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COMMITTEE REPORT
May 23, 2007
H. 3789
S. Printed 5/23/07--S. [SEC 5/24/07 2:04 PM]
Read the first time April 25, 2007.
To whom was referred a Bill (H. 3789) to retitle Article 5, Chapter 11, Title 1, Code of Laws of South Carolina, 1976, relating to employees and retirement insurance as "Employees and Retirees Insurance-Accounting for Post-Employment Benefits", etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the bill, as and if amended, by striking all after the enacting words and inserting:
/ SECTION 1. Article 5, Chapter 11, Title 1 of the 1976 Code is retitled "Employees and Retirees Insurance-Accounting for Post-Employment Benefits".
SECTION 2. Article 5, Chapter 11, Title 1 of the 1976 Code is amended by adding:
"Section 1-11-703. As used in this article:
(1) 'Actuarial accrued liability' means that portion, as determined by a particular actuarial cost method, of the actuarial present value of fund obligations and administrative expenses which is not provided for by future normal costs.
(2) 'Actuarial assumptions' means assumptions regarding the occurrence of future events affecting costs of the SCRHI Trust Fund or LTDI Trust Fund such as mortality, withdrawal, disability, and retirement; changes in compensation; aging effects and cost trends for post-employment benefits; benefit election rates; rates of investment earnings and asset appreciation or depreciation; procedures used to determine the actuarial value of assets; and other such relevant items.
(3) 'Actuarial cost method' means a method for determining the actuarial present value of the obligations and administrative expenses of the SCRHI Trust Fund or LTDI Trust Fund and for developing an actuarially equivalent allocation of such value to time periods, usually in the form of a normal cost and an actuarial accrued liability. Acceptable actuarial methods are the aggregate, attained age, individual entry age, frozen attained age, frozen entry age, and projected unit credit methods.
(4) 'Actuarial present value of total projected benefits' means the present value, at the valuation date, of the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value of money and the probability of payment.
(5) 'Actuarial valuation' means the determination, as of a valuation date, of the normal cost, actuarial accrued liability, actuarial value of assets, and related actuarial present values for the SCRHI Trust Fund or LTDI Trust Fund.
(6) 'Actuarially sound' means that calculated contributions to the SCRHI Trust Fund or LTDI Trust Fund are sufficient to pay the full actuarial cost of these trust funds. The full actuarial cost includes both the normal cost of providing for fund obligations as they accrue in the future and the cost of amortizing the unfunded actuarial accrued liability over a period of no more than thirty years.
(7) 'Administrative expenses' means all expenses incurred in the operation of the SCRHI Trust Fund and LTDI Trust Fund, including all investment expenses.
(8) 'LTDI Trust Fund' means the Long Term Disability Insurance Trust Fund established pursuant to Section 1-11-707 to fund benefits under the State's Basic Long Term Disability (BLTD) Income Benefit Plan.
(9) 'Board' means the State Budget and Control Board.
(10) 'Employee insurance program' or 'EIP' means the office of the board designated by the board to operate insurance programs pursuant to this article.
(11) 'IBNR' means unpaid health claims incurred but not reported. The liability for IBNR claims is actuarially estimated based on the most current historical claims experience of previous payments, inflation, award trends, and estimates of health care trend changes.
(12) 'Operating account' means the health insurance program's business operating activities account maintained by the State Treasurer in which are deposited all premiums for enrollees in self-funded health plans authorized in this article, along with employer contributions for active employees covered by such self-funded health plans, and from which claims and administrative expenses of the self-funded health and dental plans administered by the employee insurance program are paid.
(13) 'State-covered entity' means state agencies and institutions, however described, and school districts. It also includes political subdivisions of the State that participate in the state health and dental plans.
(14) 'State health and dental plans' means any insurance program administered by the employee insurance program pursuant to this article.
(15) 'SCRHI Trust Fund' means the South Carolina Retiree Health Insurance Trust Fund established pursuant to Section 1-11-705 to fund the employer cost for health benefits for retired state employees and retired public school district employees.
(16) 'State Retirement System' or 'State Retirement Systems' means all retirement systems established pursuant to Title 9 except for the National Guard Retirement System.
(17) 'Unfunded actuarial accrued liability' means for any actuarial valuation the excess of the actuarial accrued liability over the actuarial value of the assets of the fund under an actuarial cost method utilized by the fund for funding purposes.
(18) 'Trust fund paid premiums' means the employer premium for state health and dental plans coverage paid by the SCRHI Trust Fund on behalf of a retiree. When it is expressed as a percentage of trust fund paid premiums, it means that the SCRHI Trust Fund shall pay the stated percentage of the employer premiums, with the retiree paying the balance of the employer premiums and the entire employee premium.
Section 1-11-705. (A) There is established in the State Treasury separate and distinct from the general fund of the State and all other funds the South Carolina Retiree Health Insurance Trust Fund (SCRHI Trust Fund) to provide for the employer costs of retiree post-employment health insurance benefits for retired state employees and retired employees of public school districts. Earnings on the SCRHI Trust Fund must be credited to it and unexpended funds carried forward in it to succeeding fiscal years.
(B) The board is the trustee of the SCRHI Trust Fund.
(C) The employee insurance program shall administer the SCRHI Trust Fund.
(D) The employee insurance program shall engage actuarial and other services as required to transact the business of the SCRHI Trust Fund. The actuary engaged by the employee insurance program shall provide technical advice to the board regarding operation of the SCRHI Trust Fund.
