS 39.30.340.                                                               
12    * Sec. 17. AS 39.35.340(i) is amended to read:                                                                     
13 (i)  Notwithstanding (d) of this section, a member who retires as a peace officer                                       
14 or firefighter may elect to use five or fewer years of credited service granted under this                              
15 section in computing years of credited service under AS 39.35.535(c) or 39.35.537.                                  
16 When eligibility for credited service for military service has been established and an                                  
17 election under this subsection has been made, an indebtedness in addition to the                                        
18 indebtedness determined under (b) of this section shall be determined for each year of                                  
19 military service used under this subsection, in an amount based on the increase, if any,                                
20       in the present value of future benefits for that year as determined by the department.                            
21    * Sec. 18. AS 39.35.370(a) is amended to read:                                                                     
22 (a)  Subject to AS 39.35.450, a terminated employee who first became a                                              
23       member before July 1, 2006, is eligible for a normal retirement benefit                                       
24                 (1)  at age 60 with at least five years of credited service;                                        
25 (2)  with at least 20 years of credited service as a peace officer or                                                   
26       firefighter; or                                                                                                   
27                 (3)  with at least 30 years of credited service for all other employees.                                
28    * Sec. 19. AS 39.35.370 is amended by adding a new subsection to read:                                             
29 (l)  Subject to AS 39.35.450, a terminated employee who first becomes a                                                 
30       member after June 30, 2006, is eligible for a normal retirement benefit                                           
31 (1)  at age 60 with at least five years of credited service as a peace                                                  
01       officer or firefighter; or                                                                                        
02                 (2)  at age 55 with at least 20 years of credited service as a peace                                    
03       officer or firefighter.                                                                                           
04    * Sec. 20. AS 39.35.381(e) is amended to read:                                                                     
05 (e)  A person who retires under this section is not entitled to disability or death                                     
06 benefits under AS 39.35.400 - 39.35.440, a minimum benefit under AS 39.35.485, or                                       
07 to medical benefits under AS 39.35.535 or 39.35.537. Service earned under this                                      
08       section may not be used for vesting under AS 39.35.095 - 39.35.680.                                               
09    * Sec. 21. AS 39.35.475(a) is amended to read:                                                                     
10 (a)  Subject to (g) of this section, once [ONCE] each year the administrator                                        
11 shall increase benefit payments to eligible disabled members, to persons age 60 or                                      
12 older receiving benefits under this plan in the preceding calendar year, and to persons                                 
13 who have received benefits under this plan for at least five years who are not                                          
14       otherwise eligible for an increase under this section.                                                            
15    * Sec. 22. AS 39.35.475(b) is amended to read:                                                                     
16 (b)  Subject to (h) of this section, the [THE] increase in benefit payments                                         
17 applies to total benefit payments except for the cost-of-living allowance under                                         
18 AS 39.35.480. The amount of the increase is a percentage of the current benefit equal                                   
19       to                                                                                                                
20 (1)  the lesser of 75 percent of the increase in the cost of living in the                                              
21 preceding calendar year or nine percent, for recipients who on July 1 are at least 65                                   
22       years old and for members receiving disability benefits; and                                                      
23 (2)  the lesser of 50 percent of the increase in the cost of living in the                                              
24 preceding calendar year or six percent, for recipients who on July 1 are at least 60 but                                
25 less than 65 years old or for recipients who are less than 60 years old on July 1 but                                   
26       who have received benefits from the plan for at least five years.                                                 
27    * Sec. 23. AS 39.35.475 is amended by adding new subsections to read:                                              
28 (g)  A person who receives a benefit under AS 39.35.370(l) is not eligible to                                           
29       receive an increase in benefits under this section.                                                               
30 (h)  If the board determines that the plan has an unfunded liability greater than                                       
31 10 percent, the board may reduce the amount of the increase under (b) of this section                                   
01       that is payable to a protective occupation employee who first becomes a member after                              
02       June 30, 2006. At any time, the board may terminate a reduction made under this                                   
03       subsection.                                                                                                       
04    * Sec. 24. AS 39.35.535(a) is amended to read:                                                                     
05            (a)  Except as provided in (d) and (g) of this section, the following persons are                        
06       entitled to major medical insurance coverage under this section:                                                  
07                 (1)  for employees first hired before July 1, 1986,                                                     
08                      (A)  an employee who is receiving a monthly benefit from the                                       
09            plan and who has elected coverage;                                                                           
10 (B)  the spouse and dependent children of the employee                                                                  
11            described in (A) of this paragraph;                                                                          
12 (C)  the surviving spouse of a deceased employee who is                                                                 
13            receiving a monthly benefit from the plan and who has elected coverage;                                      
