AN ACT Relating to benefits for public employees except common school employees; amending RCW 41.05.010, 41.05.025, 41.05.030, 41.05.040, 41.05.045, 41.05.050, 41.05.060, 41.05.070, 41.05.080, 31.12.125, 36.32.400, 41.04.180, 41.04.230, 41.04.250, 41.04.380, 41.04.600, 41.04.605, 41.04.615, 41.04.625, 41.04.630, 41.04.640, 41.04.645, 41.40.380, 44.44.040, 47.64.270, 48.24.010, and 70.14.010; reenacting and amending RCW 41.04.260; adding new sections to chapter 41.05 RCW; adding a new section to chapter 41.06 RCW; adding a new section to chapter 48.01 RCW; creating new sections; recodifying RCW 41.04.250, 41.04.255, 41.04.260, 41.04.362, 41.04.364, 41.04.370, 41.04.375, 41.04.380, 41.04.385, 41.04.600, 41.04.605, 41.04.610, 41.04.615, 41.04.620, 41.04.625, 41.04.630, 41.04.635, 41.04.640, and 41.04.645; repealing RCW 41.04.205 and 41.05.005; making appropriations; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. A new section is added to chapter 41.05 RCW to read as follows:

There is hereby created an agency of state government to be known as the public employees' benefits agency. The agency shall be vested with all powers and duties authorized under this chapter and such other powers and duties as may be provided by law.

NEW SECTION. Sec. 2. A new section is added to chapter 41.05 RCW to read as follows:

The executive head and appointing authority of the agency shall be the director. The director shall be appointed by the governor and shall serve at the pleasure of the governor. The director shall have experience in the development and provision of employee benefit programs. The director shall be paid a salary to be fixed by the governor in accordance with RCW 43.03.040.

NEW SECTION. Sec. 3. A new section is added to chapter 41.05 RCW to read as follows:

The director shall appoint at least four persons to be agency staff, including an internal auditor and a confidential secretary, who shall be exempt from the provisions of chapter 41.06 RCW.

Sec. 4. Section 1, chapter 39, Laws of 1970 ex. sess. as last amended by section 90, chapter 3, Laws of 1983 and RCW 41.05.010 are each amended to read as follows:

Unless the context clearly indicates otherwise, ((~~words used in~~)) the definitions in this section apply throughout this chapter ((~~have the following meaning~~)):

(1) "Actuary" means either an actuarial consulting firm engaged by the agency or the state actuary.

(2) "Agency" means the public employees' benefits agency.

(3) "Board" means the ((~~state employees' insurance board established under the provisions of RCW 41.05.025~~)) public employees' benefits board.

(4) "Director" means the director of the agency.

(5) "Dependent" means:

(a) A legal spouse;

(b) Any natural born or adoptive child living with the employee or whom the employee has a legal obligation to support who is:

(i) Under the age of twenty; or

(ii) Under the age of twenty-four and verified as enrolled full time in a postsecondary program; or

(iii) Developmentally, mentally, or physically disabled;

(i) Living with the qualified employee; and

(ii) Under the age of twenty; or

(iii) Under the age of twenty-four and verified as enrolled full time in a postsecondary program; or

(iv) Developmentally, mentally, or physically disabled;

(d) At the discretion of the director, a foster child or children of a qualified employee where such child or children are not eligible for any other insurance coverage; and

(e) At the discretion of the director, a natural-born relative for whom a qualified employee is sole legal guardian.

((~~(2)~~)) (6) "Employee" shall include all full time ((~~and~~)), career seasonal, part-time employees ((of the state, a county, a municipality, or other political subdivision of the state, whether or not covered by civil service; elected and appointed officials of the executive branch of government, including full time members of boards, commissions, or committees; and shall include any or all part time and temporary employees under the terms and conditions established by the board; justices of the supreme court and judges of the court of appeals and the superior courts; and members of the state legislature or of the legislative authority of any county, city, or town who are elected to office after February 20, 1970)) of an employer, project employees employed by an employer with a specific termination date that exceeds nine months, and all elected or appointed officials of the state and its political subdivisions except for elected or appointed officials of school districts and elected or appointed officials who are insured under another program provided by the state or a political subdivision for its employees. For purposes of this subsection:

(a) "Career seasonal employee" means an employee in a position with an established working cycle greater than five months per year but not more than nine months in any consecutive twelve-month period;

(b) "Full time" means permanent employment with at least thirty-two hours of work in a normal work week; and

(c) "Part-time employee" means a permanent employee working at least twenty hours per week but no more than thirty-two hours per week.

(7) "Employer" means the state of Washington, including the executive, legislative, and judicial branches including noncivil service positions, and its political subdivisions other than educational service districts and school districts.

((~~(3)~~)) (8) "Panel medicine plan" means a health care plan which can be offered by a health care service contractor which itself furnishes the health care service contracted for by means of a group practice prepaid medical care plan, meets such criteria established by the director, and also includes a health maintenance organization holding a valid certificate of registration under chapter 48.46 RCW.

((~~(4) "Trustee" shall mean the director of personnel~~))

(9) "Persons eligible for continuation of coverage" means those persons eligible under Public Law No. 99-272, the consolidated omnibus budget reconciliation act of 1985 (COBRA) as amended by Public Law No. 99-509, the omnibus budget reconciliation act of 1986; and Public Law No. 99-514, the 1986 tax reform act.

(10) "Qualified employee" means either:

(a) An employee who is either single or married to a person not employed by an employer; or

(b) In the instance where a person is married to a person employed by an employer, that person designated in a manner established by the director.

Sec. 5. Section 2, chapter 136, Laws of 1977 ex. sess. as last amended by section 68, chapter 287, Laws of 1984 and RCW 41.05.025 are each amended to read as follows:

(1) ((There is hereby created a state employees' insurance board to be composed of the members of the present board holding office on the day prior to July 1, 1977, which such members shall serve until the expiration of the period of time of the term for which they were appointed and until their successors are appointed and qualified. Thereafter the board shall be composed as follows: The governor or the governor's designee; one administrative officer representing all of higher education to be appointed by the governor; two higher education faculty members to be appointed by the governor; the director of the department of personnel who shall act as trustee; one representative of an employee association certified as an exclusive representative of at least one bargaining unit of classified employees and one representative of an employee union certified as exclusive representative of at least one bargaining unit of classified employees, both to be appointed by the governor; one person who is retired and is covered by a program under the jurisdiction of the board, to be appointed by the governor; one member of the senate who shall be appointed by the president of the senate; and one member of the house of representatives who shall be appointed by the speaker of the house. The terms of office of the administrative officer representing higher education, the two higher education faculty members, the representative of an employee association, the retired person, and the representative of an employee union shall be for four years: PROVIDED, That the first term of one faculty member and one employee association or union representative member shall be for three years. Meetings of the board shall be at the call of the director of personnel. The board shall prescribe rules for the conduct of its business and shall elect a chairman and vice chairman annually. Members of the board shall be compensated in accordance with RCW 43.03.240 and shall be paid for their travel expenses while on official business in accordance with RCW 43.03.050 and 43.03.060, and legislative members shall receive allowances provided for in RCW 44.04.120.