(E) Upon recommendations of the actuary, the board shall adopt generally accepted and reasonable actuarial assumptions and methods for the operation and funding of the SCRHI Trust Fund as it considers necessary and prudent. The actuarial assumptions and methods adopted by the board must be appropriate for the purposes at hand and must be reasonable, individually and in the aggregate, taking into account the experience of the plan and reasonable expectations. Utilizing the actuarial assumptions most recently adopted by the board, the actuary engaged by the employee insurance program shall set the annual actuarial valuations of normal cost, actuarial liability, actuarial value of assets, and related actuarial present values for the SCRHI Trust Fund.
(F) The board may adopt rules and promulgate regulations as necessary for the proper administration of the SCRHI Trust Fund.
(G)(1)The funds of the SCRHI Trust Fund must be invested and reinvested by the State Treasurer in the manner allowed by law. The State Treasurer shall consult with the employee insurance program and the employee insurance program's actuary to develop an annual investment plan for the SCRHI Trust Fund taking into account the cash flow needs of the employee insurance program with regard to payment of the employer share of premiums and claims for covered retirees.
(2) Effective beginning with the first fiscal year after the ratification of an amendment to Section 16, Article X of the Constitution of this State allowing funds in post-employment benefits trust funds to be invested in equity securities, the Retirement System Investment Commission (RSIC) established pursuant to Chapter 16 of Title 9, shall invest and reinvest the funds of the SCRHI Trust Fund as assets of a retirement system are invested. The chief investment officer shall consult with the employee insurance program and the employee insurance program's actuary to develop an annual investment plan for the SCRHI Trust Fund taking into account the cash flow needs of the employee insurance program with regard to payment of the employer share of premiums and claims for covered retirees. After the initial fiscal year the RSIC assumes this investing function, the annual investment plan for the SCRHI Trust Fund must be approved by the commission no later than June first of each year for the fiscal year beginning July first of the same calendar year.
(H) The board annually shall determine the minimum annual required contributions to the SCRHI Trust Fund on an actuarially sound basis in accordance with Governmental Accounting Standards Board Statement No. 45, or any other Governmental Accounting Standards Board statements that may be applicable to the SCRHI Trust Fund.
(I) [RESERVED]
(J) Each month, the employee insurance program shall determine the monthly amount of the state-funded employer premium with respect to retired state employees and retired public school district employees who are eligible for state-paid employer premiums pursuant to Section 1-11-730, and shall transfer this amount to the operating account from the SCRHI Trust Fund. In addition, the employee insurance program shall transfer the total cost of post-employment benefits for retirees and their dependents, net of premium contributions made on behalf of retirees and other sources of revenue attributable to retirees, in accordance with Governmental Accounting Standards Board Statements No. 43 and 45 and the Implementation Guide.
(K) The funds of the SCRHI Trust Fund may only be used for the payment of employer-provided other post-employment benefits under the terms of the state health and dental plans. The administrative costs related to the administration of the SCRHI Trust Fund, and the investment and reinvestment of its funds, may be funded from the earnings of the SCRHI Trust Fund.
(L) As a trust, the funds of the SCRHI Trust Fund are not assets of the State or the school districts or their respective agencies. The contributions to the SCRHI Trust Fund are irrevocable and may not revert to the employer except upon complete satisfaction of all liabilities and administrative expenses of the state health and dental plans of other post-employment benefits provided pursuant to the state health and dental plans.
Section 1-11-707. (A) There is established in the State Treasury separate and distinct from the general fund of the State and all other funds the South Carolina Long Term Disability Insurance Trust Fund (LTDI Trust Fund) to provide for the payment of benefits under the state's Basic Long Term Disability Income Benefit Plan. Earnings on the LTDI Trust Fund must be credited to it and unexpended funds carry forward in it to succeeding fiscal years.
(B) The board is the trustee of the LTDI Trust Fund.
(C) The employee insurance program shall administer the LTDI Trust Fund.
(D) The employee insurance program shall engage actuarial and other services as required to transact the business of the LTDI Trust Fund. The actuary engaged by the employee insurance program shall provide technical advice to the board regarding operation of the LTDI Trust Fund.
(E) Upon recommendations of the actuary, the board shall adopt generally accepted and reasonable actuarial assumptions and methods for the operation and funding of the LTDI Trust Fund as it considers necessary and prudent. The actuarial assumptions and methods adopted by the board must be appropriate for the purposes at hand and must be reasonable, individually and in the aggregate, taking into account the experience of the plan and reasonable expectations. Utilizing the actuarial assumptions most recently adopted by the board, the actuary engaged by the employee insurance program shall set the annual actuarial valuations of normal cost, actuarial liability, actuarial value of assets, and related actuarial present values for the LTDI Trust Fund.
(F) The board may adopt rules and promulgate regulations as necessary for the proper administration of the LTDI Trust Fund.
(G)(1) The funds of the LTDI Trust Fund must be invested and reinvested by the State Treasurer in the manner allowed by law. The State Treasurer shall consult with the employee insurance program and the employee insurance program's actuary to develop an annual investment plan for the LTDI Trust Fund taking into account the cash flow needs of the employee insurance program with regard to payment of the employer share of premiums and claims for covered retirees.
(2) Effective beginning with the first fiscal year after the ratification of an amendment to Section 16, Article X of the Constitution of this State allowing funds in post-employment benefits trust funds to be invested in equity securities, the Retirement System Investment Commission (RSIC) established pursuant to Chapter 16 of Title 9, shall invest and reinvest the funds of the LTDI Trust Fund as assets of a retirement system are invested. The chief investment officer shall consult with the employee insurance program and the employee insurance program's actuary to develop an annual investment plan for the LTDI Trust Fund taking into account the cash flow needs of the employee insurance program with regard to payment of the employer share of premiums and claims for covered retirees. After the initial fiscal year the RSIC assumes this investing function, the annual investment plan for the LTDI Trust Fund must be approved by the commission no later than June first of each year for the fiscal year beginning July first of the same calendar year.
