Report Title:

VEBA Trusts; Authorization to Establish

 

Description:

Authorizes public sector employee organizations to establish voluntary employees' beneficiary association (VEBA) trusts pursuant to section 501(c)(9) of the Internal Revenue Code.

THE SENATE

S.B. NO.

2611

TWENTY-FIRST LEGISLATURE, 2002

 

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 exclusive representative-sponsored trust that would provide health benefits for state and county employees of a particular bargaining unit. The trust would be established as a voluntary employees’ beneficiary association (VEBA) trust pursuant to section 501(c)(9) of the Internal Revenue Code. 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.

This Act 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 ("ERISA").

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated 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 the respective counties to a trust established under this chapter, and other terms and conditions of employment, which are subject to collective bargaining, entered into between an employer and the exclusive representative of the employer's employees.

"Contribution" means monetary payments made to a trust established under this chapter by the State or the respective 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 such other employees as may be excluded from coverage pursuant to section 89-6(f).

"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 chief justice of the supreme court in the case of the judiciary, the board of education in the case of the department of education, the Hawaii health systems corporation board in the case of the Hawaii health systems corporation, 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 administrative director of the courts shall be the employer in lieu of the chief justice for purposes which the chief justice deems prudent or necessary to avoid conflict.

"Exclusive representative" means the organization, which as a result of certification under chapter 89, has the right to be the collective bargaining agent of all employees in an appropriate bargaining unit without discrimination and without regard to organization membership.

§   -2 Establishment of trust. An exclusive representative shall meet the following requirements in order to establish a voluntary employees' beneficiary association trust under this chapter and be exempt from chapter 87A:

(1) The exclusive representative shall establish a tax-exempt trust pursuant to section 501(c) (9) of the Internal Revenue Code of 1986, as amended, (otherwise referred to as a voluntary employees’ beneficiary association (VEBA) trust). Beneficiaries of the trust shall include all of the employees in an appropriate bargaining unit described in section 89-6, that has been certified to be represented by the exclusive representative that establishes the trust;

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

(3) The trust shall provide for a benefits plan that it intends to provide for its beneficiaries, a summary description of the benefits plan, and rules of the plan, which meet the federal Employees Retirement Income Security Act of 1974, as amended, standards and requirements. A copy of the summary description of the benefits plan and its amendments shall be furnished to each beneficiary covered under the plan with a copy to the department of human resources development of the State of Hawaii, and to the respective human resource departments of each employer as their interest may appear.

All trusts that fulfill the requirements of this section are deemed in compliance with this chapter. All trusts subject to this chapter, along with the respective trust's establishing exclusive representative, and the beneficiaries of the trust, shall be exempt from chapter 87A, with respect to the beneficiaries of the trusts.

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

(c) A trust shall also file a copy of any documents referenced in subsections (a) and (b) with the state comptroller and the department of human resources development.

§   -4 Trustees; fiduciary duty. The trustees of the trust established under this chapter shall be fiduciaries within the standards and meaning of Federal Employees Retirement Income Security Act of 1974, as amended, as set forth in section 404 and related sections of that Act.

§   -5 Employer contributions to trust. Upon the establishment of a trust by an exclusive representative, the State, through the department of budget and finance, and the respective counties, through their respective departments of finance, and all public employers through their respective fiscal agencies, shall pay to the trust a monthly contribution equal to the amount specified in the applicable public sector collective bargaining agreement.

§   -6 Violation of this chapter; enforcement. The attorney general shall enforce this chapter in addition to any other 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 July 1, 2002.

INTRODUCED BY:

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