(2) The board shall study all matters connected with the providing of adequate health care coverage, life insurance, liability insurance, accidental death and dismemberment insurance, and disability income insurance or any one of, or a combination of, the enumerated types of insurance and health care plans for employees and their dependents on the best basis possible with relation both to the welfare of the employees and to the state: PROVIDED, That liability insurance shall not be made available to dependents.)) The director, with the assistance of the actuary and consent of the board, shall design benefits, engage an insurance broker if required, devise specifications, analyze carrier responses to advertisements for bids, determine the terms and conditions of employee participation and coverage, ((~~and~~)) decide on the award of contracts which shall be signed by the ((~~trustee on behalf of the board~~)) director, and conduct enrollments, including positive enrollments: PROVIDED, That all contracts for insurance, health care plans, including panel medicine plans, or protection applying to employees covered by RCW 28B.10.660 and chapters 41.04 and 41.05 RCW shall provide that the beneficiaries of such insurance, health care plans, or protection may ((~~utilize~~)) use on an equal participation basis the services of practitioners licensed pursuant to chapters 18.22, 18.25, 18.32, 18.53, 18.57, 18.71, 18.74, 18.83, and 18.88 RCW: PROVIDED FURTHER, That the boards of trustees and boards of regents of the several institutions of higher education shall retain sole authority to provide liability insurance as provided in RCW 28B.10.660. The director, with the consent of the board, shall from time to time review and amend such plans. Contracts for all plans shall be rebid and awarded ((~~at least~~)) July 1, 1992, and every ((~~five~~)) four years thereafter, but within such four-year period the director may rebid and award contracts as directed by the board, based on cost and competitiveness.

(((3) The board shall develop and provide as a part of the employee insurance benefit program an employee health care benefit plan which may be provided through a contract or contracts with regularly constituted insurance carriers or health care service contractors as defined in chapter 48.44 RCW, and a plan to be provided by a panel medicine plan in its service area only when approved by the board. The board may but shall not be required to pay more for health benefits under a panel medicine plan than it would otherwise be required to pay for health benefits by a contract with a regularly constituted insurance carrier or health care service contractor in effect at the time the panel medicine plan is included in the employee health care benefit plan. Except for panel medicine plans, the board may but is not required to contract with more than one insurance carrier or health care service contractor to provide similar benefits: PROVIDED, That employees may choose participation in only one of the health care benefit plans sponsored by the board. Active employees, as defined in RCW 41.05.010(2), eligible for medicare benefits shall have the option of continuing participation in health care programs on the same basis as all other employees or participation in medicare supplemental programs as may be developed by the board. These health care benefit plans shall provide coverage for all officials and employees and their dependents without premium or subscription cost to the individual employees and officials, unless the board approves a panel medicine plan at a subscription rate in excess of the premium of the regularly constituted insurance carrier or health care service contractor, in which circumstances an employee contribution may be authorized at an amount equal to such excess. Rates for self pay segments of state employee groups will be developed from the experience of the entire group. Such self pay rates will be established based on a separate rate for the employee, the spouse, and children.

~~(4)~~)) (2) The director, with the consent of the board, shall:

(a) Develop and provide as a part of the insurance benefit program a qualified employee health care benefit plan which may be provided through a contract or contracts with regularly constituted insurance carriers or health care service contractors and panel medicine plans;

(b) Except for the panel medicine plans, contract with at least one insurance carrier or health care service contractor to provide similar benefits. The qualified employee, however, may choose participation in only one of the health care benefit plans sponsored by the agency; and

(c) Authorize premium rates that exceed the employers' contribution, and the rates shall be established on the basis of separate rates for the qualified employee, spouse, and children.

(3) Premium contributions for dependents may be authorized except for spouses who are employed by an employer. Such contributions shall consist of the difference of the premium for the health care benefit plan or panel medicine plan selected by the qualified employee and the employer's contribution. Such premium contributions shall be designed with consideration of the individual's ability to pay and shall not create obstacles to receipt of medically necessary and preventive care.

(4) Coinsurance, deductibles, and other forms of employee financial participation shall be incorporated into the health care benefit plan or plans and panel medicine plans.

(5) The employer contribution shall be the same for all health care plans offered to state employees, adjusted for the number of employees and dependents covered by the health plan, provided that the employer contribution shall not exceed the premium charged by the plan.

(6) The director shall establish effective coordination of benefits.

(7) The ((~~board~~)) director shall review plans proposed by insurance carriers who desire to offer property insurance and/or accident and casualty insurance to state employees through payroll deduction. The ((~~board~~)) director may approve, with the consent of the board, any such plan for payroll deduction by carriers holding a valid certificate of authority in the state of Washington and which the ((~~board~~)) director determines to be in the best interests of employees and the state. The ((~~board~~)) agency shall ((~~promulgate~~)) adopt rules setting forth criteria by which it shall evaluate the plans.

Sec. 6. Section 3, chapter 39, Laws of 1970 ex. sess. as last amended by section 1, chapter 122, Laws of 1987 and RCW 41.05.030 are each amended to read as follows:

(1) The ((~~state employees' insurance board~~)) director shall have the following powers and duties, in addition to any other powers and duties prescribed by law:

(a) To ((authorize the director of personnel to appoint a benefits supervisor, to whom the director may delegate his duties hereunder, and other necessary personnel, subject to the jurisdiction of the state civil service law, chapter 41.06 RCW)) employ necessary staff, in addition to those appointed under section 3 of this 1988 act, and such additional staff shall be subject to the provisions of chapter 41.06 RCW;

(b) To authorize ((~~other~~)) necessary administrative expenses;

(c) To provide for the disbursement of funds in the ((~~state~~)) employees' insurance principal account for payment of premiums and to reduce employee contributions or increase benefits; ((~~and~~))

(d) To provide for the expenditure of funds in the ((~~state~~)) employees' insurance administrative account, subject to legislative appropriation, to pay salaries and wages and other necessary administrative expenses;

(e) To adopt rules in accordance with chapter 34.04 RCW; and

(f) If benefit programs are self-funded, to employ legal counsel other than the attorney general, to contract for any actuarial or underwriting services not provided by the office of the state actuary, and shall contract for private services for claims adjudication and all other types of administrative and employee services required for self-funding.

(2) The director shall maintain all necessary records of the agency and of the several benefit programs under the control of the director at a central location. Within such records shall be employee specific eligibility data across all plans offered by the agency, data required to develop enrollment demographics on a plan specific basis, and information as required by the actuary to fulfill the requirements set forth under RCW 47.64.270(3). The director shall also require annual reports with quarterly updates by all providers on utilization and financial status. If the experience is at variance of more than three percent of what was anticipated in the biennial appropriation for premiums, the director shall notify the governor and the legislature.

(3) Except as provided in this subsection, the director shall enter into contracts except that any contract involving a third party payer shall acknowledge the state's ownership of all claims information regardless of the form in which it is maintained. For any health care or dental insurance contract or contracts negotiated to begin on July 1, 1988, the director of the office of financial management may be the signatory on behalf of the agency.

(4) The director ((~~of the department of personnel shall be trustee and administrator of all health benefit and insurance contracts.~~

He)) shall transmit contributions for health care and other insurance plans in payment of premiums and transfers to the ((~~state~~)) employees' insurance administrative account for operating and administrative costs of the ((~~board and the benefits supervisor~~)) agency, and receive and deposit contributions and dividends or refunds into the ((~~state~~)) employees' insurance principal account. ((He)) The director shall provide facilities and services necessary for the purpose of the ((~~board~~)) agency and its operations, subject to full reimbursement by the ((~~board~~)) agency for the cost thereof to be paid out of the ((~~state~~)) employees' insurance administrative account.

((~~(3)~~)) (5) Every division, department, or separate agency of state government shall fully cooperate in administration of the plans, education of employees, claims administration, and other duties as required by the ((~~trustee or the board~~)) director.

(6) The director shall stand in a fiduciary relationship to qualified employees.

(7) The director shall submit to the governor and legislature quarterly summaries of the financial reports and updates required by section 6(2) of this 1988 act.