(H) The board annually shall determine the minimum annual required contributions to the LTDI Trust Fund on an actuarially sound basis in accordance with Governmental Accounting Standards Board Statement No. 45, or any other Governmental Accounting Standards Board statements that may be applicable to the LTDI Trust Fund.
(I) [RESERVED]
(J) Each month, the employee insurance program shall transfer to the operating account from the LTDI Trust Fund the amount invoiced by the third-party administrator for the BLTD Plan for payment of LTDI claims, including reasonable expenses associated with claims administration of the BLTD Plan.
(K) The assets of the LTDI Trust Fund may only be used for the payment of the state's claims under the BLTD Plan along with reasonable expenses associated with the operation of the BLTD Plan, and the assets of the LTDI Trust Fund may not be used for any other purpose. The administrative costs related to the administration of the LTDI Trust Fund, and the investment and reinvestment of its funds, must be funded from the earnings of the LTDI Trust Fund.
(L) As a trust, the funds of the LTDI Trust Fund are not assets of the State or the school districts or their respective agencies. The contributions to the LTDI Trust Fund are irrevocable and may not revert to the employer except upon complete satisfaction of all liabilities and administrative expenses of the State Basic Long Term Disability Income Benefit Plan of other post-employment benefits provided pursuant to the State Basic Long Term Disability Income Benefit Plan."
SECTION 3. Section 1-11-730 of the 1976 Code is amended to read:
"Section 1-11-730. (A) If a person began employment eligible for coverage under the state health and dental plans on or before the reference date, the following eligibility provisions govern that person's participation in state health and dental plans as a retiree:
(A)(1) A person covered by the state health and dental insurance plans who terminates employment with at least twenty years' retirement service credit by a state-covered entity before eligibility for retirement under a state retirement system is eligible for state health and dental plans coverage, the plans effective on the date of retirement under a state retirement system, if the last five years are consecutive and in a full-time permanent position with a state-covered entity. With respect to a retiree eligible for coverage pursuant to this subsection, the retiree is eligible for trust fund paid premiums and the retiree is responsible for the entire employee premium.
(B)(2) A member of the General Assembly who leaves office or retires with at least eight years' credited service in the General Assembly Retirement System is eligible to participate in the state health and dental plans by paying the full premium costs as determined by the State Budget and Control Board.
(C)(3) With respect to an active employee: (a) employed by the State or a public school district, (b) retiring with ten or more years of state-covered entity service credited under a state retirement system, and (c) with the last five years of earned service credit consecutive and in a full-time permanent position with the State or a public school district, is eligible for state paid premiums, if the last five years are consecutive and in a full-time permanent position with a state covered entity the retiree is eligible for trust fund paid premiums and the retiree is responsible for the entire employee premium.
(D)(4) A person covered by the state health and dental plans who retires with at least five years' state-covered entity service credited under a state retirement system is eligible to participate in the plan state health and dental plans by paying the full premium costs as determined by the board, if the last five years are consecutive and in a full-time permanent position with a state-covered entity.
(E)(5) A spouse or dependent of a person covered by the plans who is killed in the line of duty after December 31, 2001, shall receive equivalent coverage under the state health and dental plans for a period of twelve months and the State shall be is responsible for paying the full premium costs. After the twelve-month period, a spouse or dependent is eligible for state-paid trust fund paid premiums. A spouse is eligible for state-paid trust fund paid premiums under this subsection until the spouse remarries. A dependent is eligible for state-paid trust fund paid premiums under this subsection until the dependent's eligibility for coverage under the plans would ordinarily terminate.
(F) All state and school district employees employed before July 1, 1984, who were or would have been eligible for the plans upon completion of five years' service are exempt from the provisions of this section and are eligible for the plan effective on the date of their retirement.
(G)(6) A former municipal or county council member of a county or municipality which participates in the state health and dental insurance plans who served on the council for at least twelve years and who was covered under the plans at the time of termination is eligible to maintain coverage under the plans if the former member pays the full employer and employee contributions and if the county or municipal council elects to allow this coverage for former members.
(H)(7) A person covered by the state health and dental plans who terminated employment with at least eighteen years' retirement service credit by a state-covered entity before eligibility for retirement under a state retirement system prior to before 1990 is eligible for the plans effective on the date of retirement, if this person returns to a state-covered entity and is covered by the state health and dental plans and completes at least two consecutive years in a full-time, permanent position prior to before the date of retirement.
(B) If a person began employment eligible for coverage under the state health and dental plans after the reference date, the following eligibility provisions govern that person's participation in state health and dental plans as a retiree:
(1) An active employee covered by the state health and dental plans who retires with at least five years of earned retirement service credit under a state retirement system with a state-covered entity is eligible to participate as a retiree in the state health and dental plans if the last five years of the person's covered employment were consecutive and in a full-time permanent position.
(2) A person covered by the state health and dental plans who terminates employment before the person's date of retirement with at least twenty years of earned retirement service credit under a state retirement system with a state-covered entity is eligible to participate as a retiree in the state health and dental plans on the person's date of retirement under a state retirement system, if the last five years of the person's covered employment before termination were consecutive and in a full-time permanent position.
(3) A retired state employee or a retired employee of a public school district who retires under a state retirement system and who is eligible for state health and dental plan coverage under the provisions of item (1) or (2) of this subsection, is eligible for trust fund paid premiums as follows:
(a) If the retiree's earned service credit in a state retirement system is five or more years but fewer than fifteen years with a state-covered entity, then the retiree shall pay the full premium for health and dental plans.
