STAND. COM. REP. NO.419

Honolulu, Hawaii

, 2001

RE: H.B. No. 1689

H.D. 1

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Labor and Public Employment, to which was referred H.B. No. 1689 entitled:

"A BILL FOR AN ACT RELATING TO THE PUBLIC EMPLOYEES HEALTH FUND,"

begs leave to report as follows:

The purpose of this bill is to clarify that the Board of Trustees of the Public Employees Health Fund owes a primary fiduciary duty to public employers.

Your Committee agrees with the intent of this bill, but finds that it fails to also include the ultimate fiduciary duty owed by the fund to public employees.

In particular, your Committee finds that the Board of Trustees of the Health Fund has a fiduciary duty to public employees in administering moneys contributed to that fund to pay for health care benefits for public employees. In order to fulfill its fiduciary duty to public employees, the board must also adopt a fiduciary duty to public employers to ensure that the overall health fund system continues to survive and provide benefits to public employees.

Your Committee finds that if the board were to single-mindedly pursue actions that reflect a solitary fiduciary duty only to public employees without regard to rising employer costs, the possibility arises that the entire health benefits system for public employees may break down. If this occurs, the board would not have fulfilled its fiduciary duty to public employees.

Your Committee further finds that moneys in the Health Fund consists of contributions from both public employers and public employees. Although benefits go only to public employees, moneys in the Health Fund are derived from employers as well as employees. The Board of Trustees must therefore owe a dual fiduciary duty to both public employers and public employees.

Your Committee further finds that the Attorney General concurs with the idea that the Board of Trustees of the Health Fund owes a dual fiduciary duty to both public employers and employees. In an unnumbered letter opinion dated January 6, 2000, in response to a question from Representative Nathan Suzuki, the Attorney General specifically found that both the statutory scheme and legislative history of chapter 87, Hawaii Revised Statutes, evidenced the Legislature's intent that the Board owes duties to both the employee-beneficiary and to the public employer in the conduct of its affairs.

Accordingly, your Committee has amended this bill to clarify that the Board of Trustees of the Public Employees Health Fund owes a dual fiduciary duty to both public employees and public employers. Your Committee has also added a purpose section to explain the Committee's reasoning and renumbered the remaining sections.

As affirmed by the record of votes of the members of your Committee on Labor and Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1689, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1689, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Labor and Public Employment,

____________________________

TERRY NUI YOSHINAGA, Chair