P. O. BOX 2120
August 8, 1997


TO: Division Superintendents
FROM: Richard T. La Pointe
Superintendent of Public Instruction
SUBJECT: Health Insurance Credit Program for Retired School Division Employees

  House Bill 862, enacted in the 1996 Session of the General
  Assembly, provides for a basic health insurance credit for
  retired teachers and other professional school division
  employees to be effective July 1, 1998, with the cost paid by
  the Commonwealth.  This legislation also allows for a local
  option election by school divisions to provide, at local
  expense, an enhanced health credit to retirees.  

  Current and future retirees who meet the eligibility criteria
  will receive the basic credit, and may receive the enhanced
  credit if the school division elects to provide that benefit. 
  This memo provides information regarding the health insurance
  credit program and includes a survey to be submitted to the
  Virginia Retirement System (VRS), which is responsible for
  implementing and administering the program.  The following
  information, which explains the health insurance credit
  program in greater detail, is enclosed:

  >  Copy of House Bill 862, passed in 1996, which established
     the health insurance credit program for teachers and
     other school division employees;

  >  VRS survey to obtain information to assist in
     implementing the program;

  >  A letter from VRS regarding the cost to provide the
     enhanced credit;

  >  List of retirees, for your school division, who meet the
     creditable service criteria for the health credit or who
     are disability retirees;

  >  Frequently asked questions regarding the program;

  >  A model resolution for use if the local school board
     elects to provide an enhanced credit; and

  >  The Health Insurance Credit Program Administrative
     Procedures, including Exhibits I, II & III which are
     provided for informational purposes at this time.  The
     exhibits explain, in detail, the three alternative
     methods of paying the basic credit (and enhanced credit,
     if elected by the local school board).

  The main points of House Bill 862 are:

  >  Eligibility Criteria for Credit (Basic and Enhanced): 
     All full-time, salaried teachers and professional and
     clerical employees of local public school boards who have
     at least 15 years of total creditable service in VRS and
     who are participating in an acceptable health insurance
     plan are eligible for the health credit upon retirement. 
     Disability retirees are eligible for the full credit
     regardless of their length of creditable service.  
     Eligible participants must be enrolled in an employer-sponsored
     health plan, personal health insurance policy
     from a private carrier, or covered as a dependent on a
     spouse's insurance plan.  Medicare Part A and B coverage
     does not qualify as a personal health insurance policy.

  >  Basic Credit Amount: The state cost of the basic credit
     in 1998-2000 will be .35% of compensation for all full-time, 
     salaried teachers and professional and clerical
     employees of local school boards.  The Department of
     Education is currently projecting the state cost of the
     basic credit for the 1998-2000 biennium.  As a benefit,
     the monthly health insurance credit equals $1.50 for each
     full year of VRS service.  The maximum credit is $45.00
     per month.  Disability retirees receive the maximum
     credit regardless of their creditable service.  The
     amount of the credit may not exceed the cost of the
     premium for retiree coverage.  The credit may not be
     applied to premiums for spouse and/or dependent coverage.
     The credit continues for the life of the retiree.  The
     credit is not transferred to a survivor.

  >  Local Option Enhanced Credit Amount:  Local school boards
     may elect to provide a monthly  enhanced health insurance
     credit of $1.00 per year of VRS service, with a maximum
     additional credit of $30.00 per month or the amount of
     the premium for the retiree's coverage, whichever is

  >  Cost of Enhanced Credit:  The cost for the enhanced
     credit will be the responsibility of the electing local
     school board.  A separate rate will be established for
     local school boards electing to provide the enhanced
     credit.  The cost for the enhanced credit amount will be
     actuarially determined, will reflect the cost for current
     and future retirees, and will be expressed as a
     percentage of payroll and submitted monthly.  Information
     regarding the cost of the enhanced credit is included in
     this packet.

  >  How to Elect the Enhanced Credit:  The school division
     does not have to elect to provide the enhanced credit. 
     Further, the credit can be elected at any time, effective
     July 1 of any future year, however, the election is
     irrevocable.  The local school board must provide VRS
     with an election form to provide retirees with the
     enhanced credit and must submit the election form at
     least 45 days prior to the effective date (July 1 of a
     year) to allow sufficient time to make the required
     payroll adjustments for eligible retirees.   The earliest
     effective date for the enhanced credit is July 1, 1998.

  In order to implement the provisions of House Bill 862 and to
  administer the health insurance credit program, VRS is
  requesting information regarding the health insurance coverage
  provided to teachers and administrative and clerical staff of
  local school boards.  Enclosed is a survey to be returned to
  VRS by August 22, 1997, to gather the necessary information. 
  The purpose of the enclosed survey is to determine:  

  >  Which school divisions offer an employer-sponsored health
     plan and if the plan provides pre- and post-age 65
     coverage; and;

  >  The number of retired employees who may have the credit
     treated as a deduction or who may receive the health
     insurance credit as a reimbursement under the alternate
     health insurance credit program.

  The credit may be handled in one of three ways:  as an offset
  to the health insurance premium if it is an employer-sponsored
  plan and VRS is taking the premium deduction; paid as a
  reimbursement directly to the retiree upon receipt of evidence
  of payment for coverage if the retiree is covered by a non
  employer-sponsored plan; or, paid to the employer if the
  employer is billing the retirees for health coverage. 
  Information regarding the administrative procedures for the
  three payment methods is enclosed (Exhibits I, II and III).

  A list of retirees who retired from your school division
  through July, 1997, and who meet the creditable service
  criteria for the credit or who are disability retirees is also
  enclosed.  Please indicate on the list which retirees are
  covered by an employer-sponsored plan by indicating "yes" or
  "no"  beside each name and returning a copy of this document
  to VRS.  VRS will contact the retirees who are not covered by
  an employer-sponsored plan to determine if they have eligible
  individual coverage or are covered as a dependent through the
  spouse's insurance plan.

  If you have questions regarding the cost of the enhanced
  credit or the administration of the program, please contact
  Donna Blatecky (804-344-3150) or Rolly Butts (804-344-3104) of
  the VRS.  If you have questions regarding the cost of the
  basic credit, paid by the Commonwealth, please contact Daniel
  S. Timberlake, Assistant Superintendent for Finance, at the
  Department of Education (804-225-2025).