(b) If the retiree's earned service credit in a state retirement system is more than fifteen years, but fewer than twenty-five years with a state-covered entity, then the retiree is eligible for fifty percent trust fund paid premiums and the retiree shall pay the remainder of the premium cost.
(c) If the retiree's earned service credit in a state retirement system is twenty-five or more years with a state-covered entity, then the retiree is eligible for trust fund paid premiums and the retiree is responsible for the entire employee premium.
(4) If a retiree under a state retirement system was employed by an entity that participates in the state health and dental plans pursuant to the provisions of Section 1-11-720 and is eligible to participate in state health and dental plans as a retiree pursuant to the provisions of item (1) or (2) of this subsection, then the retiree's employer, at its discretion, may elect to pay all or a portion of the premium for the retiree's state health and dental plans.
(5) A spouse or dependent of a person covered by the plans who is killed in the line of duty on or after the reference date, shall continue to maintain coverage under state health and dental plans for a period of twelve months after the covered person's death and the State is responsible for paying the full premium. After the twelve-month period, a spouse or dependent is eligible for trust fund paid premiums and the spouse or dependent is responsible for the entire employee premium. A spouse is eligible for trust fund paid premiums under this subsection until the spouse remarries. A dependent is eligible for trust fund paid premiums pursuant to this subsection until the dependent's eligibility for coverage under the plans would ordinarily terminate.
(C) For employees who participate in the state health and dental plans pursuant to the provisions of Section 1-11-720 but who are not members of the State Retirement Systems, one year of full-time employment or its equivalent under their employment relation equates to one year of earned retirement service credit under a state retirement system for purposes of the requirements of subsection (B)(1) and (2) of this section. The EIP shall implement the provisions of this subsection and make determinations pursuant to it. A person aggrieved by a determination of the EIP pursuant to this subsection may appeal that determination as a contested case as provided in Chapter 23 of Title 1, the Administrative Procedures Act.
(D) Notwithstanding the dates of employment provided in subsections (A) and (B) of this section, a member of the General Assembly on leaving office may elect eligibility for participation in the state health and dental insurance plans pursuant to subsection (A) or (B) of this section."
SECTION 4. If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of this act, the General Assembly hereby declaring that it would have passed this act, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.
SECTION 5. The Code Commissioner shall insert the effective date of this act for the phrase "reference date" where it appears in Section 1-11-705 of the 1976 Code as added by this act and in Section 1-11-730 of the 1976 Code as amended by this act.
SECTION 6. This act takes effect on the first day of the month following the month during which this act is approved by the Governor. /
Renumber sections to conform.
Amend title to conform.
HUGH K. LEATHERMAN for Committee.
TO RETITLE ARTICLE 5, CHAPTER 11, TITLE 1, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO EMPLOYEES AND RETIREMENT INSURANCE AS "EMPLOYEES AND RETIREES INSURANCE-ACCOUNTING FOR POST-EMPLOYMENT BENEFITS", TO MAKE FINDINGS WITH RESPECT TO THE STATE'S COMPLIANCE WITH NEW REQUIREMENTS OF THE GOVERNMENTAL ACCOUNTING STANDARDS BOARD FOR POST-EMPLOYMENT BENEFITS; BY ADDING SECTIONS 1-11-703, 1-11-705, AND 1-11-707 SO AS TO ESTABLISH THE SOUTH CAROLINA RETIREE HEALTH INSURANCE TRUST FUND (SCRHI TRUST FUND) AND THE SOUTH CAROLINA LONG TERM DISABILITY INSURANCE TRUST FUND AS THE METHOD OF PAYING AND ACCOUNTING FOR RETIREE HEALTH INSURANCE PREMIUMS AND BASIC LONG TERM DISABILITY INCOME BENEFIT PLAN PREMIUMS IN COMPLIANCE WITH NEW ACCOUNTING STANDARDS, TO PROVIDE FOR THE ACTUARIAL FUNDING AND INVESTMENT OF THE ASSETS OF THESE TRUST FUNDS, AND TO PROVIDE DEFINITIONS; TO AMEND SECTION 1-11-710, RELATING TO THE STATE HEALTH AND DENTAL PLANS, SO AS TO PROVIDE FUNDING FOR THE SCRHI TRUST FUND BY MEANS OF INCREASED EMPLOYER CONTRIBUTION RATES; AND TO AMEND SECTION 1-11-730, RELATING TO PERSONS ELIGIBLE FOR POST-EMPLOYMENT PARTICIPATION IN THE STATE HEALTH AND DENTAL PLANS AND ELIGIBILITY FOR EMPLOYER PAID PREMIUMS FOR RETIREES, SO AS TO CONFORM THE PAYMENT OF EMPLOYER PREMIUMS FOR RETIREES TO THE REVISED METHOD PROVIDED IN THIS ACT, PROSPECTIVELY TO REVISE THE ELIGIBILITY REQUIREMENTS FOR EMPLOYER PAID PREMIUMS FOR RETIREES, AND TO DELETE AN OBSOLETE PROVISION.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. (A) The General Assembly finds that:
(1) The Governmental Accounting Standards Board (GASB) has issued new standards to account for post-employment benefits (OPEB) other than pensions for public employees.
(2) South Carolina currently provides OPEB benefits in the form of state health and dental insurance and basic long term disability income benefit plan on a "pay as you go" basis to retirees and that this method of payment fails adequately to account for benefits as they are earned by current employees under the new GASB OPEB accounting standards.
(3) It is necessary to establish trust funds as provided in this act so that these post-employment benefits and the liabilities they give rise to may be determined currently in a manner similar to the way in which pension fund liabilities are reported.