14 (D)  the dependent children of a deceased employee who are                                                              
15            dependent on the surviving spouse described in (C) of this paragraph;                                        
16                 (2)  for members first hired on or after July 1, 1986,                                                  
17 (A)  an employee who is receiving a monthly benefit from the                                                            
18            plan and who has elected coverage for the employee;                                                          
19 (B)  the spouse of the employee described in (A) of this                                                                
20            paragraph if the employee elected coverage for the spouse;                                                   
21 (C)  the dependent children of the employee described in (A) of                                                         
22            this paragraph if the employee elected coverage for the dependent children;                                  
23 (D)  the surviving spouse of a deceased employee who is                                                                 
24            receiving a monthly benefit from the plan and who has elected coverage;                                      
25 (E)  the dependent children of a deceased employee who are                                                              
26 dependent on the surviving spouse described in (D) of this paragraph if the                                             
27            surviving spouse has elected coverage for the dependent children.                                            
28    * Sec. 25. AS 39.35.535(c) is amended to read:                                                                     
29 (c)  A benefit recipient who became a member before July 1, 2006, or the                                            
30 surviving spouse of the person may elect major medical insurance coverage in                                        
31       accordance with regulations and under the following conditions:                                                   
01                 (1)  a person, other than a disabled member or a disabled member who                                    
02 is appointed to normal retirement, shall [MUST] pay an amount equal to the full                                     
03 monthly group premium for retiree major medical insurance coverage if the person is                                     
04                      (A)  younger than 60 years of age and has less than                                                
05                           (i)  25 years of credited service as a peace officer under                                    
06                 AS 39.35.360 and 39.35.370; or                                                                          
07                           (ii)  30 years of credited service under AS 39.35.360 and                                     
08                 39.35.370 that is not service as a peace officer; or                                                    
09                      (B)  of any age and has less than 10 years of credited service;                                    
10 (2)  a person is not required to make premium payments for retiree                                                      
11       major medical coverage if the person                                                                              
12                      (A)  is a disabled member;                                                                         
13 (B)  is a disabled member who is appointed to normal                                                                    
14            retirement;                                                                                                  
15 (C)  is 60 years of age or older and has at least 10 years of                                                           
16            credited service; or                                                                                         
17                      (D)  has at least                                                                                  
18 (i)  25 years of credited service as a peace officer under                                                              
19                 AS 39.35.360 and 39.35.370; or                                                                          
20 (ii)  30 years of credited service under AS 39.35.360 and                                                               
21                 39.35.370 not as a peace officer.                                                                       
22    * Sec. 26. AS 39.35.535 is amended by adding a new subsection to read:                                             
23 (g)  A benefit recipient who is a peace officer or firefighter and who first                                            
24 becomes a member after June 30, 2006, or a benefit recipient who is the surviving                                       
25 spouse of a person who is a peace officer or firefighter and who first becomes a                                        
26       member after June 30, 2006, may elect medical benefits under AS 39.35.537.                                      
27    * Sec. 27. AS 39.35 is amended by adding a new section to read:                                                    
28 Sec. 39.35.537. Medical benefit; eligibility of peace officers or firefighters                                        
29 first hired after June 30, 2006; surviving spouses and dependents. (a) A member                                       
30 who is a peace officer or firefighter hired after June 30, 2006, is entitled to medical                                 
31 benefits under this section. A member who applies for medical benefits under this                                       
01       section shall apply on the forms and in the manner prescribed by the administrator.                               
02            (b)  The member's surviving spouse is eligible to elect medical benefits if the                              
03       member had retired or was eligible for retirement and medical benefits at the time of                             
04       the member's death.                                                                                               
05 (c)  The medical benefits available to eligible persons are access to the retiree                                       
06 major medical insurance plan and to the health reimbursement arrangement plan under                                     
07 AS 39.30.300. Access to the retiree major medical insurance plan means that an                                          
08 eligible person may not be denied insurance coverage except for failure to pay the                                      
09       required premium.                                                                                                 
10 (d)  Retiree major medical insurance plan coverage elected by an eligible                                               
11 member under this section covers the eligible member, the spouse of the eligible                                        
12       member, and the dependent children of the eligible member.                                                        
13 (e)  Retiree major medical insurance plan coverage elected by a surviving                                               
14 spouse of an eligible member under this section covers the surviving spouse and the                                     
15 dependent children of the eligible member who are dependent on the surviving spouse.                                    
