Montana Administrative Register Notice 2-21-473 No. 12   06/20/2013    
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In the matter of the amendment of ARM 2.21.1931, 2.21.1932, 2.21.1933, 2.21.1934, 2.21.1937, 2.21.1938, 2.21.1939, 2.21.1940, and 2.21.1941 and the repeal of ARM 2.21.1930 pertaining to the VEBA plan









TO: All Concerned Persons


1. On March 14, 2013, the Department of Administration published MAR Notice No. 2-21-473 regarding a public hearing on the proposed amendment and repeal of the above-stated rules at page 296 of the 2013 Montana Administrative Register, Issue No. 5. The public hearing was held April 9, 2013.


2. The department has amended ARM 2.21.1931, 2.21.1933, 2.21.1934, 2.21.1937, and 2.21.1939 as proposed, and repealed ARM 2.21.1930 as proposed.


3. The department has amended ARM 2.21.1932, 2.21.1938, 2.21.1940, and 2.21.1941 as proposed, but with the following changes, stricken matter interlined, new matter underlined:


2.21.1932 DEFINITIONS In addition to the definitions found in 2-18-1303, MCA, the following definitions apply to this subchapter:

(1) though (5) remain as proposed.

(6) "Separation from service" or "Separate from service" means the employee retires or otherwise has a termination of employment. The separation from service must be a separation from the employer.  If it the separation is a transfer to another agency or public entity, VEBA eligibility is based on the new group and its VEBA criteria. If the separation is a transfer to another agency or public entity without a VEBA plan, the employee would receive any remaining leave as provided by the employer's leave policy.

(7) remains as proposed.


AUTH: 2-18-1305, MCA

IMP:  2-18-1302, MCA


2.21.1938 ELECTIONS (1) through (3) remain as proposed.

(4) The contribution source(s) of contribution must be agreed upon before a vote is conducted. The group may be polled in a manner acceptable to the group.  Once a majority agrees upon the contribution source(s), the contribution source(s) must be listed on the ballot.

(5) through (9) remain as proposed.


AUTH: 2-18-1305, MCA

IMP:  2-18-1310, MCA


2.21.1940 CONTRIBUTIONS (1) and (2) remain as proposed.

(3) Each participating employer shall provide for a member to annually designate how many hours (if any) of the member's sick leave and/or annual vacation leave balance in excess of 240 hours and/or sick leave will be automatically converted to an employer contribution to the member's account each pay period, as provided in 2-18-1311, MCA. The current state's VEBA plan policy designates 0 hours does not allow contributions of leave prior to separation from service.

(4) and (5) remain as proposed.

(6) Annual vacation leave is considered a contribution source, as approved by the voting entity, and may be converted tax-free for the purposes of a contribution. The rate of annual vacation leave is 100% of the employee's balance at the time of separation of from service.

(7) remains as proposed.


AUTH: 2-18-1305, MCA

IMP: 2-18-1311, MCA


2.21.1941 BENEFITS IN THE EVENT OF DEATH (1) remains as proposed.

(2) Upon proof of a VEBA participant's death, if the deceased VEBA participant's account has a positive account balance, the VEBA participant's surviving spouse and/or qualified dependent(s) are eligible to use the account for qualified health care expenses.

(3) through (6) remain as proposed.


AUTH: 2-18-1305, MCA

IMP: 2-18-1313, MCA


4. The department has thoroughly considered the comments and testimony received.  The department thanks those individuals who provided comments and testimony. A summary of the comments received and the department's responses are as follows:


COMMENT #1: Regarding ARM 2.21.1931, a person requested clarification regarding eligibility of domestic partners and dependents over age 26.


RESPONSE #1: The department must adhere to the Internal Revenue Code rules regarding dependents in order to maintain the VEBA plan's tax free status. Therefore, if a person is considered a dependent under the Internal Revenue Code, then they are considered eligible dependents under the VEBA plan.


COMMENT #2: A person asked for clarification about the definition of employer in ARM 2.21.1932.


RESPONSE #2: "Employer" is defined in VEBA statute 2-18-1303(5), MCA. ("'Employer' means a legally constituted department, board, commission, or any other administrative unit of state government, a county, an incorporated city or town, or any other political subdivision of the state, including a school district, or a unit of the university system.") The Montana Administrative Procedure Act precludes unnecessarily repeating statute in rules. The department has added language to the rule to clarify that all definitions in 2-18-1303, MCA, apply to these rules.


COMMENT #3: A person asked for clarification regarding ARM 2.21.1934(2) regarding the monthly fee.


RESPONSE #3: Although there is currently no monthly fee associated with the VEBA plan, the changed language allows for the department to impose fees if necessary in the future.


COMMENT #4: A person asked for clarification about how existing groups of less than five members will be treated under the new minimum of five members in ARM 2.21.1932(4).


RESPONSE #4: An existing group of less than five may continue or choose to disband. If the group decides to disband, it will not be allowed to create another group with less than five members.


COMMENT #5: A person asked for clarification regarding ARM 2.21.1932(6) and what would happen if an employee transfers to an employer with no VEBA plan.


RESPONSE #5: The department has added a sentence to explain that if an employee transferred to another employer without a VEBA plan, then the employee would receive any leave as a taxed cash payout. The department has also added the words "or public entity" to ARM 2.21.1932(6) to clarify that an employee may transfer between the state and another public entity.


COMMENT #6: A person suggested that the department clarify how a contribution source is determined.


RESPONSE #6: The department agrees and is adopting ARM 2.21.1938(4) as shown above.


COMMENT #7: A person asked for clarification about whether union employees can opt out of a group based upon their union status as discussed in ARM 2.21.1938(5).


RESPONSE #7: A group of union employees may form their own VEBA group. Otherwise, they would be included with the group that is formed by all employees.


COMMENT #8: Concerning ARM 2.21.1940, a person asked for clarification regarding whether an employee who has excess annual leave and is currently in a VEBA can choose to have that excess annual leave be put into their VEBA even before they terminate.


RESPONSE #8: The state, as an employer, does not allow state employees to contribute excess annual leave prior to separation from service, but other public entities may allow this. As explained in the statement of reasonable necessity, the state does not allow the contribution of any type of leave prior to separation from service because it is not financially possible for the state to make annual employer contributions. To clarify the rule, the department has amended ARM 2.21.1940(3) as shown above.


In addition, the department has amended language in (6) to use the correct term.


COMMENT #9: A person suggested that the department define "proof of a VEBA participant's death" in ARM 2.21.1941(2).


RESPONSE #9: The state's VEBA plan is administered by a third-party administrator. It is the third-party administrator's contractual duty to set the parameters for using the balance of a deceased VEBA participant's account.


To clarify the matter, the department has amended ARM 2.21.1941(2) as shown above.




By:   /s/ Sheila Hogan                                        By:   /s/ Michael P. Manion              

         Sheila Hogan, Director                                      Michael P. Manion, Rule Reviewer

         Department of Administration                          Department of Administration




Certified to the Secretary of State June 10, 2013.


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