(B) The General Assembly further finds that bringing the accounting for OPEB into compliance with new GASB standards is solely for the purpose of GASB compliance and the trust funds established by this act and other changes in OPEB contained in this act do not in any way limit the authority of the General Assembly to alter or eliminate these benefits as it determines appropriate, nor do they limit the authority of the State Budget and Control Board to amend the plan of benefits pursuant to Section 1-11-710(A)(2) of the 1976 Code, nor do the provisions of this act give rise to any contract or other right of employees and retirees as to the OPEB's to which the provisions of this act apply.
SECTION 2. Article 5, Chapter 11, Title 1 of the 1976 Code is retitled "Employees and Retirees Insurance-Accounting for Post-Employment Benefits".
SECTION 3. Article 5, Chapter 11, Title 1 of the 1976 Code is amended by adding:
"Section 1-11-703. As used in this article:
(1) 'Actuarial accrued liability' means that portion, as determined by a particular actuarial cost method, of the actuarial present value of fund obligations and administrative expenses which is not provided for by future normal costs.
(2) 'Actuarial assumptions' means assumptions regarding the occurrence of future events affecting costs of the SCRHI Trust Fund or LTDI Trust Fund such as mortality, withdrawal, disability, and retirement; changes in compensation; aging effects and cost trends for post-employment benefits; benefit election rates; rates of investment earnings and asset appreciation or depreciation; procedures used to determine the actuarial value of assets; and other such relevant items.
(3) 'Actuarial cost method' means a method for determining the actuarial present value of the obligations and administrative expenses of the SCRHI Trust Fund or LTDI Trust Fund and for developing an actuarially equivalent allocation of such value to time periods, usually in the form of a normal cost and an actuarial accrued liability. Acceptable actuarial methods are the aggregate, attained age, individual entry age, frozen attained age, frozen entry age, and projected unit credit methods.
(4) 'Actuarial present value of total projected benefits' means the present value, at the valuation date, of the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value of money and the probability of payment.
(5) 'Actuarial valuation' means the determination, as of a valuation date, of the normal cost, actuarial accrued liability, actuarial value of assets, and related actuarial present values for the SCRHI Trust Fund or LTDI Trust Fund.
(6) 'Actuarially sound' means that calculated contributions to the SCRHI Trust Fund or LTDI Trust Fund are sufficient to pay the full actuarial cost of these trust funds. The full actuarial cost includes both the normal cost of providing for fund obligations as they accrue in the future and the cost of amortizing the unfunded actuarial accrued liability over a period of no more than thirty years.
(7) 'Administrative expenses' means all expenses incurred in the operation of the SCRHI Trust Fund and LTDI Trust Fund, including all investment expenses.
(8) 'LTDI Trust Fund' means the Long Term Disability Insurance Trust Fund established pursuant to Section 1-11-707 to fund benefits under the State's Basic Long Term Disability (BLTD) Income Benefit Plan.
(9) 'Board' means the State Budget and Control Board.
(10) 'Employee insurance program' or 'EIP' means the office of the board designated by the board to operate insurance programs pursuant to this article.
(11) 'IBNR' means unpaid health claims incurred but not reported. The liability for IBNR claims is actuarially estimated based on the most current historical claims experience of previous payments, inflation, award trends, and estimates of health care trend changes.
(12) 'Operating account' means the health insurance program's business operating activities account maintained by the State Treasurer in which are deposited all premiums for enrollees in self-funded health plans authorized in this article, along with employer contributions for active employees covered by such self-funded health plans, and from which claims and administrative expenses of the self-funded health and dental plans administered by the employee insurance program are paid.
(13) 'State-covered entity' means state agencies and institutions, however described, and school districts. It also includes political subdivisions of the State that participate in the state health and dental plans.
(14) 'State health and dental plans' means any insurance program administered by the employee insurance program pursuant to this article.
(15) 'SCRHI Trust Fund' means the South Carolina Retiree Health Insurance Trust Fund established pursuant to Section 1-11-705 to fund the employer cost for health benefits for retired state employees and retired public school district employees.
(16) 'State Retirement System' or 'State Retirement Systems' means all retirement systems established pursuant to Title 9 except for the National Guard Retirement System.
(17) 'Unfunded actuarial accrued liability' means for any actuarial valuation the excess of the actuarial accrued liability over the actuarial value of the assets of the fund under an actuarial cost method utilized by the fund for funding purposes.
(18) 'Trust fund paid premiums' means the employer premium for state health and dental plans coverage paid by the SCRHI Trust Fund on behalf of a retiree. When it is expressed as a percentage of trust fund paid premiums, it means that the SCRHI Trust Fund shall pay the stated percentage of the employer premiums, with the retiree paying the balance of the employer premiums and the entire employee premium.
Section 1-11-705. (A) There is established in the State Treasury separate and distinct from the general fund of the State and all other funds the South Carolina Retiree Health Insurance Trust Fund (SCRHI Trust Fund) to provide for the employer costs of retiree post-employment health insurance benefits for retired state employees and retired employees of public school districts. Earnings on the SCRHI Trust Fund must be credited to it and unexpended funds carried forward in it to succeeding fiscal years.
(B) The board is the trustee of the SCRHI Trust Fund.
(C) The employee insurance program shall administer the SCRHI Trust Fund.
(D) The employee insurance program shall engage actuarial and other services as required to transact the business of the SCRHI Trust Fund. The actuary engaged by the employee insurance program shall provide technical advice to the board regarding operation of the SCRHI Trust Fund.
(E) Upon recommendations of the actuary, the board shall adopt generally accepted and reasonable actuarial assumptions and methods for the operation and funding of the SCRHI Trust Fund as it considers necessary and prudent. The actuarial assumptions and methods adopted by the board must be appropriate for the purposes at hand and must be reasonable, individually and in the aggregate, taking into account the experience of the plan and reasonable expectations. Utilizing the actuarial assumptions most recently adopted by the board, the actuary engaged by the employee insurance program shall set the annual actuarial valuations of normal cost, actuarial liability, actuarial value of assets, and related actuarial present values for the SCRHI Trust Fund.