NEW SECTION. Sec. 7. A new section is added to chapter 41.05 RCW to read as follows:

The director, through the actuary, annually shall provide a funding rate recommendation to the governor and the legislature. Such funding rate shall be developed from data maintained for each of the health plans offered to state employees by the actuary sufficient to:

(1) Summarize and validate the current year's costs;

(2) Adjust for any known irregularities in the claims experience;

(3) Determine the current observed health care cost trend;

(4) Estimate the trend for the ensuing contract period;

(5) Adjust for any benefit or enrollment changes;

(6) Determine the necessary reserve adjustments;

(7) Determine all administrative charges;

(8) Calculate a per employee funding rate including a separate accounting for dependents; and

(9) Calculate any required additional rates for retirees, persons eligible for continuation of coverage, or any other self-pay rate.

NEW SECTION. Sec. 8. A new section is added to chapter 41.05 RCW to read as follows:

The public employees' benefits board is hereby created to be composed of the following members appointed by the governor:

(1) Three representatives of employees;

(2) Four persons knowledgeable in employee benefits who are not public employees; and

(3) A representative of retired employees.

The members of the board shall elect a chair and a vice-chair.

NEW SECTION. Sec. 9. A new section is added to chapter 41.05 RCW to read as follows:

The board shall have the following powers and duties:

(1) To advise and consent to the decisions of the director as prescribed by this chapter; and

(2) To study all matters connected with the providing of adequate health care coverage, life insurance, liability insurance, accidental death and dismemberment insurance, and disability income insurance or any one of, or a combination of, the enumerated types of insurance and health care plans for employees and their dependents on the best basis possible with relation to both the welfare of the employees and to the state and report the findings and any recommendations to the director regarding these studies.

Sec. 10. Section 4, chapter 39, Laws of 1970 ex. sess. as last amended by section 3, chapter 122, Laws of 1987 and RCW 41.05.040 are each amended to read as follows:

(1) There is hereby created an account within the state treasury, designated as the ((~~state~~)) employees' insurance principal account, to be used by the ((~~trustee~~)) director for the deposit of employer contributions, dividends and refunds, and for payment of premiums for employee insurance benefit contracts entered into in accordance with instructions of the ((~~board~~)) director and payments to the ((~~state~~)) employees' insurance administrative account authorized by RCW 41.05.030(2). Moneys from the ((~~state~~)) employees' insurance principal account shall be disbursed by the state treasurer by warrants on vouchers duly authorized by the ((~~trustee~~)) director. ((However, before June 30, 1987, the treasurer shall not disburse moneys from the account when the disbursement would result in a fund balance of less than $11,597,000. Notwithstanding RCW 43.84.090, all earnings of investments of balances in the state employees' insurance principal account shall be credited to the state employees' insurance administrative account.))

(2) Excess funds in the employees' insurance principal account are not intended to be used solely for the purposes of this chapter and may be transferred periodically to the general fund.

NEW SECTION. Sec. 11. A new section is added to chapter 41.05 RCW to read as follows:

There is hereby created an account within the state treasury, designated as the employees' contribution account, to be used by the director for the deposit of employee contributions for partial payment of premiums for employee insurance benefit contracts entered into in accordance with instructions of the director. Moneys from the employees' contribution account shall be disbursed by the state treasurer by warrants on vouchers duly authorized by the director.

Sec. 12. Section 2, chapter 122, Laws of 1987 and RCW 41.05.045 are each amended to read as follows:

There is hereby created the ((~~state~~)) employees' insurance administrative account in the state treasury. This account, subject to legislative appropriation, is to be used by the ((~~trustee~~)) director to pay administrative expenses of the ((~~state employees' insurance board and the salaries, wages, and expenses of the benefits supervisor~~)) agency and other necessary personnel in accordance with RCW 41.05.030. Moneys from the ((~~state~~)) employees' insurance administrative account shall be disbursed by the state treasurer by warrants on vouchers duly authorized by the ((~~trustee~~)) director. ((~~Notwithstanding RCW 43.84.090, all earnings of investments of balances in the state employees' insurance administrative account shall be credited to this account.~~)) Any excess of earnings of investments of balances credited to this account over administrative expenses disbursed from this account shall be expended to the ((~~state~~)) employees' insurance principal account. Any deficiency in the ((~~state~~)) employees' insurance administrative account caused by an excess of administrative expenses disbursed from this account over earnings of investments of balances credited to this account shall be transferred to this account from the ((~~state~~)) employees' insurance principal account.

Sec. 13. Section 9, chapter 2, Laws of 1983 as last amended by section 4, chapter 122, Laws of 1987 and RCW 41.05.050 are each amended to read as follows:

(1) Every department, division, or separate agency of state government, and such county, municipal, or other political subdivisions as are covered by this chapter, shall provide contributions to insurance and health care plans for its employees and their dependents, the content of such plans to be determined by the ((~~state employees' insurance board~~)) director. Such contributions, which shall be paid by the county, the municipality, or other political subdivision for their employees, shall include an amount determined by the ((~~state employees' insurance board~~)) director to pay the administrative expenses of the ((~~board~~)) agency and the salaries ((~~and~~)), wages, and expenses of the ((~~benefits supervisor~~)) agency and other necessary personnel: PROVIDED, That this administrative service charge for state employees shall not result in an employer contribution in excess of the amount authorized by the governor and the legislature as prescribed in RCW 41.05.050(2), and that the sum of an employee's insurance premiums and administrative service charge in excess of such employer contribution shall be paid by the employee. All such contributions will be paid into the ((~~state~~)) employees' insurance principal account to be expended in accordance with RCW 41.05.030.

(2) The contributions of any department, division, or separate agency of the state government, and such county, municipal, or other political subdivisions as are covered by this chapter, shall be set by the ((~~state employees' insurance board~~)) director, subject to the approval of the governor for availability of funds as specifically appropriated by the legislature for that purpose: PROVIDED, That provision for school district personnel shall not be made under this chapter: PROVIDED FURTHER, That insurance and health care contributions for ferry employees shall be governed by RCW 47.64.270.

(3) The ((~~trustee~~)) director, with the assistance of the department of personnel, shall survey private industry and public employers in the state of Washington to determine the average employer contribution for group insurance programs under the jurisdiction of the ((~~state employees' insurance board~~)) agency. Such survey shall be conducted during each even-numbered year but may be conducted more frequently. The survey shall be reported to the ((~~board~~)) director for ((~~its~~)) his or her use in setting the amount of the recommended employer contribution to the employee insurance benefit program covered by this chapter. The ((~~board~~)) director shall transmit a recommendation for the amount of the employer contribution to the governor and the director of financial management for inclusion in the proposed budgets submitted to the legislature.

Sec. 14. Section 6, chapter 39, Laws of 1970 ex. sess. and RCW 41.05.060 are each amended to read as follows:

The department of general administration shall make its services available to the ((~~board~~)) agency in advertising for and procuring bids for health care benefit programs authorized by the board in accordance with RCW 43.19.1935.

Sec. 15. Section 7, chapter 39, Laws of 1970 ex. sess. as last amended by section 5, chapter 136, Laws of 1977 ex. sess. and RCW 41.05.070 are each amended to read as follows:

The cost of any health care insurance contracts or plans to any department, division or separate agency of state, county, municipal, or other political subdivision of state government shall be paid by any officer authorized to disburse such funds to the ((~~trustee~~)) director for payment of the contributions due pursuant to any such contract authorized by the ((~~board~~)) director.

NEW SECTION. Sec. 16. A new section is added to chapter 41.05 RCW to read as follows:

(1) Health care benefit plans shall be provided pursuant to RCW 41.05.025 for qualified full-time and career seasonal employees immediately after the commencement of employment. Part-time employees shall have a probationary period of six consecutive calendar months.

(2) Plans shall not provide maternity benefits for a dependent child or children of qualified employees.

(3) There shall be an open enrollment period at least once every two years to modify coverage or to change plans but a qualified employee shall be permitted to modify coverage with regard to dependents at any time.

