HOUSE OF REPRESENTATIVES
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII
A BILL FOR AN ACT
relating to the hawaii employer-union health benefits trust fund.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Chapter 87A, Hawaii Revised Statutes, is amended by adding three new sections to be appropriately designated and to read as follows:
"§87A- Selection of benefit plan carriers, third-party administrators, consultants, actuaries, auditors, or administrators. Procurement of a carrier, third-party administrator for any benefits plan, consultant, actuary, auditor, or administrator shall be exempt from chapter 103D.
§87A- Fiduciary duties; prohibited transactions. (a) A fiduciary of the trust shall comply with all fiduciary duties with respect to a plan imposed on fiduciaries under title 29 United States Code sections 1001 to 1191, as amended, and any related regulations.
(b) All fiduciaries of the trust shall discharge their duties with respect to a plan solely in the interest of the participants and beneficiaries and:
(1) For the exclusive purpose of:
(A) Providing benefits to participants and their beneficiaries; and
(B) Defraying reasonable expenses of administering the plan;
(2) With the care, skill, prudence, and diligence under the prevailing circumstances that a prudent person acting in a similar capacity and familiar with those matters would use in the conduct of an enterprise of a similar character and with like aims;
(3) By diversifying the investments of the plan so as to minimize the risk of large losses unless it is clearly prudent not to do so under the circumstances; and
(4) In accordance with the documents and instruments governing the plan insofar as these documents and instruments are consistent with the requirements of this chapter.
(c) In addition to any liability that a fiduciary may have under this chapter, a fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan under the following circumstances:
(1) If the fiduciary knowingly participates in or knowingly undertakes to conceal an act or omission of another fiduciary while knowing that the act or omission is a breach;
(2) If by failing to comply with subsections (a) and (b), the fiduciary has enabled another fiduciary to commit a breach; or
(3) If the fiduciary has knowledge that another fiduciary committed a breach, unless the fiduciary makes reasonable efforts under the circumstances to remedy the breach.
If the assets of the plan are held by two or more trustees, each trustee shall use reasonable care to prevent the other trustee from committing a breach, and each trustee shall be responsible for jointly managing and controlling the assets of the plan.
(d) A fiduciary shall not cause a plan to engage in a transaction if the fiduciary knows or should know that the transaction constitutes a direct or indirect:
(1) Selling, exchanging, or leasing of any property between the plan and a party in interest;
(2) Lending of money or other extension of credit between the plan and a party in interest;
(3) Furnishing of goods, services, or facilities between the plan and a party in interest; or
(4) Transferring to or using by or for the benefit of a party in interest of any assets of the plan.
(e) A fiduciary shall not:
(1) Deal with the assets of the plan in the fiduciary's own interest or for the fiduciary's own account;
(2) In the fiduciary's individual capacity or in any other capacity, act in any transaction involving the plan on behalf of a party or representative of a party whose interests are adverse to the interests of the plan or the interests of the plan participants or beneficiaries; or
(3) Receive any consideration for the fiduciary's own personal account from any party dealing with the plan in connection with a transaction involving the assets of the plan.
§87A- Liability for breach of fiduciary duty. (a) Any person who is a fiduciary with respect to a plan and who breaches any of the responsibilities, obligations, or duties imposed on fiduciaries under this chapter shall be:
(1) Personally liable to make good to the plan losses to the plan resulting from each breach;
(2) Personally liable to restore to the plan any profits of the fiduciary that were made through the use of assets of the plan by the fiduciary; and
(3) Subject to any other equitable and remedial relief as the court may deem appropriate, including the removal of the fiduciary.
(b) Any provision in any agreement or instrument that purports to relieve a fiduciary of any responsibility, obligation, or duty under this chapter shall be void as against public policy. However, nothing in this section shall preclude the following:
(1) A plan from purchasing insurance for its fiduciaries or for itself to cover liability or losses occurring by reason of the act or omission of a fiduciary in the case of a breach of a fiduciary obligation by the fiduciary; provided that the insurance permits recourse by the insurer against the fiduciary in the case of a breach of fiduciary obligation by the fiduciary;
(2) A fiduciary from purchasing insurance to cover liability under this chapter from and for the fiduciary's own account; or
(3) An employee organization from purchasing insurance to cover potential liability of one or more persons who serve in a fiduciary capacity with regard to an employee welfare benefit plan."