(F) The board may adopt policies and procedures as necessary for the proper administration of the SCRHI Trust Fund.
(G) (1)The funds of the SCRHI Trust Fund must be invested and reinvested by the State Treasurer in the manner allowed by law. The State Treasurer shall consult with the employee insurance program and the employee insurance program's actuary to develop an annual investment plan for the SCRHI Trust Fund taking into account the cash flow needs of the employee insurance program with regard to payment of the employer share of premiums and claims for covered retirees.
(2) Effective beginning with the first fiscal year after the ratification of an amendment to Section 16, Article X of the Constitution of this State allowing funds in post-employment benefits trust funds to be invested in equity securities, the Retirement System Investment Commission (RSIC) established pursuant to Chapter 16 of Title 9, shall invest and reinvest the funds of the SCRHI Trust Fund as assets of a retirement system are invested. The chief investment officer shall consult with the employee insurance program and the employee insurance program's actuary to develop an annual investment plan for the SCRHI Trust Fund taking into account the cash flow needs of the employee insurance program with regard to payment of the employer share of premiums and claims for covered retirees. After the initial fiscal year the RSIC assumes this investing function, the annual investment plan for the SCRHI Trust Fund must be approved by the commission no later than June first of each year for the fiscal year beginning July first of the same calendar year.
(H) The board annually shall determine the minimum annual required contributions to the SCRHI Trust Fund on an actuarially sound basis in accordance with Governmental Accounting Standards Board Statement No. 45, or any other Governmental Accounting Standards Board statements that may be applicable to the SCRHI Trust Fund.
(I) The board shall fund the SCRHI Trust Fund:
(1) through the employer contributions for the South Carolina Retirement Systems as provided in Section 1-11-710(A)(2). The total employer contributions collected from the State and school districts for post-employment benefits must be transferred immediately to the SCRHI Trust Fund for investment, reinvestment, and the payment of post-employment benefits;
(2) by transfer of the Employee Insurance Program as of January thirty-first of each calendar year to the trust fund from the employee insurance program's operating account, the cash balance in the operating account in excess of one hundred forty percent of the actuarially-determined IBNR reserves of the State's health plans as of December thirty-first of the preceding year. On the reference date, an initial transfer must take place applicable to the cash balance as of December 31, 2006; and
(3) with funding as authorized by the General Assembly pursuant to Section 1-11-710(D).
(J) Each month, the employee insurance program shall determine the monthly amount of the state-funded employer premium with respect to retired state employees and retired public school district employees who are eligible for state-paid employer premiums pursuant to Section 1-11-730, and shall transfer this amount to the operating account from the SCRHI Trust Fund. In addition, the employee insurance program shall transfer the total cost of post-employment benefits for retirees and their dependents, net of premium contributions made on behalf of retirees and other sources of revenue attributable to retirees, in accordance with Governmental Accounting Standards Board Statements No. 43 and 45 and the Implementation Guide.
(K) The funds of the SCRHI Trust Fund may only be used for the payment of employer-provided other post-employment benefits under the terms of the state health and dental plans. The administrative costs related to the administration of the SCRHI Trust Fund, and the investment and reinvestment of its funds, may be funded from the earnings of the SCRHI Trust Fund.
(L) As a trust, the funds of the SCRHI Trust Fund are not assets of the state or the school districts or their respective agencies. The contributions to the SCRHI Trust Fund are irrevocable and may not revert to the employer except upon complete satisfaction of all liabilities and administrative expenses of the state health and dental plans of other post-employment benefits provided pursuant to the state health and dental plans.
Section 1-11-707. (A) There is established in the State Treasury separate and distinct from the general fund of the State and all other funds the South Carolina Long Term Disability Insurance Trust Fund (LTDI Trust Fund) to provide for the payment of benefits under the State's Basic Long Term Disability Income Benefit Plan. Earnings on the LTDI Trust Fund must be credited to it and unexpended funds carry forward in it to succeeding fiscal years.
(B) The board is the trustee of the LTDI Trust Fund.
(C) The employee insurance program shall administer the LTDI Trust Fund.
(D) The employee insurance program shall engage actuarial and other services as required to transact the business of the LTDI Trust Fund. The actuary engaged by the employee insurance program shall provide technical advice to the board regarding operation of the LTDI Trust Fund.
(E) Upon recommendations of the actuary, the board shall adopt generally accepted and reasonable actuarial assumptions and methods for the operation and funding of the LTDI Trust Fund as it considers necessary and prudent. The actuarial assumptions and methods adopted by the board must be appropriate for the purposes at hand and must be reasonable, individually and in the aggregate, taking into account the experience of the plan and reasonable expectations. Utilizing the actuarial assumptions most recently adopted by the board, the actuary engaged by the employee insurance program shall set the annual actuarial valuations of normal cost, actuarial liability, actuarial value of assets, and related actuarial present values for the LTDI Trust Fund.
(F) The board may adopt rules and promulgate regulations as necessary for the proper administration of the LTDI Trust Fund.
(G) (1) The funds of the LTDI Trust Fund must be invested and reinvested by the State Treasurer in the manner allowed by law. The State Treasurer shall consult with the employee insurance program and the employee insurance program's actuary to develop an annual investment plan for the LTDI Trust Fund taking into account the cash flow needs of the employee insurance program with regard to payment of the employer share of premiums and claims for covered retirees.