(4) The agency shall not provide liability insurance for dependents.

Sec. 17. Section 8, chapter 39, Laws of 1970 ex. sess. as last amended by section 6, chapter 136, Laws of 1977 ex. sess. and RCW 41.05.080 are each amended to read as follows:

(1) Retired or disabled state employees, or employees of county, municipal, or other political subdivisions covered by this chapter who are retired, may continue their participation in insurance plans and contracts after retirement or disablement, under the qualifications, terms, conditions, and benefits set by the ((~~board~~)) director: PROVIDED, That the rates charged such retired or disabled employees for health care will be developed from the same experience pool as active employees: PROVIDED FURTHER, That such retired or disabled employees shall bear the full cost of premiums required to provide such coverage: PROVIDED FURTHER, That such self pay rates will be established based on a separate rate for the employee, the spouse, and the children: PROVIDED FURTHER, That rates for a retired or disabled employee, spouse, or child who is eligible for and who elects to apply for medicare will be actuarially reduced to reflect the value of Part A and Part B of medicare. The term "retired state employees" for the purpose of this section shall include but not be limited to members of the legislature whether voluntarily or involuntarily leaving state office.

(2) Persons eligible for continuation of coverage may continue their participation in insurance plans under the same terms and conditions as may retired or disabled state employees under subsection (1) of this section except such persons shall bear not less than one hundred percent and not more than one hundred two percent of the full cost of premiums required to provide such coverage. These persons shall no longer be eligible under this chapter if they are covered under any other group health insurance or benefit plan including medicare, or they are not making timely payments of the required contribution.

NEW SECTION. Sec. 18. A new section is added to chapter 41.05 RCW to read as follows:

(1) Except as provided in RCW 41.04.180, the employees, with their dependents, of any county, municipality, or other political subdivision of this state shall be eligible to participate in any insurance program administered under this chapter if the legislative authority of any such county, municipality, or other political subdivisions of this state determines a transfer to an insurance program administered under this chapter should be made: PROVIDED, That this section shall have no application to school district personnel provided for in RCW 28A.58.420 and members of the law enforcement officers' and fire fighters' retirement system under chapter 41.26 RCW: PROVIDED FURTHER, That in the event of a special district employee transfer pursuant to this section, members of the governing authority shall be eligible to be included in such transfer if such members are authorized by law as of June 25, 1976 to participate in the insurance program being transferred from and subject to payment by such members of all costs of insurance for members.

(2) If the legislative authority of a county, municipality, or other political subdivision determines to so transfer, the board shall:

(a) Establish the conditions under which the transfer may be made;

(b) Hold public hearings on the application for transfer; and

Approval of the application by the board shall effect a transfer of the employees involved to the insurance or health care program for which application has been made.

NEW SECTION. Sec. 19. A new section is added to chapter 41.05 RCW to read as follows:

(1) With the consent of the board, the director may self-fund, self-insure, or enter into other methods of providing insurance coverage for insurance programs under the jurisdiction of the agency except property and casualty insurance. If a program does not require the prepayment of reserves, the director shall establish such reserves for the payment of claims as are normally required for that type of insurance under an insured program.

(2) Any savings realized as a result of a program created under this section shall not be used to increase benefits unless such use is authorized by law.

(3) In the event of the director initiating self-funding, self-insuring, or entering into other methods of providing insurance coverage, the director shall ensure that any benefits shall not be increased unless a specific appropriation or similar authorization from the legislature occurs. The director shall also enter into contracts to ensure at least third party administration of the program, claims adjudication services, and data management services.

NEW SECTION. Sec. 20. A new section is added to chapter 41.05 RCW to read as follows:

(1) The director shall keep full and adequate accounts and records of the assets, obligations, transactions, and affairs of any program created under section 19 of this act.

(2) The director shall file an annual statement with quarterly updates of the financial condition, transactions, and affairs of any program created under section 19 of this act in a form and manner prescribed by the insurance commissioner. The statement shall contain information as required by the insurance commissioner for the type of insurance being offered under the program and shall be filed with the insurance commissioner. A copy of the annual statement and the updates shall be filed with the speaker of the house of representatives and the president of the senate.

NEW SECTION. Sec. 21. A new section is added to chapter 41.05 RCW to read as follows:

Any program created under section 19 of this act shall be subject to the examination requirements of chapter 48.03 RCW as if the program were a domestic insurer. In conducting an examination, the insurance commissioner shall determine the adequacy of the reserves established for the program.

NEW SECTION. Sec. 22. A new section is added to chapter 41.05 RCW to read as follows:

(1) Reserves established by the director for any program created under section 19 of this act shall be held in a separate trust fund by the state treasurer and shall be known as the public employees' benefit reserve fund which is hereby created. The state investment board shall act as the investor for the funds and, except as provided in RCW 43.33A.160, one hundred percent of all earnings from these investments shall accrue directly to the reserve fund.

(2) Reserves may be drawn down upon meeting criteria agreed upon by the director and the insurance commissioner.

NEW SECTION. Sec. 23. A new section is added to chapter 41.05 RCW to read as follows:

No member of the agency may participate in a decision to initiate or modify a program under section 19 of this act if a breach of the appearance of fairness doctrine would occur.

NEW SECTION. Sec. 24. A new section is added to chapter 41.05 RCW to read as follows:

The director shall be deemed to stand in a fiduciary relationship to the employees covered by any insurance program created under section 19 of this act and shall discharge the duties of his or her position in good faith and with that diligence, care, and skill which ordinary prudent persons would exercise under similar circumstances in like positions.

Sec. 25. Section 14, chapter 31, Laws of 1984 and RCW 31.12.125 are each amended to read as follows:

A credit union may:

(1) Issue shares to and receive deposits from its members as provided in this chapter and the bylaws of the credit union;

(2) Make loans to its members as provided in this chapter and the bylaws of the credit union;

(3) Pay dividends or interest to its members;

(4) Impose reasonable charges for the services it provides to its members;

(5) Impose financing charges and reasonable late charges in the event of default on loans in accordance with the bylaws of the credit union and recover reasonable costs and expenses, including reasonable attorneys' fees incurred both before and after judgment, incurred in the collection of sums due it if provided for in the note or agreement signed by the borrower;

(6) Acquire, lease, hold, assign, pledge, hypothecate, sell, or otherwise dispose of a possessory interest in personal property and, with the prior written permission of the supervisor, in real property, so long as the property is necessary or incidental to the operation of the credit union. The written permission of the supervisor is not required for the acquisition and disposition of property through the collection of loans secured by the property;

(7) Deposit and invest funds in excess of the amount approved for loans to members as provided in this chapter;

(8) Borrow money, up to a maximum of fifty percent of its paid-in and unimpaired capital and surplus;

(9) Discount or sell any of its assets, or purchase any or all of the assets of another credit union. A credit union may not discount or sell more than ten percent of its assets without the prior written approval of the supervisor;

(10) Accept deposits of deferred compensation of its members under the terms and conditions of RCW 28A.58.740 and ((~~41.04.250(2)~~)) 41.05.---(2) (RCW 41.04.250(2) as recodified by this 1988 act);

(11) Act as fiscal agent for and receive payments on shares and deposits from the federal government or this state, and any agency or political subdivision thereof;

(12) Engage in activities and programs as requested by the federal government, this state, and any political subdivision thereof, when the activities or programs are not inconsistent with this chapter;

(13) Hold membership in other credit unions organized under this chapter or other laws and in associations controlled by or fostering the interests of credit unions, including a central liquidity facility organized under state or federal law; and

(14) Exercise such incidental powers as are necessary or requisite to enable it to carry on effectively the business for which it is incorporated.