16 (f)  Participation in the retiree major medical insurance plan is not required in                                       
17       order to participate in the health reimbursement arrangement plan.                                                
18 (g)  A person eligible for medical benefits under this section is not required to                                       
19 participate in the health reimbursement arrangement plan in order to participate in the                                 
20       retiree major medical insurance plan.                                                                             
21 (h)  A person who is eligible for medical benefits under this section must make                                         
22 the irrevocable election to participate or not participate in the retiree major medical                                 
23 insurance plan by reaching 70 1/2 years of age, or upon application for retirement and                                  
24       medical benefits, whichever is later.                                                                             
25 (i)  Major medical insurance coverage takes effect on the first day of the month                                        
26 following the date of the administrator's approval of the election and stops when the                                   
27       person who elects coverage dies or fails to make a required premium payment.                                      
28 (j)  The coverage for persons 65 years of age or older is the same as that                                              
29 available for persons under 65 years of age. The benefits payable to those persons 65                                   
30 years of age or older supplement any benefits provided under the federal old age,                                       
31       survivors and disability insurance program.                                                                       
01 (k)  The medical and optional insurance premiums owed by the person who                                                 
02 elects coverage may be deducted from the health reimbursement arrangement. If the                                       
03 amount of the health reimbursement arrangement becomes insufficient to pay the                                          
04 premiums, the person who elects coverage under (a) of this section shall pay the                                        
05       premiums directly.                                                                                                
06            (l)  The cost of premiums for retiree major medical insurance coverage under                                 
07       this section for an eligible member or surviving spouse who is                                                    
08                 (1)  not eligible for Medicare is an amount equal to the full monthly                                   
09       group premiums for retiree major medical insurance coverage;                                                      
10 (2)  eligible for Medicare is the following percentage of the premium                                                   
11       amounts established for retirees who are eligible for Medicare:                                                   
12 (A)  30 percent if the member had 10 or more, but less than 15,                                                         
13            years of service;                                                                                            
14 (B)  25 percent if the member had 15 or more, but less than 20,                                                         
15            years of service;                                                                                            
16 (C)  20 percent if the member had 20 or more, but less than 25,                                                         
17            years of service;                                                                                            
18 (D)  15 percent if the member had 25 or more, but less than 30,                                                         
19            years of service;                                                                                            
20 (E)  10 percent if the member had 30 or more years of service.                                                          
21 (m)  The eligibility for retiree major medical insurance coverage for an                                                
22 alternate payee under a qualified domestic relations order shall be determined based                                    
23 on the eligibility of the member to elect coverage. The alternate payee shall pay the                                   
24       full monthly premium for retiree major medical insurance coverage.                                                
25 (n)  A person who is entitled to retiree major medical insurance coverage under                                         
26       this section shall                                                                                                
27                 (1)  be informed by the administrator in writing                                                        
28 (A)  that the health insurance coverage available to retired                                                            
29 members may be different from the health insurance coverage provided to                                                 
30            employees;                                                                                                   
31 (B)  of time limits for selecting optional health insurance                                                             
01            coverage and whether the election is irrevocable; and                                                        
02 (2)  indicate in writing on a form provided by the administrator that the                                               
03 person has received the information required by this subsection and whether the                                         
04       person has chosen to receive optional health insurance coverage.                                                  
05 (o)  The monthly group premiums for retiree major medical insurance coverage                                            
06 under this section are established by the administrator in accordance with                                              
07 AS 39.30.095. Nothing in this chapter guarantees a person who elects coverage under                                     
08 (a) of this section a monthly group premium rate for retiree major medical insurance                                    
09 coverage other than the premium in effect for the month in which the premium is due                                     
10       for coverage for that month.                                                                                      
11 (p)  In this section, "health reimbursement arrangement plan" means the plan                                            
12       established in AS 39.30.300.                                                                                      
13    * Sec. 28. AS 39.35.680(4) is amended to read:                                                                     
14 (4)  "average monthly compensation" means the result obtained by                                                        
15 dividing the compensation earned by an employee during a considered period by the                                       
16 number of months, including fractional months, for which compensation was earned;                                       
17 an employee must have at least 115 days of credited service in the last payroll year in                                 
18 order for that year to be used as part of the consecutive payroll years; the considered                                 
19       period consists of                                                                                                
20 (A)  for employees first hired before July 1, 1996, the three                                                           
21 consecutive payroll years during the period of credited service that yield the                                          
22            highest average;                                                                                             
