Report Title:

Public Employee Health Benefits

 

Description:

Allows an employee sponsored trust to provide health benefits for state and county employees of a bargaining unit and existing and future retirees. (SD2)

THE SENATE

S.B. NO.

2961

TWENTY-FIRST LEGISLATURE, 2002

S.D. 2

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATION TRUSTS.

 

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

SECTION 1. The purpose of this Act is to allow for the establishment of an employee organization sponsored trust that would provide health benefits for state and county employees of a particular bargaining unit, as well as future and existing retirees, that wish to participate in such a trust. The trust would be established as a voluntary employees' beneficiary association (VEBA) trust pursuant to section 501(c)(9) of the Internal Revenue Code of 1986, as amended. The trust would be funded by employer contributions negotiated pursuant to a collective bargaining agreement and employee contributions to be determined by the trust's board of trustees for active employees.

The Act also provides for retiree coverage for any employee who retires from the State or its various counties on or after July 1, 2003, who is a member of the employee organization which has established a VEBA trust under section 2 of this Act pursuant to an applicable collective bargaining agreement effective on or after July 1, 2003. Existing retirees who are members of an employee organization, who were previously covered by a collective bargaining agreement, will be provided a one-time election to join the employee organization sponsored VEBA trust once such a trust is established if they wish to do so. Retiree coverage provided by an employee organization's VEBA trust would be funded by employer contributions made directly to the VEBA trust by the employer.

This requirement of establishing a VEBA trust in order to be exempt from participation in the Hawaii Employer Union Trust Fund is intended to be a cost-containment measure in response to the ever increasing costs of health care throughout the State. It is also the intent of this Act to impose upon the trustees of these types of trusts the fiduciary duties required by the Employee Retirement Income Security Act of 1974, as amended.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATION TRUSTS

§   -1 Definitions. As used in this chapter:

"Collective bargaining agreement" means the formal written agreement over wages, hours, amounts of contributions by the State and counties or the University of Hawaii to a trust established under this chapter, and other terms and conditions of employment, entered into between an employer and the exclusive representative of the employees of the employer.

"Contribution" means money payments made to the trust by the State or the several counties or a state or county employee.

"Employee" or "public employee" means any person employed by a public employer, except elected and appointed officials and other employees as may be excluded from coverage in section 89-6(c).

"Employee organization" means any organization of any kind in which public employees participate and that exists for the primary purpose of dealing with public employers concerning grievances, labor disputes, wages, hours, amounts of contributions by the State and counties to any voluntary employee beneficiary association trust established under this chapter, and other terms and conditions of employment of public employees.

"Employer" or "public employer" means the governor in the case of the State, the respective mayors in the case of the city and county of Honolulu and the counties of Hawaii, Maui, and Kauai, the board of education in the case of the department of education, and the board of regents in the case of the University of Hawaii, and any individual who represents one of these employers or acts in their interest in dealing with public employees. In the case of the judiciary, the governor shall be the employer for the purposes of this chapter.

"Exclusive representative" means the employee organization, which as a result of certification by the Hawaii labor relations board, has the right to be the collective bargaining agent of all employees in an appropriate bargaining unit without discrimination and without regard to employee organization membership.

"Retiree" means an individual who has retired or will retire from the State of Hawaii or its various counties. §   -2 Establishment of the trust. An employee organization must meet the following requirements if it is to establish a voluntary employees' beneficiary association trust under this chapter and be exempt from chapter 87A:

(1) The employee organization shall establish a tax-exempt trust pursuant to section 501(c)(9) of the Internal Revenue Code of 1986, as amended, known as a Voluntary Employees' Beneficiary Association (VEBA) trust;

(2) The trust may offer health benefits in accordance with section 501(c)(9) of the Internal Revenue Code of 1986, as amended, and related regulations;