Sec. 26. Section 36.32.400, chapter 4, Laws of 1963 as amended by section 7, chapter 106, Laws of 1975-'76 2nd ex. sess. and RCW 36.32.400 are each amended to read as follows:

Any county by a majority vote of its board of county commissioners may enter into contracts to provide health care services and/or group insurance for the benefit of its employees, and may pay all or any part of the cost thereof. Any two or more counties, by a majority vote of their respective boards of county commissioners may, if deemed expedient, join in the procuring of such health care services and/or group insurance, and the board of county commissioners of each participating county may, by appropriate resolution, authorize their respective counties to pay all or any portion of the cost thereof.

Nothing in this section shall impair the eligibility of any employee of a county, municipality, or other political subdivision under ((~~RCW 41.04.205~~)) section 18 of this 1988 act.

Sec. 27. Section 1, chapter 75, Laws of 1963 as last amended by section 1, chapter 82, Laws of 1974 ex. sess. and RCW 41.04.180 are each amended to read as follows:

Notwithstanding section 18 of this 1988 act, any county, municipality, or other political subdivision of the state acting through its principal supervising official or governing body may, whenever funds shall be available for that purpose provide for all or a part of hospitalization and medical aid for its employees and their dependents through contracts with regularly constituted insurance carriers or with health care service contractors as defined in chapter 48.44 RCW or self-insurers as provided for in chapter 48.52 RCW, for group hospitalization and medical aid policies or plans: PROVIDED, That any county, municipality, or other political subdivision of the state acting through its principal supervising official or governing body shall provide the employees thereof a choice of policies or plans through contracts with not less than two regularly constituted insurance carriers or health care service contractors or other health care plans, including but not limited to, trusts of self-insurance as provided for in chapter 48.52 RCW: AND PROVIDED FURTHER, That any county may provide such hospitalization and medical aid to county elected officials and their dependents on the same basis as such hospitalization and medical aid is provided to other county employees and their dependents: PROVIDED FURTHER, That provision for school district personnel shall not be made under this section but shall be as provided for in RCW 28A.58.420.

Sec. 28. Section 5, chapter 59, Laws of 1969 as last amended by section 1, chapter 271, Laws of 1985 and RCW 41.04.230 are each amended to read as follows:

Any official of the state authorized to disburse funds in payment of salaries and wages of public officers or employees is authorized, upon written request of the officer or employee, to deduct from the salaries or wages of the officers or employees, the amount or amounts of subscription payments, premiums, contributions, or continuation thereof, for payment of the following:

(1) Credit union deductions: PROVIDED, That the credit union is organized solely for public employees: AND PROVIDED FURTHER, That twenty-five or more employees of a single state agency or a total of one hundred or more state employees of several agencies have authorized such a deduction for payment to the same credit union.

(2) Parking fee deductions: PROVIDED, That payment is made for parking facilities furnished by the agency or by the department of general administration.

(3) U.S. savings bond deductions: PROVIDED, That a person within the particular agency shall be appointed to act as trustee. The trustee will receive all contributions; purchase and deliver all bond certificates; and keep such records and furnish such bond or security as will render full accountability for all bond contributions.

(4) Board, lodging or uniform deductions when such board, lodging and uniforms are furnished by the state, or deductions for academic tuitions or fees or scholarship contributions payable to the employing institution.

(5) Dues and other fees deductions: PROVIDED, That the deduction is for payment of membership dues to any professional organization formed primarily for public employees or college and university professors: AND PROVIDED, FURTHER, That twenty-five or more employees of a single state agency, or a total of one hundred or more state employees of several agencies have authorized such a deduction for payment to the same professional organization.

(6) Labor or employee organization dues may be deducted in the event that a payroll deduction is not provided under a collective bargaining agreement under the provisions of RCW 41.06.150: PROVIDED, That twenty-five or more officers or employees of a single agency, or a total of one hundred or more officers or employees of several agencies have authorized such a deduction for payment to the same labor or employee organization: PROVIDED, FURTHER, That labor or employee organizations with five hundred or more members in state government may have payroll deduction for employee benefit programs.

(7) Voluntary deductions for political committees duly registered with the public disclosure commission and/or the federal election commission: PROVIDED, That twenty-five or more officers or employees of a single agency or a total of one hundred or more officers or employees of several agencies have authorized such a deduction for payment to the same political committee.

(8) Insurance contributions to the trustee of contracts for payment of premiums under contracts authorized by the ((~~state employees' insurance board~~)) public employees' benefits agency.

Deductions from salaries and wages of public officers and employees other than those enumerated in this section or by other law, may be authorized by the director of financial management for purposes clearly related to state employment or goals and objectives of the agency and for plans authorized by the state employees' insurance board.

The authority to make deductions from the salaries and wages of public officers and employees as provided for in this section shall be in addition to such other authority as may be provided by law: PROVIDED, That the state or any department, division, or separate agency of the state shall not be liable to any insurance carrier or contractor for the failure to make or transmit any such deduction.

Sec. 29. Section 1, chapter 264, Laws of 1971 ex. sess. as last amended by section 2, chapter 256, Laws of 1981 and RCW 41.04.250 are each amended to read as follows:

"Employee" as used in this section and RCW ((~~41.04.260~~)) 41.05.--- (RCW 41.04.260 as recodified by this 1988 act) includes all full-time, part-time and career seasonal employees of the state, a county, a municipality, or other political subdivision of the state, whether or not covered by civil service; elected and appointed officials of the executive branch of the government, including full-time members of boards, commissions, or committees; justices of the supreme court and judges of the court of appeals and of the superior and district courts; and members of the state legislature or of the legislative authority of any county, city, or town.

The state, through the committee for deferred compensation created in RCW ((~~41.04.260~~)) 41.05.--- (RCW 41.04.260 as recodified by this 1988 act), and any county, municipality, or other political subdivision of the state acting through its principal supervising official or governing body is authorized to contract with an employee to defer a portion of that employee's income, which deferred portion shall in no event exceed the amount allowable under 26 U.S.C. Sec. 457, and deposit or invest such deferred portion in a credit union, savings and loan association, bank, or mutual savings bank or purchase life insurance, shares of an investment company, or fixed and/or variable annuity contracts from any insurance company or any investment company licensed to contract business in this state. The committee can provide such plans as it deems are in the interests of state employees. In addition to the types of investments described in this section, the committee may invest the deferred portion of an employee's income, without limitation as to amount, in any of the class of investments described in RCW 43.84.150 as in effect on January 1, 1981. Any income deferred under such a plan shall continue to be included as regular compensation, for the purpose of computing the state or local retirement and pension benefits earned by any employee.

Coverage of an employee under a deferred compensation plan under this section shall not render such employee ineligible for simultaneous membership and participation in any pension system for public employees.

Sec. 30. Section 1, chapter 274, Laws of 1975 1st ex. sess. as last amended by section 1, chapter 121, Laws of 1987 and by section 11, chapter 475, Laws of 1987 and RCW 41.04.260 are each reenacted and amended to read as follows:

(1) There is hereby created a committee for deferred compensation to be composed of ((~~five~~)) the director and four members appointed by the governor, one of whom shall be a representative of an employee association or union certified as an exclusive representative of at least one bargaining unit of classified employees, one who shall be a representative of either a credit union, savings and loan association, mutual savings bank or bank, one who possesses expertise in the area of insurance or investment of public funds, and one who shall be the state attorney general or his or her designee((~~, and one additional member selected by the governor~~)). The committee shall serve without compensation but shall receive travel expenses as provided for in RCW 43.03.050 and 43.03.060 as now existing or hereafter amended.

(2) The deferred compensation principal account is hereby created in the state treasury. Any deficiency in the deferred compensation administrative account caused by an excess of administrative expenses disbursed from that account over earnings of investments of balances credited to that account shall be transferred to that account from the deferred compensation principal account.

