STAND. COM. REP. NO. 2979

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  H.B. No. 2519
                                        H.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Labor and Environment, to which was
referred H.B. No. 2519, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO FLEXIBLE SPENDING ACCOUNTS,"

begs leave to report as follows:

     The purpose of this measure is to require that all Flexible
Spending Account (FSA) contributions, interest earned, and
forfeited balances be held in trust.  The measure also allows the
funds to be held in trust outside the state treasury and requires
that the interest earned on the contributions and forfeited
participant balances be used to defray administrative fees
associated with managing the FSA.

     Testimony in support of this measure was received from the
Department of Human Resources Development (DHRD), University of
Hawaii, the United Public Workers, the Hawaii Government
Employees Association, the Hawaii State Teachers Association, and
Comprehensive Financial Planning, Inc.

     Your Committee finds that DHRD is in the process of
implementing the FSA option for state employees effective July 1,
2000.  Because of the increased record-keeping required for FSAs,
the State must hire an administrator to manage the program.  The
cost of this administrator must be charged to employees enrolled
in the program.  Your Committee believes that allowing interest
earnings and participant forfeitures to be used to pay
administrative costs will minimize the cost of FSAs to the
employee.

 
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                                   STAND. COM. REP. NO. 2979
                                   Page 2



     As affirmed by the record of votes of the members of your
Committee on Labor and Environment that is attached to this
report, your Committee is in accord with the intent and purpose
of H.B. No. 2519, H.D. 1, and recommends that it pass Second
Reading and be referred to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Labor and
                                   Environment,



                                   ______________________________
                                   BOB NAKATA, Chair

 
a                                                     HB2519 HD1