(3) The trust shall provide for a plan of benefits it intends to provide for its members, and a summary plan description of the benefits and rules of the plan, which will meet the standards and requirements of the Employees Retirement Income Security Act of 1974, as amended. The trust shall furnish a copy of the summary plan description and its amendments to each employee covered under the plan with a copy to the department of human resources and development for the State of Hawaii, and to the department of education, University of Hawaii and the respective human resource departments of each county as their interest may appear;

(4) The trust shall have at least one member of its governing board who is a retiree and a member of the employee organization sponsoring the trust;

(5) The governing board of the trust shall notify its members of regularly scheduled meetings and shall determine the appropriate method by which such notice shall be made; and

(6) The employee organization has an applicable collective bargaining agreement with the employer.

§   -3 Filing requirements. (a) Once established the trust must comply with all form and report filing requirements imposed upon the trust by the Internal Revenue Service, and must conform with all requirements of the Employees Retirement Income Security Act of 1974, as amended.

(b) An annual independent audit by a licensed certified public accountant shall be performed on the trust in accordance with generally accepted accounting principles. The audit shall include full disclosure of all transactions with parties of interest, and include any prohibited transactions within the requirements and standards of the Employees Retirement Income Security Act of 1974, as amended.

(c) The trust shall file a copy of any documents referenced in subsections (a) and (b) with the department of accounting and general services and the department of human resources and development.

§   -4 Trustees; fiduciary duty. The trustees of the voluntary employees' beneficiary association trust shall be fiduciaries within the standards and meaning of section 404 of the Employees Retirement Income Security Act of 1974, as amended, and other related sections.

§   -5 State and county contributions to trust; active employees. Upon the establishment of a trust satisfying the requirements of section    -2 by an employee organization, the State through the department of budget and finance and the several counties through their respective departments of finance, or the University of Hawaii shall pay to the trust a monthly contribution equal to the amount specified in the applicable public sector collective bargaining agreement from July 1, 2003, and thereafter.

§   -6 State and county contributions to trust; retired employees. (a) Any individual who becomes a retiree on or after the establishment of an employee organization sponsored trust pursuant to section    -2, and who is a member of that employee organization, shall be enrolled in that employee organization sponsored trust established pursuant to section  -2 and the applicable collective bargaining agreement under which the retiree was covered at the date of retirement.

(b) Any retiree, prior to an employee organization sponsored trust being established pursuant to section    -2, who is a member of that employee organization, and who was previously covered by a collective bargaining agreement, shall be given a one-time option to transfer participation from the Hawaii employer union health benefit trust to the corresponding employee organization VEBA trust once established pursuant to section    -2. For the purposes of this chapter and for providing retiree benefits, a collective bargaining agreement may include provisions specifying contributions and any process by which Medicare part B reimbursements may be ported from the employer-union health benefits trust fund established pursuant to chapter 87A for reimbursements to those retirees who are covered by the VEBA trust.

(c) Upon the establishment of a trust satisfying the requirements of section    -2 by an employee organization, the State, through the department of budget and finance and the several counties through their respective departments of finance, or the University of Hawaii, shall pay to the trust for each retiree who participates, a monthly contribution pursuant to the applicable collective bargaining agreement which shall not exceed the base monthly contributions or the specific contribution limits set forth in chapter 87A.

§   -7 Termination of the trust. Should an employee organization or a collective bargaining agreement which establishes a trust under section    -2 terminate or cease to provide health benefits, the participants in such trust shall be given the opportunity to return to the Hawaii employer union health benefits trust upon the date that health benefits cease to be provided. All participants electing to return to the Hawaii employer union health benefits trust shall be given the same rights and benefits as if the participant had first participated in the Hawaii employer union health benefits trust from the inception of that trust.

§   -8 Violation of the chapter; enforcement. The attorney general shall enforce any violation of this chapter in addition to any other U.S. federal agency or other state agency that has regulatory oversight over the trust established under this chapter."

SECTION 3. This Act shall take effect upon its approval.