(2) Effective beginning with the first fiscal year after the ratification of an amendment to Section 16, Article X of the Constitution of this State allowing funds in post-employment benefits trust funds to be invested in equity securities, the Retirement System Investment Commission (RSIC) established pursuant to Chapter 16 of Title 9, shall invest and reinvest the funds of the LTDI Trust Fund as assets of a retirement system are invested. The chief investment officer shall consult with the employee insurance program and the employee insurance program's actuary to develop an annual investment plan for the LTDI Trust Fund taking into account the cash flow needs of the employee insurance program with regard to payment of the employer share of premiums and claims for covered retirees. After the initial fiscal year the RSIC assumes this investing function, the annual investment plan for the LTDI Trust Fund must be approved by the commission no later than June first of each year for the fiscal year beginning July first of the same calendar year.
(H) The board annually shall determine the minimum annual required contributions to the LTDI Trust Fund on an actuarially sound basis in accordance with Governmental Accounting Standards Board Statement No. 45, or any other Governmental Accounting Standards Board statements that may be applicable to the LTDI Trust Fund.
(I) The board shall increase the employer contributions used to fund the BLTD Plan by an amount equal to or greater than the minimum annual required contribution for the LTDI Trust Fund as determined in subsection (H) of this section. The increased employer contributions remitted to the employee insurance program under this subsection must be deposited in the LTDI Trust Fund.
(J) Each month, the employee insurance program shall transfer to the operating account from the LTDI Trust Fund the amount invoiced by the third-party administrator for the BLTD Plan for payment of LTDI claims, including reasonable expenses associated with claims administration of the BLTD Plan.
(K) The assets of the LTDI Trust Fund may only be used for the payment of the State's claims under the BLTD Plan along with reasonable expenses associated with the operation of the BLTD Plan, and the assets of the LTDI Trust Fund may not be used for any other purpose. The administrative costs related to the administration of the LTDI Trust Fund, and the investment and reinvestment of its funds, must be funded from the earnings of the LTDI Trust Fund.
(L) As a trust, the funds of the LTDI Trust Fund are not assets of the state or the school districts or their respective agencies. The contributions to the LTDI Trust Fund are irrevocable and may not revert to the employer except upon complete satisfaction of all liabilities and administrative expenses of the State Basic Long Term Disability Income Benefit Plan of other post-employment benefits provided pursuant to the State Basic Long Term Disability Income Benefit Plan."
SECTION 4. A. Section 1-11-710(A) of the 1976 Code is amended to read:
"(A) The State Budget and Control Board shall:
(1) make available to active and retired employees of this State and its public school districts and their eligible dependents group health, dental, life, accidental death and dismemberment, and disability insurance plans and benefits in an equitable manner and of maximum benefit to those covered within the available resources.;
(2) approve by August fifteenth of each year a plan of benefits, eligibility, and employer, employee, retiree, and dependent contributions for the next calendar year. The board shall devise a plan for the method and schedule of payment for the employer and employee share of contributions. Provided that the Budget and Control Board, and by July 1 first of the current fiscal year, shall develop and implement a plan increasing the employer contribution rates of the State Retirement System Systems to a level adequate to cover the employer's share for the current fiscal year's cost of providing health and dental insurance to retired state and school district employees. The plan state health and dental plans must include a method for the distribution of the funds appropriated as provided by law which are designated for retiree insurance and also must include a method for allocating to school districts, excluding EIA funding, sufficient general fund monies to offset the additional cost incurred by these entities in their federal and other fund activities as a result of this employer contribution charge. The funds collected through increasing the employer contribution rates for the State Retirement Systems under this section must be deposited in the SCRHI Trust Fund established pursuant to Section 1-11-705. The amounts appropriated in this section shall constitute the State's pro rata contributions to these programs except the State shall pay its pro rata share of health and dental insurance premiums for retired state and public school employees for the current fiscal year.;
(3) adjust the plan, benefits, or contributions, at any time to insure the fiscal stability of the system.;
(4) set aside in separate continuing accounts in the State Treasury, appropriately identified, all funds, state-appropriated and other, received for actual health and dental insurance premiums due. Funds credited to these accounts may be used to pay the costs of administering the state health and dental insurance programs plans and may not be used for purposes of other than providing insurance benefits for employees and retirees. A reserve equal to not less than an average of one and one-half months' claims must be maintained in the accounts and all funds in excess of the reserve must be used to reduce premium rates or improve or expand benefits as funding permits."
B. Section 1-11-710 of the 1976 Code is amended by adding a new subsection at the end to read:
"(D) The General Assembly intends to authorize funding for the SCRHI Trust Fund in order to make progress toward reaching or maintaining the minimum annual required contribution under Governmental Accounting Standards Board Statement No. 45. The board shall determine the minimum annual required contribution pursuant to Section 1-11-705(H)."
SECTION 5. Section 1-11-730 of the 1976 Code is amended to read:
"Section 1-11-730. (A) If a person began employment eligible for coverage under the state health and dental plans on or before the reference date, the following eligibility provisions govern that person's participation in state health and dental plans as a retiree:
(A)(1) A person covered by the state health and dental insurance plans who terminates employment with at least twenty years' retirement service credit by a state-covered entity before eligibility for retirement under a state retirement system is eligible for state health and dental plans coverage, the plans effective on the date of retirement under a state retirement system, if the last five years are consecutive and in a full-time permanent position with a state-covered entity. With respect to a retiree eligible for coverage pursuant to this subsection, the retiree is eligible for trust fund paid premiums and the retiree is responsible for the entire employee premium.
(B)(2) A member of the General Assembly who leaves office or retires with at least eight years' credited service in the General Assembly Retirement System is eligible to participate in the state health and dental plans by paying the full premium costs as determined by the State Budget and Control Board.