23 (B)  for employees first hired on or after July 1, 1996, the five                                                       
24 consecutive payroll years during the period of credited service that yield the                                          
25            highest average;                                                                                             
26 (C)  if the employee does not have the number of consecutive                                                            
27 payroll years required by (A) or (B) of this paragraph, the actual number of                                            
28            months, including fractional months, that the employee worked;                                               
29 (D)  for an employee who has made an election under                                                                     
30 AS 39.35.300(c) or 39.35.310(c), the actual number of months, including                                                 
31            fractional months, that the employee worked;                                                                 
01                      (E)  for a peace officer or firefighter hired before July 1, 2006                              
02            [AT ANY TIME], the three consecutive payroll years during the period of                                      
03            credited service that yield the highest average;                                                             
04                      (F)  for a peace officer or firefighter hired after June 30,                                   
05            2006, the five consecutive payroll years during the period of credited                                   
06            service that yield the highest average;                                                                  
07    * Sec. 29. AS 39.35.680(18) is amended to read:                                                                    
08                 (18)  "employer" means                                                                                  
09                      (A)  the State of Alaska;                                                                          
10 (B)  a political subdivision or public organization of the state                                                        
11 that participates in the plan based on a resolution to participate in the plan that                                     
12            was approved by the administrator                                                                            
13                           (i)  on or before July 1, 2006; or                                                        
14                           (ii)  for peace officers and firefighters; or                                             
15 (C)  a political subdivision or public organization of the state                                                        
16 that assumes liability for participation in the plan by another political                                           
17 subdivision or public organization of the state [,] as a result of consolidation                                    
18            or reorganization that occurs                                                                                
19 (i)  at any time, with respect to peace officers or                                                                 
20                 firefighters;                                                                                       
21 (ii)  on or after July 1, 2006, with respect to employees                                                   
22 who are not peace officers or firefighters [ASSUMES LIABILITY                                                       
23 UNDER THE PLAN OF A POLITICAL SUBDIVISION OR PUBLIC                                                                     
24                 ORGANIZATION DESCRIBED IN (B) OF THIS PARAGRAPH];                                                       
25    * Sec. 30. AS 39.35.680(26) is amended to read:                                                                    
26 (26)  "normal retirement" means retirement for a member who is                                                          
27       eligible to receive benefits under AS 39.35.370(a) or (l) or under 39.35.385(a) or (f);                     
28    * Sec. 31. AS 39.35.720 is amended to read:                                                                        
29 Sec. 39.35.720. Membership. Except as provided in AS 39.35.095, an [AN]                                             
30 employee who becomes a member on or after July 1, 2006, shall participate in the plan                                   
31       set out in AS 39.35.700 - 39.35.990.                                                                              
01    * Sec. 32. AS 39.35.750 is amended by adding a new subsection to read:                                             
02            (f)  This section does not apply to contributions made under AS 39.35.257 and                                
03       does not require an employer who makes a contribution for an employee under                                       
04       AS 39.35.257 to make another contribution for that employee.                                                      
05    * Sec. 33. The uncodified law of the State of Alaska is amended by adding a new section to                         
06 read:                                                                                                                   
07 RETIREMENT PLAN ELECTION. (a) A peace officer or firefighter who was first                                              
08 hired after June 30, 2006, and before the effective date of this section, and who is a member                           
09 of the defined contribution retirement plan of the public employees' retirement system under                            
10 AS 39.35.700 - 39.35.990, may, within 90 days after the effective date of this section, make a                          
11 one-time election to participate in the defined benefit retirement plan under AS 39.35.095 -                            
12 39.35.680 and to transfer all contributions that have been made or should be made to the                                
13 defined contribution retirement plan for service the member completes before the effective                              
14 date of the member's participation in the defined benefit retirement plan. The transferred                              
15 contributions shall be used to purchase credited service in the defined benefit retirement plan                         
16 on an actuarial equivalent basis determined by the Alaska Retirement Management Board                                   
17 established under AS 37.10.210.                                                                                         
18 (b)  In this section, "peace officer" or "firefighter" has the meaning given in                                         
19 AS 39.35.680.                                                                                                           
20    * Sec. 34. The uncodified law of the State of Alaska is amended by adding a new section to                         
21 read:                                                                                                                   
22 RETIREMENT PLAN ELECTION PROCEDURE; REGULATIONS REQUIRED.                                                               
23 (a) An election made under sec. 33 of this Act to participate in the defined benefit retirement                         
24 plan under AS 39.35.095 - 39.35.680 must be made in writing on one or more forms and in                                 
25 the manner prescribed by the administrator. Before accepting an election to participate in the                          
26 defined benefit retirement plan, the administrator shall provide the employee who plans on                              
27 making an election to participate in the defined benefit retirement plan with information,                              
28 including calculations to illustrate the effect of moving the employee's retirement plan from                           
29 the defined contribution retirement plan to the defined benefit retirement plan as well as other                        
30 information that informs the employee of potential consequences of the employee's election.                             