The amount of compensation deferred by employees under agreements entered into under the authority contained in RCW ((~~41.04.250~~)) 41.05.--- (RCW 41.04.250 as recodified by this 1988 act) shall be paid into the deferred compensation principal account and shall be sufficient to cover costs of administration and staffing in addition to such other amounts as determined by this committee. The deferred compensation principal account shall be used to carry out the purposes of RCW ((~~41.04.250~~)) 41.05.--- (RCW 41.04.250 as recodified by this 1988 act). All eligible state employees shall be given the opportunity to participate in agreements entered into by the committee under RCW ((~~41.04.250~~)) 41.05.--- (RCW 41.04.250 as recodified by this 1988 act). State agencies shall cooperate with the committee in providing employees with the opportunity to participate. Any county, municipality, or other subdivision of the state may elect to participate in any agreements entered into by the committee under RCW ((~~41.04.250~~)) 41.05.--- (RCW 41.04.250 as recodified by this 1988 act), including the making of payments therefrom to the employees participating in a deferred compensation plan upon their separation from state or other qualifying service. Accordingly, the deferred compensation principal account shall be considered to be a public pension or retirement fund within the meaning of Article XXIX, section 1 of the state Constitution, for the purpose of determining eligible investments and deposits of the moneys therein. All moneys in the deferred compensation principal account, all property and rights purchased therewith, and all income attributable thereto, shall remain (until made available to the participating employee or other beneficiary) solely the money, property, and rights of the state and participating counties, municipalities and subdivisions (without being restricted to the provision of benefits under the plan) subject only to the claims of the state's and participating jurisdictions' general creditors. Participating jurisdictions shall each retain property rights separately.

(3) The state investment board, at the request of the deferred compensation committee, is authorized to invest moneys in the deferred compensation principal account in accordance with RCW 43.84.150. Except as provided in RCW 43.33A.160, one hundred percent of all earnings from these investments shall accrue directly to the deferred compensation principal account. The earnings on any surplus balances in the deferred compensation principal account shall be credited to the deferred compensation principal account, notwithstanding RCW 43.84.090.

(4) The deferred compensation administrative account is hereby created in the state treasury. All expenses of the committee including staffing and administrative expenses shall be paid out of the deferred compensation administrative account. Notwithstanding RCW 43.84.090, all earnings of investments of balances in the deferred compensation administrative account shall be credited to this account. Any excess of earnings of investments of balances credited to this account over administrative expenses disbursed from this account shall be expended to the deferred compensation principal account. Any deficiency in the deferred compensation administrative account caused by an excess of administrative expenses disbursed from this account over earnings of investments of balances credited to this account shall be transferred to this account from the deferred compensation principal account.

(5) In addition to the duties specified in this section and RCW 41.04.250, the deferred compensation committee shall administer the salary reduction plan established in RCW 41.04.600 through 41.04.645.

(6) The deferred compensation committee shall keep or cause to be kept full and adequate accounts and records of the assets, obligations, transactions, and affairs of any deferred compensation plans created under RCW ((~~41.04.250~~)) 41.05.--- (RCW 41.04.250 as recodified by this 1988 act) through ((~~41.04.260~~)) 41.05.--- (RCW 41.04.260 as recodified by this 1988 act).

The deferred compensation committee shall file an annual report of the financial condition, transactions, and affairs of the deferred compensation plans under the committee's jurisdiction. A copy of the annual report shall be filed with the speaker of the house of representatives, the president of the senate, the governor, and the state auditor.

(7) Members of the deferred compensation committee shall be deemed to stand in a fiduciary relationship to the employees participating in the deferred compensation plans created under RCW 41.04.250 through 41.04.260 and shall discharge the duties of their respective positions in good faith and with that diligence, care, and skill which ordinary prudent persons would exercise under similar circumstances in like positions.

(8) The committee may adopt rules necessary to carry out the purposes of RCW ((~~41.04.250~~)) 41.05.--- (RCW 41.04.250 as recodified by this 1988 act) and ((~~41.04.260~~)) 41.05.--- (RCW 41.04.260 as recodified by this 1988 act).

Sec. 31. Section 3, chapter 162, Laws of 1984 and RCW 41.04.380 are each amended to read as follows:

(1) The department of personnel shall conduct a needs assessment to determine the need for and interest in child day care facilities for the children of state employees;

(2) The department of personnel shall determine the number of children which may participate in the demonstration project required under RCW ((~~41.04.370~~)) 41.05.--- (RCW 41.04.370 as recodified by this 1988 act) through ((~~41.04.380~~)) 41.05.--- (RCW 41.04.380 as recodified by this 1988 act); and

(3) If the suitable space is determined to be available, the department of personnel shall contract with one or more organizations to operate child day care facilities for the children identified under this section. Such facilities may be located in one or more buildings as identified under RCW ((~~41.04.375~~)) 41.05.--- (RCW 41.04.375 as recodified by this 1988 act).

Sec. 32. Section 1, chapter 475, Laws of 1987 and RCW 41.04.600 are each amended to read as follows:

(1) The state of Washington may enter into salary reduction agreements with employees pursuant to the Internal Revenue Code, 26 U.S.C. Sec. 125 for the purpose of making it possible for employees to select on a "before-tax basis" certain taxable and nontaxable benefits pursuant to 26 U.S.C. Sec. 125. The purpose of the salary reduction plan established in this chapter is to attract and retain individuals in governmental service by permitting them to enter into agreements with the state to provide for benefits pursuant to 26 U.S.C. Sec. 129.

(2) Nothing in the salary reduction plan constitutes an employment agreement between the participant and the state, and nothing contained in the participant's salary reduction agreement, the plan, or RCW ((~~41.04.605~~)) 41.05.--- (RCW 41.04.605 as recodified by this 1988 act) through ((~~41.04.645~~)) 41.05.--- (RCW 41.04.645 as recodified by this 1988 act) gives a participant any right to be retained in state employment.

Sec. 33. Section 2, chapter 475, Laws of 1987 and RCW 41.04.605 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout RCW ((~~41.04.610~~)) 41.05.--- (RCW 41.04.610 as recodified by this 1988 act) through ((~~41.04.635~~)) 41.05.--- (RCW 41.04.635 as recodified by this 1988 act).

(1) "Salary reduction plan" means a plan whereby state employees and officers may agree to a reduction of salary which reduction will allow the employee to participate in benefits offered pursuant to 26 U.S.C. Sec. 125.

(2) "Committee" means the committee for deferred compensation.

(3) "Salary" means a state employee's or officer's monthly salary or wages.

(4) "Dependent care program" means the program for the care of dependents pursuant to 26 U.S.C. Sec. 129 financed from funds deposited in the salary reduction account in the state treasury for the purpose of holding and disbursing the funds deposited under the auspices of the salary reduction plan.

(5) "Participant" means an individual who fulfills the eligibility and enrollment requirements under the salary reduction plan.

(6) "Plan year" means the time period established by the committee.

Sec. 34. Section 4, chapter 475, Laws of 1987 and RCW 41.04.615 are each amended to read as follows:

(1) A plan document describing the salary reduction plan shall be adopted and administered by the committee. The committee shall represent the state in all matters concerning the administration of the plan. The state through the committee, may engage the services of a professional consultant or administrator on a contractual basis to serve as an agent to assist the committee in carrying out the purposes of RCW ((~~41.04.600~~)) 41.05.--- (RCW 41.04.600 as recodified by this 1988 act) through ((~~41.04.645~~)) 41.05.--- (RCW 41.04.645 as recodified by this 1988 act).

(2) The committee shall formulate and establish policies and procedures for the administration of the salary reduction plan that are consistent with existing state law, the internal revenue code, and the regulations adopted by the internal revenue service as they may apply to the benefits offered to participants under the plan.

