(1) As used in this section:

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(a) ‘Board’ means the Public Employees Retirement Board.

(b) ‘Eligible retired state employee’ means:

(A) A retired member of the Public Employees Retirement System who was a state employee at the time of retirement, is retired for service or disability, is receiving a retirement allowance or benefit under the system, had eight years or more of qualifying service in the system at the time of retirement or is receiving a disability retirement allowance including a pension computed as if the member had eight years or more of creditable service in the system at the time of retirement, and has attained earliest service retirement age but is not eligible for federal Medicare coverage; or

(B) A person who is a surviving spouse or dependent of a deceased eligible retired state employee as provided in subparagraph (A) of this paragraph at the time of death, who:

(i) Is receiving a retirement allowance or benefit under the system; or

(ii) Was covered at the time of the eligible retired state employee’s death by the retired employee’s health insurance contracted for under ORS § 238.410, and the employee retired on or after September 29, 1991.

(c) ‘Qualifying service’ means creditable service in the system and any periods of employment with an employer participating in the system required of the employee before becoming a member of the system.

(d) ‘System’ means the Public Employees Retirement System.

(2) Of the monthly cost of coverage for an eligible retired state employee under a health care insurance contract entered into under ORS § 238.410, an amount as determined under subsection (3) of this section shall be paid from the Retiree Health Insurance Premium Account established by subsection (4) of this section, and any monthly cost in excess of the amount so determined shall be paid by the eligible retired state employee in the manner provided in ORS § 238.410 (4). Any amount paid under this subsection shall be exempt from all state, county and municipal taxes imposed on the eligible retired member.

(3) On or before January 1 of each year, the Public Employees Retirement Board shall calculate the average difference between the health insurance premiums paid by retired state employees under contracts entered into by the board under ORS § 238.410 and the health insurance premiums paid by state employees who are not retired under contracts entered into by the Public Employees’ Benefit Board. For the purposes of subsection (2) of this section, an eligible retired state employee shall be entitled to receive toward the monthly cost of coverage under a health insurance contract entered into under ORS § 238.410:

(a) For an eligible retired state employee with eight years or more of qualifying service in the system, but less than 10 years of qualifying service in the system, 50 percent of the amount calculated by the board under this subsection.

(b) For an eligible retired state employee with 10 years or more of qualifying service in the system, but less than 15 years of qualifying service in the system, 60 percent of the amount calculated by the board under this subsection.

(c) For an eligible retired state employee with 15 years or more of qualifying service in the system, but less than 20 years of qualifying service in the system, 70 percent of the amount calculated by the board under this subsection.

(d) For an eligible retired state employee with 20 years or more of qualifying service in the system, but less than 25 years of qualifying service in the system, 80 percent of the amount calculated by the board under this subsection.

(e) For an eligible retired state employee with 25 years or more of qualifying service in the system, but less than 30 years of qualifying service in the system, 90 percent of the amount calculated by the board under this subsection.

(f) For an eligible retired state employee with 30 years or more of qualifying service in the system, 100 percent of the amount calculated by the board under this subsection.

(4) Pursuant to section 401(h) of the Internal Revenue Code, the Retiree Health Insurance Premium Account is established within the Public Employees Retirement Fund, separate and distinct from the General Fund. Interest earned by the account shall be credited to the account. All moneys in the account are continuously appropriated to the Public Employees Retirement Board and may be used only to pay costs of health care insurance contract coverage under subsection (2) of this section, paying the administrative costs incurred by the board under this section and investment of moneys in the account under any law of this state specifically authorizing that investment.

(5) The Retiree Health Insurance Premium Account shall be funded by employer contributions. The state shall transmit to the board those amounts the board determines to be actuarially necessary to fund the liabilities of the account. The level of employer contributions shall be established by the board using the same actuarial assumptions it uses to determine employer contribution rates to the Public Employees Retirement Fund. The amounts shall be transmitted at the same time and in the same manner as contributions for pension benefits are transmitted under ORS § 238.225.

(6) The Public Employees Retirement Board shall, by rule, establish a procedure for calculating the average difference between the health insurance premiums paid by retired state employees under contracts entered into by the board under ORS § 238.410 and the health insurance premiums paid by state employees who are not retired under contracts entered into by the Public Employees’ Benefit Board.

(7) As provided in section 401(h)(5) of the Internal Revenue Code of 1986, upon satisfaction of all liabilities for providing benefits described in subsection (2) of this section, any amount remaining in the Retiree Health Insurance Premium Account shall be returned to the state.

(8) No member of the system shall have an interest in the Retiree Health Insurance Premium Account or in the benefits provided under this section. [Formerly 237.247; 1997 c.222 § 45; 1999 c.317 § 17; 2001 c.945 § 80; 2003 c.14 § 113; 2005 c.808 § 6]

238.415 was added to and made a part of ORS Chapter 237 (1993 Edition) by legislative action but was not added to ORS Chapter 238 or any smaller series therein. See Preface to Oregon Revised Statutes for further explanation.