(C)(3) With respect to an active employee: (a) employed by the state or a public school district, (b) retiring with ten or more years of state-covered entity service credited under a state retirement system, and (c) with the last five years of earned service credit consecutive and in a full-time permanent position with the state or a public school district, is eligible for state paid premiums, if the last five years are consecutive and in a full-time permanent position with a state covered entity the retiree is eligible for trust fund paid premiums and the retiree is responsible for the entire employee premium.
(D)(4) A person covered by the state health and dental plans who retires with at least five years' state-covered entity service credited under a state retirement system is eligible to participate in the plan state health and dental plans by paying the full premium costs as determined by the board, if the last five years are consecutive and in a full-time permanent position with a state-covered entity.
(E)(5) A spouse or dependent of a person covered by the plans who is killed in the line of duty after December 31, 2001, shall receive equivalent coverage under the state health and dental plans for a period of twelve months and the State shall be is responsible for paying the full premium costs. After the twelve-month period, a spouse or dependent is eligible for state-paid trust fund paid premiums. A spouse is eligible for state-paid trust fund paid premiums under this subsection until the spouse remarries. A dependent is eligible for state-paid trust fund paid premiums under this subsection until the dependent's eligibility for coverage under the plans would ordinarily terminate.
(F) All state and school district employees employed before July 1, 1984, who were or would have been eligible for the plans upon completion of five years' service are exempt from the provisions of this section and are eligible for the plan effective on the date of their retirement.
(G)(6) A former municipal or county council member of a county or municipality which participates in the state health and dental insurance plans who served on the council for at least twelve years and who was covered under the plans at the time of termination is eligible to maintain coverage under the plans if the former member pays the full employer and employee contributions and if the county or municipal council elects to allow this coverage for former members.
(H)(7) A person covered by the state health and dental plans who terminated employment with at least eighteen years' retirement service credit by a state-covered entity before eligibility for retirement under a state retirement system prior to before 1990 is eligible for the plans effective on the date of retirement, if this person returns to a state-covered entity and is covered by the state health and dental plans and completes at least two consecutive years in a full-time, permanent position prior to before the date of retirement.
(B) If a person began employment eligible for coverage under the state health and dental plans after the reference date, the following eligibility provisions govern that person's participation in state health and dental plans as a retiree:
(1) An active employee covered by the state health and dental plans who retires with at least five years of earned retirement service credit under a state retirement system with a state-covered entity is eligible to participate as a retiree in the state health and dental plans if the last five years of the person's covered employment were consecutive and in a full-time permanent position.
(2) A person covered by the state health and dental plans who terminates employment before the person's date of retirement with at least twenty years of earned retirement service credit under a state retirement system with a state-covered entity is eligible to participate as a retiree in the state health and dental plans on the person's date of retirement under a state retirement system, if the last five years of the person's covered employment before termination were consecutive and in a full-time permanent position.
(3) A retired state employee or a retired employee of a public school district who retires under a state retirement system and who is eligible for state health and dental plan coverage under the provisions of item (1) or (2) of this subsection, is eligible for trust fund paid premiums as follows:
(a) If the retiree's earned service credit in a state retirement system is five or more years but fewer than twelve years and six months with a state-covered entity, then the retiree shall pay the full premium for health and dental plans.
(b) If the retiree's earned service credit in a state retirement system is more than twelve years and six months, but fewer than twenty-five years with a state-covered entity, then the retiree is eligible for fifty percent trust fund paid premiums and the retiree shall pay the remainder of the premium cost.
(c) If the retiree's earned service credit in a state retirement system is twenty-five or more years with a state-covered entity, then the retiree is eligible for trust fund paid premiums and the retiree is responsible for the entire employee premium.
(4) If a retiree under a state retirement system was employed by an entity that participates in the state health and dental plans pursuant to the provisions of Section 1-11-720 and is eligible to participate in state health and dental plans as a retiree pursuant to the provisions of item (1) or (2) of this subsection, then the retiree's employer, at its discretion, may elect to pay all or a portion of the premium for the retiree's state health and dental plans.
(5) A spouse or dependent of a person covered by the plans who is killed in the line of duty on or after the reference date, shall continue to maintain coverage under state health and dental plans for a period of twelve months after the covered person's death and the State is responsible for paying the full premium. After the twelve-month period, a spouse or dependent is eligible for trust fund paid premiums and the spouse or dependent is responsible for the entire employee premium. A spouse is eligible for trust fund paid premiums under this subsection until the spouse remarries. A dependent is eligible for trust fund paid premiums pursuant to this subsection until the dependent's eligibility for coverage under the plans would ordinarily terminate.
(C) For employees who participate in the state health and dental plans pursuant to the provisions of Section 1-11-720 but who are not members of the State Retirement Systems, one year of full-time employment or its equivalent under their employment relation equates to one year of earned retirement service credit under a state retirement system for purposes of the requirements of subsection (B)(1) and (2) of this section. The EIP shall implement the provisions of this subsection and make determinations pursuant to it. A person aggrieved by a determination of the EIP pursuant to this subsection may appeal that determination as a contested case as provided in Chapter 23 of Title 1, the Administrative Procedures Act."
SECTION 6. If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of this act, the General Assembly hereby declaring that it would have passed this act, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.
SECTION 7. The Code Commissioner shall insert the effective date of this act for the phrase "reference date" where it appears in Section 1-11-705 of the 1976 Code as added by this act and in Section 1-11-730 of the 1976 Code as amended by this act.
SECTION 8. This act takes effect on the first day of the month following the month during which this act is approved by the Governor.
This web page was last updated on Monday, June 22, 2009 at 2:44 P.M.