AN ACT RELATING TO THE FLEXIBLE SPENDING ACCOUNT PROGRAM; REQUIRING THAT AMOUNTS WITHHELD FROM PUBLIC EMPLOYEE SALARIES ALONG WITH ANY EMPLOYER CONTRIBUTIONS FOR THE PURPOSES OF THE FLEXIBLE SPENDING ACCOUNT PROGRAM BE DEPOSITED INTO AN ACCOUNT WITHIN THE STATE SELF-INSURANCE RESERVE FUND AND USED FOR THE PURPOSES OF THE PROGRAM; REQUIRING THAT EXCESS PORTIONS OF THE EMPLOYER CONTRIBUTION TO THE STATE INSURANCE PROGRAM ALSO BE USED FOR THE FLEXIBLE SPENDING ACCOUNT PROGRAM IF REQUESTED BY AN EMPLOYEE; REQUIRING INCOME EARNED ON THE FLEXIBLE SPENDING ACCOUNT BE RETAINED WITHIN THE ACCOUNT AND USED FOR PURPOSES OF THE FLEXIBLE SPENDING ACCOUNT PROGRAM; AMENDING SECTIONS 2-18-809 AND 2-18-812, MCA; AND PROVIDING AN EFFECTIVE DATE.

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

Section 1. Section 2-18-809, MCA, is amended to read:

"2-18-809. Definitions. As used in this part, the following definitions apply:

(1) "Advisory council" means the state employee group benefits advisory council provided for in 2-15-1016.

(2) "Department" means the department of administration provided for in 2-15-1001.

(3) "Flexible spending account" means a funding and accounting arrangement allowed by federal law that:

(a) gives a state employee a choice between receiving taxable salary or having a part of the employee's salary withheld; and

(b) provides for depositing any portion of the state employee's salary withheld and any employer contribution designated by the employee into an account and receiving from that account nontaxable reimbursement for certain out-of-pocket medical expenses of the state employee or a dependent of the employee.

(4) "Group benefits" means group hospitalization, health, medical, surgical, disability, life, and other similar and related group benefits provided to officers and employees of the state, including flexible spending account benefits. The term "group benefits" does not include casualty insurance, defined in 33-1-206; marine insurance, authorized in 33-1-209 and 33-1-221 through 33-1-229; property insurance, defined in 33-1-210; surety insurance, defined in 33-1-211; and title insurance, defined in 33-1-212.

(5) "State employee" means an employee of the state, specifically including a member or employee of the legislative branch of state government. The term "state employee" does not include employees of counties, cities, towns, school districts, or the Montana university system."

Section 2. Section 2-18-812, MCA, is amended to read:

"2-18-812. Alternatives to conventional insurance for providing state employee group benefits authorized -- requirements. The department may establish alternatives to conventional insurance for providing state employee group benefits. The requirements for providing alternatives to conventional insurance are as follows:

(1) The department shall maintain state employee group benefit plans on an actuarially sound basis.

(2) The department shall maintain reserves sufficient to liquidate the unrevealed claims liability and other liabilities of state employee group benefit plans.

(3) The department shall deposit all reserve funds and premiums paid to a state employee group benefit plan account within the state self-insurance reserve fund, and the deposits must be expended for claims under the plan.

(4) The department shall deposit income earned from the investment of a state employee group benefit plan's reserve fund into the account established under subsection (3) in order to offset the costs of administering the plan. Expenditures for actual and necessary expenses required for the efficient administration of the plan must be made from temporary appropriations, as described in 17-7-501(1) or (2), made for that purpose.

(5) The department shall deposit into the account provided for in subsection (3) all portions of a state employee's salary designated by the employee to be withheld for the purposes of flexible spending account benefits as well as any employee-designated portion of the employer contribution for group benefits provided for in 2-18-703 that is not required to be used for mandatory or elected benefits. Income earned on the deposits must be retained within the account and used for the purposes provided in this subsection. The money deposited and income earned on the deposits must be used for:

(a) payment of claims made by the employee;

(b) payment of reasonable costs of administration of the flexible spending account program;

(c) offsetting losses of the flexible spending account program; and

(d) reducing administration fees collected from participants in the program.

(6) The department shall, prior to implementation of any alternative to conventional insurance, present to the advisory council the evidence upon which the department has concluded that the alternative method will be more efficient, less costly, or otherwise superior to contracting for conventional insurance.

(7) The provisions of Title 33 do not apply to the department when exercising the powers and duties provided for in this section."

Section 3. Effective date. [This act] is effective July 1, 1999.

- END -

I hereby certify that the within bill,

SB 0120, originated in the Senate.

Secretary of the Senate

President of the Senate

Signed this	day

of	, .

Speaker of the House

Signed this	day

of	, .

SENATE BILL NO. 120

INTRODUCED BY S. BARTLETT

BY REQUEST OF THE DEPARTMENT OF ADMINISTRATION

AN ACT RELATING TO THE FLEXIBLE SPENDING ACCOUNT PROGRAM; REQUIRING THAT AMOUNTS WITHHELD FROM PUBLIC EMPLOYEE SALARIES ALONG WITH ANY EMPLOYER CONTRIBUTIONS FOR THE PURPOSES OF THE FLEXIBLE SPENDING ACCOUNT PROGRAM BE DEPOSITED INTO AN ACCOUNT WITHIN THE STATE SELF-INSURANCE RESERVE FUND AND USED FOR THE PURPOSES OF THE PROGRAM; REQUIRING THAT EXCESS PORTIONS OF THE EMPLOYER CONTRIBUTION TO THE STATE INSURANCE PROGRAM ALSO BE USED FOR THE FLEXIBLE SPENDING ACCOUNT PROGRAM IF REQUESTED BY AN EMPLOYEE; REQUIRING INCOME EARNED ON THE FLEXIBLE SPENDING ACCOUNT BE RETAINED WITHIN THE ACCOUNT AND USED FOR PURPOSES OF THE FLEXIBLE SPENDING ACCOUNT PROGRAM; AMENDING SECTIONS 2-18-809 AND 2-18-812, MCA; AND PROVIDING AN EFFECTIVE DATE.