THE SENATE

S.C.R. NO.

68

TWENTY-FIFTH LEGISLATURE, 2009

 

STATE OF HAWAII

 

 

 

 

 

SENATE CONCURRENT

RESOLUTION

 

 

REQUESTING THE state AUDITOR TO CONDUCT A MANAGEMENT AND Performance AUDIT OF THE BOARD OF TRUSTEES OF THE STATE DEFERRED COMPENSATION PLAN AND PLAN ADMINISTRATORS CONTRACTED BY THE BOARD.

 

 


     WHEREAS, the state Deferred Compensation Plan was established in 1981 in chapter 88E, Hawaii Revised Statutes (HRS), in accordance with section 457 of the Internal Revenue Code of 1954, as amended, for the benefit of public employees of the State and the counties of the State of Hawaii to enable these employees to defer a portion of their compensation to a future period of time; and

 

     WHEREAS, pursuant to chapter 88E, HRS, a Board of Trustees was established with its members appointed by the Governor of the State of Hawaii to perform necessary duties and functions to establish and maintain a deferred compensation plan and to engage the services of a plan administrator in accordance with specifications as may be established by the Board; and

 

     WHEREAS, since its inception, the Deferred Compensation Plan has experienced rapid growth, with large numbers of public employees participating in the Plan and contributing a portion of their compensation into the Plan to be held and invested by the Board of Trustees in accordance with investment products permitted under the Plan and chapter 88E, HRS; and

 

     WHEREAS, concerns have been raised in recent years about the Deferred Compensation Plan and the Plan Administrators' lack of communication with the Plan members, lack of easy access to information relating to each member's contribution, investment performance, investment expenses, costs of administration, and each member's special needs and circumstances; and

 

     WHEREAS, numerous public employees and retirees of both the State and counties who are members of the Deferred Compensation Plan have complained of the substantial lack of information on their accounts, their inability to obtain information on their investments from the Plan administrators, and the difficulties that many of them have experienced in obtaining assistance in planning for their retirement, in meeting technical requirements of the Internal Revenue Service, and simply determining what to do with their investments in a rapidly changing economy; and

 

     WHEREAS, despite having a Board of Trustees, the members have little or no information relating to any meetings that the Board of Trustees may have had or may have in the future on matters that deal with the investments, with no reports on any decisions that may have been made by the Board on any current and future plans for the Deferred Compensation Plan; and

 

     WHEREAS, some members that have accepted ING Group as their Plan administrator were promised easy access, timely and appropriate information, and an excess of information, and that these promises have yet to materialize, resulting instead in difficult access, with little if any information available to the members; and

 

     WHEREAS, in light of the recent downturn in the economy, the substantial loss of investments experienced by many Deferred Compensation Plan members, and the need for these members to make decisions that may affect their investments, the inability to access Plan administrators has created great concern among employees and retirees with regard to the Deferred Compensation Plan, the Board of Trustees, and the Plan administrators; and

 

     WHEREAS, given the growing number of members, particularly the growing number of retirees, the need to maximize members' investments, together with the need to make timely and appropriate decisions regarding members' investments, the Board of Trustees and the Plan administrators contracted by the Board of Trustees must take positive steps to allow timely and easy access to each member's investments to enable the members to make timely and appropriate decisions on their investments; and

 

     WHEREAS, there is a need for the State Auditor to conduct a management and performance audit of the Board of Trustees and the Deferred Compensation Plan to ensure that the Board of Trustees and the Plan administrators are acting in the best interest and meeting the needs of Deferred Compensation Plan members; now, therefore,

 

     BE IT RESOLVED by the Senate of the Twenty-fifth Legislature of the State of Hawaii, Regular Session of 2009, the House of Representatives concurring, that the State Auditor is requested to conduct a management and performance audit of the Board of Trustees of the Deferred Compensation Plan; and

 

     BE IT FURTHER RESOLVED that the State Auditor is requested to include in the audit a review of the contract decisions of the Board of Trustees, including a review of current and previous Plan administrators contracted by the Board of Trustees, Plan administrators' investment expenses, the number of investment managers retained by the Plan administrators, method of selection of investment managers, criteria used to retain investment firms, the rate of return for each investment manager's portfolio, and a comparison of these investment decisions with deferred compensation plans of other jurisdictions; and

 

     BE IT FURTHER RESOLVED that the Board of Trustees, the Board of Trustees' staff, and Plan administrators are requested to fully cooperate and promptly respond to the State Auditor's requests in conducting this audit; and

 

     BE IT FURTHER RESOLVED that the State Auditor is requested to report findings and recommendations, including any proposed implementing legislation, to the Legislature no later than twenty days before the convening of the Regular Session of 2010; and

 

     BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the State Auditor and to the Chairperson of the Board of Trustees of the Deferred Compensation Plan.

 

 

 

 

OFFERED BY:

_____________________________

 

 

 

Report Title: 

Deferred Compensation Plan; Management and Performance Audit; State Auditor