SECTION 2. Section 28-8.3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) No department of the State other than the attorney general may employ or retain any attorney, by contract or otherwise, for the purpose of representing the State or the department in any litigation, rendering legal counsel to the department, or drafting legal documents for the department; provided that the foregoing provision shall not apply to the employment or retention of attorneys:
(1) By the public utilities commission, the labor and industrial relations appeals board, and the Hawaii labor relations board;
(2) By any court or judicial or legislative office of the State; provided that if the attorney general is requested to provide representation to a court or judicial office by the chief justice or the chief justice's designee, or to a legislative office by the speaker of the house of representatives and the president of the senate jointly, and the attorney general declines to provide such representation on the grounds of conflict of interest, the attorney general shall retain an attorney for the court, judicial, or legislative office, subject to approval by the court, judicial, or legislative office;
(3) By the legislative reference bureau;
(4) By any compilation commission that may be constituted from time to time;
(5) By the real estate commission for any action involving the real estate recovery fund;
(6) By the contractors license board for any action involving the contractors recovery fund;
(7) By the office of Hawaiian affairs;
(8) By the department of commerce and consumer affairs for the enforcement of violations of chapters 480 and 485A;
(9) As grand jury counsel;
(10) By the Hawaiian home lands trust individual claims review panel;
(11) By the Hawaii health systems corporation, or its regional system boards, or any of their facilities;
(12) By the auditor;
(13) By the office of ombudsman;
(14) By the insurance division;
(15) By the University of Hawaii;
(16) By the Kahoolawe island reserve commission;
(17) By the division of consumer advocacy;
(18) By the office of elections;
(19) By the campaign spending commission;
(20) By the Hawaii tourism authority, as provided in section 201B-2.5;
(21) By the division of financial institutions for any
action involving the mortgage loan recovery fund; [
(22) By the Hawaii employer-union health benefits trust fund, as provided in section 87A-9; or
(22)] (23) By a department, in the event
the attorney general, for reasons deemed by the attorney general to be good and
sufficient, declines to employ or retain an attorney for a department; provided
that the governor waives the provision of this section."
SECTION 3. Section 87A-5, Hawaii Revised Statutes, is amended to read as follows:
"§87A-5 Composition of board. (a)
The board of trustees of the employer-union health benefits trust fund shall
consist of [
ten] trustees appointed [ by the governor] in
accordance with the following procedure:
Five] Six trustees[ , one of
whom shall represent retirees,] to represent employee-beneficiaries and to
be selected as follows:
(A) Three trustees shall be
appointed from a list of two nominees per trustee selected by each of the three
exclusive representative organizations that have the largest number of
employee-beneficiaries; (B) One trustee shall be appointed
from a list of two nominees selected by mutual agreement of the remaining
exclusive employee representative organizations; and (C) One trustee representing
retirees shall be appointed from a list of two nominees selected by mutual
agreement of all eligible exclusive representatives; and (2) Five trustees to represent public
(A) One trustee to be appointed by the exclusive bargaining representative for bargaining units 2, 3, 4, 6, 8, 9, and 13;
(B) One trustee to be appointed by the exclusive bargaining representative for bargaining unit 5;
(C) One trustee to be appointed by the exclusive bargaining representative for bargaining unit 7;
(D) One trustee to be appointed by the exclusive bargaining representative for bargaining units 1 and 10;
(E) One trustee to be appointed by the exclusive bargaining representative for bargaining unit 11; and
(F) One trustee to be appointed by the exclusive bargaining representative for bargaining unit 12;
provided that all trustees shall serve at the pleasure of the appointing exclusive bargaining representative; and
(2) Six trustees, consisting of five trustees to represent public employers and one trustee to represent retiree beneficiaries, to be selected as follows:
(A) One trustee to be appointed by the governor to represent the executive branch;
(B) One trustee to be appointed by the governor from a list of nominees submitted by the University of Hawaii board of regents;
(C) One trustee to be appointed by the governor from a list of nominees submitted by the board of education;
(D) One trustee to be appointed by the mayor of the city and county of Honolulu;
(E) One trustee to be appointed by at least two county mayors from the counties of Hawaii, Maui, and Kauai; provided that the two remaining counties shall appoint an alternate trustee to serve in the absence of the trustee appointed pursuant to subparagraph (D) or pursuant to this subparagraph; and
(F) One trustee appointed by the governor to represent retiree beneficiaries;
provided that all trustees shall serve at the pleasure of the appointing authority.
