STAND. COM. REP. NO. 3301

                                   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 Ways and Means, 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 bill is to authorize the department or
agency charged with administration of flexible spending accounts
(FSA) to enter into contracts necessary to establish, administer,
or maintain the plan.

     The bill also requires that all FSA contributions, interest
earned, and forfeited balances be held in trust for the benefit
of the participants and the plan.

     Additionally, the bill 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.

     Your Committee finds that the Department of Human Resources
Development 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.  Because the cost for this
administrator must be charged to employees enrolled in the
program, your Committee finds that allowing interest earnings and

 
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                                   STAND. COM. REP. NO. 3301
                                   Page 2


participant forfeitures to be used to pay administrative costs
will minimize the cost of FSAs to the employee.

     As affirmed by the record of votes of the members of your
Committee on Ways and Means 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 Third Reading.

                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair



                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
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