(3) The funds held by the state for the dependent care program shall be deposited in the salary reduction account in the state treasury. Any interest in excess of the amount used to defray the cost of administering the salary reduction plan shall become a part of the general fund as shall unclaimed moneys remaining in the salary reduction account at the end of a plan year. The committee may assess each participant a fee for administering the salary reduction plan. In addition to moneys for initial costs, moneys shall be appropriated from the general fund for any expense relating to the administration of the salary reduction plan. The appropriation may be funded from an amount equivalent to actually realized savings experienced due to reductions in employer contributions required under the social security act, from other similar savings, from interest earned from the salary reduction account credited to the general fund, from any unclaimed moneys in the salary reduction account at the end of the plan year, and from fees charged to the participants.

(4) Every action taken by the committee in administering RCW ((~~41.04.600~~)) 41.05.--- (RCW 41.04.600 as recodified by this 1988 act) through ((~~41.04.645~~)) 41.05.--- (RCW 41.04.645 as recodified by this 1988 act) shall be presumed to be a fair and reasonable exercise of the authority vested in or the duties imposed upon it. The committee shall be presumed to have exercised reasonable care, diligence, and prudence and to have acted impartially as to all persons interested unless the contrary be proved by clear and convincing affirmative evidence.

Sec. 35. Section 6, chapter 475, Laws of 1987 and RCW 41.04.625 are each amended to read as follows:

The salary reduction account is established in the state treasury. All fees paid to reimburse participants or service providers pursuant to the provisions of RCW ((~~41.04.600~~)) 41.05.--- (RCW 41.04.600 as recodified by this 1988 act) through ((~~41.04.645~~)) 41.05.--- (RCW 41.04.645 as recodified by this 1988 act) shall be paid from the salary reduction account.

Sec. 36. Section 7, chapter 475, Laws of 1987 and RCW 41.04.630 are each amended to read as follows:

(1) The committee shall keep or cause to be kept full and adequate accounts and records of the assets, obligations, transactions, and affairs of a salary reduction plan created under RCW ((~~41.04.615~~)) 41.05.--- (RCW 41.04.615 as recodified by this 1988 act).

(2) The committee shall file an annual report of the financial condition, transactions, and affairs of the salary reduction plan under the committee's jurisdiction. A copy of the annual report shall be filed with the speaker of the house of representatives, the president of the senate, the governor, and the state auditor.

(3) Members of the committee shall be deemed to stand in a fiduciary relationship to the employees participating in the salary reduction plan and shall discharge their duties in good faith and with that diligence, care, and skill which ordinary prudent persons would exercise under similar circumstances in like positions.

Sec. 37. Section 9, chapter 475, Laws of 1987 and RCW 41.04.640 are each amended to read as follows:

The committee shall adopt rules to implement RCW ((~~41.04.610~~)) 41.05.--- (RCW 41.04.610 as recodified by this 1988 act) through ((~~41.04.635~~)) 41.05.--- (RCW 41.04.635 as recodified by this 1988 act).

Sec. 38. Section 10, chapter 475, Laws of 1987 and RCW 41.04.645 are each amended to read as follows:

RCW ((~~41.04.600~~)) 41.05.--- (RCW 41.04.600 as recodified by this 1988 act) through ((~~41.04.640~~)) 41.05.--- (RCW 41.04.640 as recodified by this 1988 act) shall be construed to effectuate the purposes of 26 U.S.C. Sec. 125.

Sec. 39. Section 39, chapter 274, Laws of 1947 as last amended by section 24, chapter 326, Laws of 1987 and RCW 41.40.380 are each amended to read as follows:

(1) Subject to subsections (2) and (3) of this section, the right of a person to a pension, an annuity, or retirement allowance, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, the various funds created by this chapter, and all moneys and investments and income thereof, are hereby exempt from any state, county, municipal, or other local tax, and shall not be subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever, and shall be unassignable.

(2) This section shall not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington or its political subdivisions and which has been approved for deduction in accordance with rules and regulations that may be ((~~promulgated by the state employees' insurance board and/or~~)) adopted by the public employees' benefits agency or the department of retirement systems, and this section shall not be deemed to prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of dues and other membership fees to any retirement association or organization the membership of which is composed of retired public employees, if a total of three hundred or more of such retired employees have authorized such deduction for payment to the same retirement association or organization.

(3) Subsection (1) of this section shall not prohibit the department of retirement systems from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a mandatory benefits assignment order issued pursuant to chapter 41.50 RCW, or (d) any administrative or court order expressly authorized by federal law.

Sec. 40. Section 22, chapter 105, Laws of 1975-'76 2nd ex. sess. as last amended by section 3, chapter 25, Laws of 1987 and RCW 44.44.040 are each amended to read as follows:

The office of the state actuary shall have the following powers and duties:

(1) Perform all actuarial services for the department of retirement systems, including all studies required by law. Reimbursement for such services shall be made to the state actuary pursuant to the provisions of RCW 39.34.130 as now or hereafter amended.

(2) Advise the legislature and the governor regarding pension benefit provisions, and funding policies and investment policies of the state investment board.

(3) Consult with the legislature and the governor concerning determination of actuarial assumptions used by the department of retirement systems and the public employees' benefit agency.

(4) Prepare a report, to be known as the actuarial fiscal note, on each pension bill introduced in the legislature which briefly explains the financial impact of the bill. The actuarial fiscal note shall include: (a) The statutorily required contribution for the biennium and the following twenty-five years; (b) the biennial cost of the increased benefits if these exceed the required contribution; and (c) any change in the present value of the unfunded accrued benefits. An actuarial fiscal note shall also be prepared for all amendments which are offered in committee or on the floor of the house of representatives or the senate to any pension bill. However, a majority of the members present may suspend the requirement for an actuarial fiscal note for amendments offered on the floor of the house of representatives or the senate.

(5) Upon request by the director of the public employees' benefit agency, provide such actuarial and underwriting services as required by the public employees' benefit agency for the insurance and other benefit programs offered by the agency. Reimbursement for such services shall be made to the office of the state actuary pursuant to the provisions of RCW 39.34.130.

(6) Provide such actuarial services as related to retirement and other benefit programs to the legislature as may be requested from time to time.

((~~(6)~~)) (7) Provide staff and assistance to the committee established under RCW 46.44.050.

Sec. 41. Section 18, chapter 15, Laws of 1983 as amended by section 2, chapter 78, Laws of 1987 and RCW 47.64.270 are each amended to read as follows:

Absent a collective bargaining agreement to the contrary, the department of transportation shall provide contributions to insurance and health care plans for ferry system employees and dependents, as determined by the ((~~state employees' insurance board~~)) public employees' benefits agency, under chapter 41.05 RCW. The ferry system management and employee organizations may collectively bargain for other insurance and health care plans, and employer contributions may exceed that of other state agencies as provided in RCW 41.05.050, subject to RCW 47.64.180. To the extent that ferry employees by bargaining unit have absorbed the required offset of wage increases by the amount that the employer's contribution for employees' and dependents' insurance and health care plans exceeds that of other state general government employees in the 1985-87 fiscal biennium, employees shall not be required to absorb a further offset except to the extent the differential between employer contributions for those employees and all other state general government employees increases during any subsequent fiscal biennium. If such differential increases in the 1987-89 fiscal biennium or the 1985-87 offset by bargaining unit is insufficient to meet the required deduction, the amount available for compensation shall be reduced by bargaining unit by the amount of such increase or the 1985-87 shortage in the required offset. Compensation shall include all wages and employee benefits.

Sec. 42. Section .24.01, chapter 79, Laws of 1947 as amended by section 11, chapter 147, Laws of 1973 1st ex. sess. and RCW 48.24.010 are each amended to read as follows:

(1) No contract of life insurance shall hereafter be delivered or issued for delivery in this state insuring the lives of more than one individual unless to one of the groups as provided for in this chapter, and unless in compliance with the other provisions of this chapter.