(b) If an exclusive bargaining representative negotiates a specific contribution to apply only to that bargaining unit, that bargaining unit shall have a sub-board of trustees to administer that exclusive bargaining unit's contributions and benefits. The benefits for that bargaining unit, including the type and level, shall be determined by the sub-board of trustees or established pursuant to the collective bargaining agreement. The sub-board of trustees shall comprise two trustees appointed by the employer and two trustees appointed by the exclusive bargaining representative.
(c) Section 26-34 shall not apply to board member selection and terms. Notwithstanding any other provision of this section, no exclusive representative of a bargaining unit that sponsors or participates in a voluntary employee beneficiary association shall be eligible to select nominees or to be represented by a trustee on the board.
(d) As used in this section, the term "exclusive representative" shall have the same meaning as in section 89-2."
SECTION 4. Section 87A-6, Hawaii Revised Statutes, is amended to read as follows:
"§87A-6 Term of a trustee; vacancy.
The term of office of each trustee shall be four years; provided that a
trustee may be reappointed for one additional consecutive four-year term. A vacancy on the board shall be filled in
the same manner as the trustee who vacated that position was nominated or
appointed; provided that the criteria used for nominating or appointing the
successor shall be the same criteria used for nominating or appointing the
person's predecessor; provided further that vacancies on the board for each
trustee position representing retirees and employee-beneficiaries appointed
under section 87A-5(1)(A) and (B) shall be filled by appointment of the
governor as follows: (1) If a vacancy occurs in one of the
trustee positions described in section 87A-5(1)(A), then the vacancy shall be
appointed from a list of two nominees submitted by the exclusive employee
representative from among the three largest exclusive employee representatives
that does not have a trustee among the three trustee positions; (2) If a vacancy occurs in a trustee
position described in section 87A-5(1)(B), then the vacancy shall be appointed
from a list of two nominees submitted by mutual agreement of the exclusive
employee representatives described in section 87A-5(1)(B); and (3) If a vacancy occurs in the retiree
position described in section 87A-5(1)(C), then the vacancy shall be appointed
from a list of two nominees submitted by mutual agreement of all eligible
exclusive employee representatives.]
If by the end of a trustee's term the trustee is not reappointed or the trustee's successor is not appointed, the trustee shall serve until the trustee's successor is appointed. The term of office of each trustee shall be at the pleasure of the nominating or appointing authority. In the event that the appointing authority fails to appoint an employer trustee to fill a vacant position, the chief justice of the supreme court shall make the appointment upon petition by two or more employee-beneficiary trustees. In the event that the appointing authority fails to appoint an employee-beneficiary trustee to fill a vacant position, the chief justice of the supreme court shall make the appointment upon petition by two or more employer trustees."
SECTION 5. Section 87A-9, Hawaii Revised Statutes, is amended to read as follows:
§87A-9[ ]] Legal
adviser. The [ attorney general shall] board may appoint or
retain by contract an attorney who is independent of the attorney general to
serve as legal adviser to the board and [ shall] provide legal
representation for the Hawaii employer-union health benefits trust fund. The
legal adviser shall have benefits experience with the Employee Retirement
Income Security Act, from the private or public sector."
SECTION 6. Section 87A-11, Hawaii Revised Statutes, is amended to read as follows:
§87A-11[ ]] Quorum;
board actions; voting. (a) [ Six] Eight trustees, [ three]
four of whom represent the public employer and [ three] four
of whom represent employee-beneficiaries, shall constitute a quorum for the
transaction of business.
(b) Trustees representing the public employers shall collectively have one vote. Trustees representing the employee-beneficiaries shall collectively have one vote.
For any vote of the trustees representing the
public employers to be valid, [
three] four of these trustees must
concur to cast such a vote. In the absence of such concurrence, the trustees
representing the public employers shall be deemed to have abstained from
For any vote of the trustees representing the
employee-beneficiaries to be valid, [
three] four of these
trustees must concur to cast such a vote. In the absence of such concurrence,
the trustees representing the employee-beneficiaries shall be deemed to have
abstained from voting.