31 (b)  An election made under sec. 33 of this Act to participate in the defined benefit                                   
01 retirement plan is irrevocable. On the effective date of the election, an eligible employee who                         
02 makes the election shall be enrolled as a member of the defined benefit retirement plan, and                            
03 the employee's participation in the plan shall be governed by the applicable provisions of the                          
04 defined benefit retirement plan. The employee's enrollment in the defined benefit retirement                            
05 plan is retroactive to the date of hire. An election made by an eligible employee who is                                
06 married is not effective unless the election is signed by the employee's spouse.                                        
07 (c)  When an eligible employee makes a one-time election under sec. 33 of this Act,                                     
08 the administrator shall cause the total amount of the employee's employee and employer                                  
09 contributions, with investment earnings and losses through the day of the employee's election                           
10 to participate as a member in the defined benefit retirement plan, to be actuarially calculated                         
11 and, subject to (d) of this section, transferred to the pension fund in the defined benefit                             
12 retirement plan. On the effective date of the employee's participation in the defined benefit                           
13 retirement plan, the employee shall be credited with service in the defined benefit retirement                          
14 plan that may be purchased under an actuarial equivalent purchase formula as determined by                              
15 the board. The board shall establish transfer procedures by regulation, but the actual transfer                         
16 may not occur later than 30 days after the date the administrator receives the employee's                               
17 completed forms under (a) of this section, unless the major financial markets for securities                            
18 available for a transfer are seriously disrupted by an unforeseen event that also causes the                            
19 suspension of trading on any national securities exchange in the country where the securities                           
20 were issued. In that event, the 30-day period may be extended by a resolution of the board. A                           
21 transfer is not commissionable or subject to other fees and may be in the form of cash or a                             
22 security as determined by the board. A security shall be valued on the date of receipt in the                           
23 employee's account.                                                                                                     
24 (d)  If the value actuarially calculated under (c) of this section is insufficient to pay for                           
25 service credit equal to the employee's actual service, the administrator shall allow the                                
26 employee the option of creating an indebtedness up to the amount needed to eliminate the                                
27 insufficiency; however, if that value exceeds the amount needed to pay for a service credit                             
28 equal to the employee's actual service, the administrator shall cause the excess to remain in                           
29 the employee's retirement plan established under AS 39.35.700 - 39.35.990. An excess under                              
30 this subsection may not be used to purchase service credit in a retirement plan administered                            
31 under AS 39.35.                                                                                                         
01       (e)  The provisions of this section are subject to the requirements of the Internal                               
02 Revenue Code and the limitations under AS 39.35.115, 39.35.678, 39.35.710(c) and (d), and                               
03 39.35.895.                                                                                                              
04       (f)  In this section,                                                                                             
05            (1)  "administrator" means the commissioner of administration or the person                                  
06 designated by the commissioner of administration under AS 39.35.003 for a public                                        
07 employees' retirement plan;                                                                                             
08            (2)  "board" means the Alaska Retirement Management Board established                                        
09 under AS 37.10.210;                                                                                                     
10            (3)  "defined benefit retirement plan" means the retirement plan established                                 
11 under AS 39.35.095 - 39.35.680 for a public employee;                                                                   
12            (4)  "defined contribution retirement plan" means the retirement plan                                        
13 established under AS 39.35.700 - 39.35.990 for a public employee;                                                       
14            (5)  "Internal Revenue Code" has the meaning given in AS 39.35.990.                                          
15    * Sec. 35. The uncodified law of the State of Alaska is amended by adding a new section to                         
16 read:                                                                                                                   
17 ADOPTION OF REGULATIONS. The commissioner of administration shall adopt                                                 
18 regulations necessary to implement the changes made by this Act. The regulations take effect                            
19 under AS 44.62 (Administrative Procedure Act), but not before the effective date of the law                             
20 implemented by the regulation.                                                                                          
21    * Sec. 36. Section 35 of this Act takes effect immediately under AS 01.10.070(c).                                  
22    * Sec. 37. Except as provided in sec. 36 of this Act, this Act takes effect July 1, 2018.