(2) Subsection (1) of this section shall not apply to contracts of life insurance:

(a) Insuring only individuals related by marriage, by blood, or by legal adoption; or

(b) Insuring only individuals having a common interest through ownership of a business enterprise, or of a substantial legal interest or equity therein, and who are actively engaged in the management thereof; or

(c) Insuring the lives of employees and retirees under contracts executed with the ((~~state employees insurance board~~)) public employees' benefits agency under the provisions of chapter 41.05 RCW.

Sec. 43. Section 6, chapter 303, Laws of 1986 and RCW 70.14.010 are each amended to read as follows:

The following state agencies are directed to cooperate with the office of financial management in order to establish appropriate health care information systems in their programs: The department of social and health services, the department of labor and industries, the ((~~state employees' insurance board~~)) public employees' benefits agency, the department of veterans affairs, and the department of corrections.

The office of financial management, in conjunction with such agencies, shall determine:

(1) Definitions of health care services;

(2) Health care data elements common to all agencies;

(3) Health care data elements unique to each agency;

(4) A mechanism for program and budget review of health care data; and

(5) Executive review of health care data.

NEW SECTION. Sec. 44. The state employees' insurance board is hereby abolished and its powers, duties, and functions are hereby transferred to the public employees' benefits agency. All references to the state employees' insurance board in the Revised Code of Washington shall be construed to mean the director or the public employees' benefits agency.

NEW SECTION. Sec. 45. All reports, documents, surveys, books, records, files, papers, or written material in the possession of the state employees' insurance board shall be delivered to the custody of the public employees' benefits agency. All cabinets, furniture, office equipment, motor vehicles, and other tangible property employed by the state employees' insurance board shall be made available to the public employees' benefits agency. All funds, credits, or other assets held by the state employees' insurance board shall be assigned to the public employees' benefits agency.

Any appropriations made to the state employees' insurance board shall, on the effective date of this section, be transferred and credited to the public employees' benefits agency.

Whenever any question arises as to the transfer of any personnel, funds, books, documents, records, papers, files, equipment, or other tangible property used or held in the exercise of the powers and the performance of the duties and functions transferred, the director of financial management shall make a determination as to the proper allocation and certify the same to the state agencies concerned.

NEW SECTION. Sec. 46. All employees of the department of personnel employed on behalf of the state employees' insurance board are transferred to the jurisdiction of the public employees' benefits agency. All employees classified under chapter 41.06 RCW, the state civil service law, are assigned to the public employees' benefits agency to perform their usual duties upon the same terms as formerly, without any loss of rights, subject to any action that may be appropriate thereafter in accordance with the laws and rules governing state civil service.

NEW SECTION. Sec. 47. All rules and all pending business before the state employees' insurance board shall be continued and acted upon by the public employees' benefits agency. All existing contracts and obligations shall remain in full force and shall be performed by the public employees' benefits agency.

NEW SECTION. Sec. 48. The transfer of the powers, duties, and functions of the state employees' insurance board shall not affect the validity of any act performed before the effective date of this section.

NEW SECTION. Sec. 49. If apportionments of budgeted funds are required because of the transfers directed by sections 45 through 48 of this act, the director of financial management shall certify the apportionments to the agencies affected, the state auditor, and the state treasurer. Each of these shall make the appropriate transfer and adjustments in funds and appropriation accounts and equipment records in accordance with the certification.

NEW SECTION. Sec. 50. Nothing contained in sections 44 through 49 of this act may be construed to alter any existing collective bargaining unit or the provisions of any existing collective bargaining agreement until the agreement has expired or until the bargaining unit has been modified by action of the personnel board as provided by law.

NEW SECTION. Sec. 51. A new section is added to chapter 41.06 RCW to read as follows:

In addition to the exemptions set forth in RCW 41.06.070, this chapter shall not apply to employees of the public employees' benefits agency appointed under section 3 of this act.

NEW SECTION. Sec. 52. A new section is added to chapter 48.01 RCW to read as follows:

This title shall not apply to any self-funded benefits plan established pursuant to section 19 of this act.

NEW SECTION. Sec. 53. Seven million dollars shall be transferred from the employees' insurance principal account to the general fund.

NEW SECTION. Sec. 54. (1) The following sums, or as much thereof as may be necessary, are appropriated to the governor for the biennium ending June 30, 1989:

@i2General Fund‑-State!w×!tr$!sc ,14

!ae0!tr23,000,000

@i2General Fund‑-Federal!w×!tr$!sc ,14

!ae0!tr4,000,000

@i2Special Fund Salary and Insurance Contribution Increase Revolving Fund!w×!tr$!sc ,14

!ae0!tr9,300,000

These funds shall be expended exclusively for the purposes of implementing a contract or contracts authorized in section 5 of this act or self-funding under section 19 of this act.

To facilitate the transfer of moneys from dedicated funds and accounts, the state treasurer is directed to transfer sufficient moneys from each dedicated fund or account to the special fund salary and insurance contribution increase revolving fund in accordance with schedules provided by the office of financial management.

(2) The sum of two hundred thousand dollars, or as much thereof as may be necessary, is appropriated for the biennium ending June 30, 1989, from the state employees' administrative insurance account of which one hundred sixty thousand dollars shall go to the public employees' benefit agency for the provision of actuarial services as may be required by this act and forty thousand dollars shall go to the office of financial management to engage an insurance broker.

NEW SECTION. Sec. 55. (1) A joint interim committee on health care planning is hereby established. This committee shall consist of four members of the senate ways and means committee, appointed by the president of the senate, with equal representation from each caucus, and four members of the house of representatives ways and means committee, appointed by the speaker of the house of representatives, with equal representation from each caucus. The committee shall meet initially within forty days following sine die of the 1988 legislative session, and meet as necessary thereafter through December 1988. A chair and vice-chair shall be elected by the members.

(2) The committee shall monitor the implementation of this act and study the additional steps required to bring about the intent of this act: Namely, benefits which will provide greater options for the employee such as flexible benefit programs; maximization of the state's purchasing of health care costs, including hospitals, professional services, and pharmaceuticals; utilization review procedures; and managed health care.

(3) The committee shall receive support from the staff of the legislature and agencies of the state, including institutions of higher education and those state agencies involved in the purchase of health care services. It shall also involve, to the extent possible, those individuals in the provision and insuring of health care services and other employee benefits.

(4) The committee shall report on its findings and any recommendations it may have adopted, including the continuation of the committee, to the president of the senate and the speaker of the house of representatives not later than January 10, 1989.

NEW SECTION. Sec. 56. The following acts or parts of acts are each repealed:

(1) Section 1, chapter 106, Laws of 1975-'76 2nd ex. sess. and RCW 41.04.205; and

(2) Section 1, chapter 136, Laws of 1977 ex. sess. and RCW 41.05.005.

NEW SECTION. Sec. 57. The following sections are recodified in chapter 41.05 RCW:

(1) RCW 41.04.250;

(2) RCW 41.04.255;

(3) RCW 41.04.260;

(4) RCW 41.04.362;

(5) RCW 41.04.364;

(6) RCW 41.04.370;

(7) RCW 41.04.375;

(8) RCW 41.04.380;

(9) RCW 41.04.385;

(10) RCW 41.04.600;

(11) RCW 41.04.605;

(12) RCW 41.04.610;

(13) RCW 41.04.615;

(14) RCW 41.04.620;

(15) RCW 41.04.625;

(16) RCW 41.04.630;

(17) RCW 41.04.635;

(18) RCW 41.04.640; and

(19) RCW 41.04.645.

NEW SECTION. Sec. 58. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions and shall take effect immediately.