Exempt from preproposal statement of inquiry under RCW 34.05.310(4).

Title of Rule: WAC 356-18-075 Medical expense plans and 251-22-127 Medical expense plans.

Purpose: These rules pertain to medical expense plans which were adopted by the 1998 legislature.

Statutory Authority for Adoption: Chapter 41.06 RCW.

Statute Being Implemented: RCW 41.06.150.

Summary: These rules implement the Voluntary Employees Benefit Association (VEBA) authorized by the 1998 legislature in HB 2371.

Name of Agency Personnel Responsible for Drafting: Sharon Peck, 521 Capitol Way South, Olympia, WA, (360) 753-0468; Implementation and Enforcement: Department of Personnel.

Name of Proponent: Department of Personnel, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: These rules implement the Voluntary Employees Benefit Association (VEBA) authorized by the 1998 legislature in HB 2371.

Proposal Changes the Following Existing Rules: See above.

No small business economic impact statement has been prepared under chapter 19.85 RCW. Not required.

Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption. These rules relate to internal government operations that are not subject to violation by a nongovernmental party. Therefore, pursuant to RCW 34.05.328 [(5)](b)(ii), section 201 does not apply.

Hearing Location: Department of Personnel, 521 Capitol Way South, Olympia, WA, on June 11, 1998, at 10:00 a.m.

Assistance for Persons with Disabilities: Contact Department of Personnel by June 4, 1998, TDD (360) 753-4107, or (360) 586-0509.

Submit Written Comments to: Sharon Peck, Department of Personnel, P.O. Box 47500, FAX (360) 586-4694, by June 9, 1998.

Date of Intended Adoption: June 11, 1998.

May 6, 1998

Dennis Karras

Secretary

WAC 356-18-075  Medical expense plans. (1) The employing agency may provide to eligible employees a medical expense plan that provides for reimbursement of medical expenses. Instead of cash out of sick leave at retirement as provided in WAC 356-18-050, the agency's head or designee may deposit equivalent funds in a medical expense plan for eligible employees. The medical expense plan must meet the requirements of the Internal Revenue Service.

(2) Medical expense plans shall be implemented only after consultation with affected groups of employees.

(a) Medical expense plans for eligible employees in any of the groups listed in (4) of this section, who are covered by a collective bargaining agreement shall be implemented only by written agreement with the bargaining unit's exclusive representative.

(b) A separate medical expense plan may be provided for unrepresented employees.

(3) As a condition of participation, the medical expense plan provided shall require that each covered eligible employee, sign an agreement with the employer. The agreement shall include the following provisions.

(a) A provision to hold the employer harmless should the United States government find that the employer or the employee is indebted to the United States as a result of:

(i) the employee not paying income taxes due on the equivalent funds placed into the plan, or

(ii) the employer did not withhold or deduct a tax, assessment, or other payment on funds placed into the plan as required by federal law.

(b) A provision to require each covered eligible employee to forfeit remuneration for accrued sick leave at retirement if the employee is covered by a medical expense plan and the employee refuses to sign the required agreement.

(4) Each medical expense plan offered by an agency shall apply to all eligible employees in any one of the following groups:

(a) Employees in an agency;

(b) Employees in a major organizational subdivision of an agency;

(c) Employees at a major operating location of an agency; or

(d) Classified employees in a bargaining unit established by the Washington personnel resources board.

(5) The following definitions are used for the medical expense plan.

(a) "Eligible employees" means all employees in a designated group in (4) of this section.

(b) "Covered eligible employee" means an eligible employee who is in a group for which the employing agency has established a medical expense plan.

(6) An established medical expense plan shall be applicable to all retirements of covered eligible employees within a calendar year. Such a medical expense plan may be discontinued in any future year, but once discontinued it may not be reinstated for the same group of eligible employees within the same calendar year as it was discontinued.

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NEW SECTION

WAC 251-22-127  Medical expense plans. (1) The employing institution of higher education may provide to eligible employees a medical expense plan that provides for reimbursement of medical expenses. Instead of cash out of sick leave at retirement as provided in WAC 251-22-124, the higher education institution's head or designee may deposit equivalent funds in a medical expense plan for eligible employees. The medical expense plan must meet the requirements of the Internal Revenue Service.

(2) Medical expense plans shall be implemented only after consultation with affected groups of employees.

(a) Medical expense plans for eligible employees in any of the groups listed in (4) of this section, who are covered by a collective bargaining agreement shall be implemented only by written agreement with the bargaining unit's exclusive representative.

(b) A separate medical expense plan may be provided for unrepresented employees.

(3) As a condition of participation, the medical expense plan provided shall require that each covered eligible employee sign an agreement with the employer. The agreement shall include the following provisions.

(a) A provision to hold the employer harmless should the United States government find that the employer or the employee is indebted to the United States as a result of:

(i) the employee not paying income taxes due on the equivalent funds placed into the plan, or

(ii) the employer did not withhold or deduct a tax, assessment, or other payment on funds placed into the plan as required by federal law.

(b) A provision to require each covered eligible employee to forfeit remuneration for accrued sick leave at retirement if the employee is covered by a medical expense plan and the employee refuses to sign the required agreement.

(4) Each medical expense plan offered by a higher education institution shall apply to all eligible employees in any one of the following groups:

(a) Employees in a higher education institution;

(b) Employees in a major organizational subdivision of a higher education institution;

(c) Employees at a major operating location of a higher education institution; or

(d) Classified employees in a bargaining unit established by the Washington personnel resources board.

(5) The following definitions are used for the medical expense plan.

(a) "Eligible employees" means employees in a designated group in (4) of this section.

(b) "Covered eligible employee" means an eligible employee who is in a group for which the employing higher education institution has established a medical expense plan.

(6) An established medical expense plan shall be applicable to all retirements of covered eligible employees within a calendar year. Such a medical expense plan may be discontinued in any future year, but once discontinued it may not be reinstated for the same group of eligible employees within the same calendar year as it was discontinued.

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