An abstention shall not be counted as either a vote in favor or against a matter before the board.
(c) Any action taken by the board shall be by
the concurrence of at least two votes. In the event of a tie vote on any
motion, the motion shall fail. Upon the concurrence of [
trustees, the board shall participate in dispute resolution."
SECTION 7. Section 87A-15, Hawaii Revised Statutes, is amended to read as follows:
Administration of the fund. The board shall administer and carry out the
purpose of the fund. Health and other benefit plans shall be provided [ at a
cost affordable to both the public employers and the public employees.] as
(1) For collective bargaining units based on the collectively bargained contributions from both the employers and the employees;
(2) For retirees within the appropriation adopted by the legislature and the respective counties; and
(3) For all other eligible beneficiaries based on the contribution from both the employer and employees."
SECTION 8. Section 87A-30, Hawaii Revised Statutes, is amended to read as follows:
"§87A-30 Hawaii employer-union health
benefits trust fund; establishment. There is established outside the state
treasury, a trust fund to be known as the "Hawaii Employer-Union Health
Benefits Trust Fund". The fund shall consist of contributions, interest,
income, dividends, refunds, rate credits, and other returns. It is hereby
declared that any and all sums contributed or paid from any source to the fund
created by this part, and all assets of the fund including any and all interest
and earnings on the same, are and shall be held in trust by the board for the
exclusive use and benefit of the employee-beneficiaries and
dependent-beneficiaries and shall not be subject to appropriation for any other
purpose whatsoever. The fund shall be under the control of the board of
trustees and placed under the department of [
budget and finance] human
resources development for administrative purposes."
SECTION 9. All rights, powers, functions, and duties of the department of budget and finance with respect to the Hawaii employer-union health benefits trust fund are transferred to the department of human resources development.
All officers and employees whose functions are transferred by this Act shall be transferred with their functions and shall continue to perform their regular duties upon their transfer, subject to the state personnel laws and this Act.
No officer or employee of the State having tenure shall suffer any loss of salary, seniority, prior service credit, vacation, sick leave, or other employee benefit or privilege as a consequence of this Act, and such officer or employee may be transferred or appointed to a civil service position without the necessity of examination; provided that the officer or employee possesses the minimum qualifications for the position to which transferred or appointed; and provided that subsequent changes in status may be made pursuant to applicable civil service and compensation laws.
An officer or employee of the State who does not have tenure and who may be transferred or appointed to a civil service position as a consequence of this Act shall become a civil service employee without the loss of salary, seniority, prior service credit, vacation, sick leave, or other employee benefits or privileges and without the necessity of examination; provided that such officer or employee possesses the minimum qualifications for the position to which transferred or appointed.
If an office or position held by an officer or employee having tenure is abolished, the officer or employee shall not thereby be separated from public employment, but shall remain in the employment of the State with the same pay and classification and shall be transferred to some other office or position for which the officer or employee is eligible under the personnel laws of the State as determined by the head of the department or the governor.
SECTION 10. All appropriations, records, equipment, machines, files, supplies, contracts, books, papers, documents, maps, and other personal property heretofore made, used, acquired, or held by the department of budget and finance with respect to the Hawaii employer-union health benefits trust fund relating to the functions transferred to the department of human resources development shall be transferred with the functions to which they relate.
SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 12. This Act shall take effect upon its approval.
Hawaii Employer-union Health Benefits Trust Fund; Procurement; Fiduciary Duties; Board Composition; Vacancies; Legal Adviser; Quorum; Fund Administration
Authorizes the board of trustees to procure certain services with an exemption from the procurement code. Establishes trust fiduciary duties, prohibits certain transactions, and establishes liabilities for breaching a fiduciary duty. Amends the membership, methods of appointment, and representation on the board of trustees; the selection process for filling a vacant trustee seat on the board; and the quorum requirements for voting by the board. Authorizes the board to appoint or contract an attorney who is independent from the attorney general and establishes qualifications for the contracted attorney. Specifies how the board shall administer and carry out the purposes of the trust fund and administratively attaches the trust fund to the department of human resources development.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.