Authorizes and sets forth the requirements for the establishment of a VEBA trust by public employee organizations to provide health benefits for its members. Establishes a 3-year VEBA trust pilot program to allow for the analysis of the costs and benefits of a VEBA trust against those of the Hawaii EUTF. (SD2)

A BILL FOR AN ACT

SECTION 1. The purpose of this Act is to allow for the temporary establishment of an employee organization sponsored trust that would provide health benefits for state and county employees of a particular bargaining unit, as well as future retirees of that bargaining unit, and existing retirees who wish to participate in such a trust. The trust would be established as a voluntary employees' beneficiary association trust pursuant to section 501(c)(9) of the Internal Revenue Code of 1986, as amended. 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 for active employees. The Act imposes upon the trustees of voluntary employees' beneficiary association trusts the fiduciary duties required by the Employee Retirement Income Security Act of 1974, as amended.

This Act also provides for retiree coverage for any employee who retires from the State or the counties who was a member of an employee organization that establishes a voluntary employees' beneficiary association trust pursuant to a collective bargaining agreement effective on or after July 1, 2005. Existing retirees who are members of an employee organization and who were previously covered by a collective bargaining agreement will be provided a one-time election to join the voluntary employees' beneficiary association trust once established. Retiree coverage for existing retirees provided by an employee organization's voluntary employees' beneficiary association trust would be funded by employer contributions made directly to the trust by the employer.

The requirement of establishing a voluntary employees' beneficiary association trust in order to be exempt from participation in the Hawaii employer-union health benefits trust fund is intended to be a cost containment measure in response to the ever-increasing costs of healthcare throughout the State. However, because of the lack of data available on the impact of a voluntary employees' beneficiary association trust on the Hawaii employer-union health benefits trust fund, this Act would allow the establishment of a voluntary employees' beneficiary association trust pilot program for a period of three years. During this period, a thorough analysis of the costs and benefits of a voluntary employees' beneficiary association trust can be evaluated against the Hawaii employer-union health benefits trust fund to see what actual savings could be realized by the State through this mechanism.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

§   -1 Definitions. As used in this chapter:

"Collective bargaining agreement" means the formal written agreement over wages, hours, amounts of contributions by the State, counties, or the University of Hawaii to a trust established under this chapter, and other terms and conditions of employment, entered into between an employer and the exclusive representative of the employees of the employer.

"Contribution" means money payments made to the trust by the State, 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 other employees excluded from coverage in section 89-6(g).

"Employee organization" is defined as in section 89-2.

"Employer" or "public employer" is defined as in section 89-2.

"Exclusive representative" is defined as in section 89-2.

"Retiree" means an individual who has retired or will retire from the State or its counties.

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

(b) All employees of an applicable bargaining unit whose employee organization has established a voluntary employees' beneficiary association trust on their behalf shall be members of the trust.

§   -3 Filing requirements. (a) Once established, the 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 Title 29 United States Code section 1001 et seq., 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 Title 29 United States Code section 1001 et seq., as amended.

(c) The trust shall file a copy of any documents referenced in subsections (a) and (b) with the department of accounting and general services and the department of human resources development.

§   -4 Trustees; fiduciary duty. The employee organization and the members of the governing board, in the management of the trust, shall be subject to fiduciary duties of the prudent person standard of care in the discharge of duties on behalf of all employees described in section    -2(a)(3) solely in the interest of the participants and beneficiaries for the exclusive purpose of:

with the care, skill, prudence, and diligence under the circumstances then prevailing 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 similar aims, by diversifying the investments of the plan so as to minimize the risk of large losses, unless, under the circumstances, it is clearly prudent not to do so.

§   -5 State and county contributions to trust; active employees. Upon the establishment of a voluntary employees' beneficiary association trust, the State through the department of budget and finance, the counties through their respective departments of finance, or the University of Hawaii, shall pay to the trust a monthly contribution equal to the amount specified in the applicable public sector collective bargaining agreement from July 1, 2005, and thereafter. The contributions shall be paid from membership fees.

§   -6 State and county contributions to trust; retired employees. (a) Any individual who becomes a retiree on or after the establishment of a voluntary employees' beneficiary association trust, and who, immediately prior to retirement, was a member of the bargaining unit of the sponsoring employee organization, shall be enrolled in that voluntary employees' beneficiary association trust. Upon the establishment of a voluntary employees' beneficiary association trust, the State, through the department of budget and finance, the counties through their respective departments of finance, or the University of Hawaii, shall pay to the trust for each retiree who retires on or after July 1, 2005, a monthly contribution pursuant to the applicable collective bargaining agreement that shall not exceed the base monthly contributions or the specific contribution limits set forth in chapter 87A.

(b) Any retiree who, immediately prior to retirement, was a member of an employee organization prior to the establishment of a voluntary employees' beneficiary association trust by the employee organization, and who was previously covered by a collective bargaining agreement, shall be given a one-time choice to transfer participation from the Hawaii employer-union health benefits trust fund established under chapter 87A to the organization's voluntary employees' beneficiary association trust once the latter is established. Upon the establishment of the voluntary employees' beneficiary association trust, the State, through the department of budget and finance, the counties through their respective departments of finance, or the University of Hawaii, shall pay to the trust for each retiree who opts to transfer into a voluntary employees' beneficiary association trust, a monthly contribution equal to the contribution paid on behalf of a similarly situated retiree under the Hawaii employer-union health benefits trust fund.

(c) Medicare part B reimbursements established pursuant to section 87A-23(2) shall be directly disbursed to those retirees and their beneficiaries who qualify and are covered by a voluntary employees' beneficiary association trust to the same extent retirees and their beneficiaries under the Hawaii employer-union health benefits trust fund receive those reimbursements.

(d) For the purposes of this chapter, a collective bargaining agreement shall include provisions specifying contributions to a voluntary employees' beneficiary association trust.

§   -7 Termination of the trust. If an employee organization or a collective bargaining agreement that establishes a voluntary employees' beneficiary association trust terminates the voluntary employees' beneficiary association trust, the participants in the trust shall be allowed to return to the Hawaii employer-union health benefits trust fund upon the date that health benefits cease to be provided. All participants electing to return to the Hawaii employer-union health benefits trust fund shall be given the same rights and benefits as if the participant had first participated in the Hawaii employer-union health benefits trust fund without loss of benefits or accrued time.

§   -8 Violation of the chapter; enforcement. The attorney general shall enforce any violation of this chapter in addition to any other state or federal agency that has regulatory oversight over voluntary employees' beneficiary association trusts. The attorney general may take appropriate legal action to:

§ -9 Insurance; immunity of State and counties. (a) The employee organization or the trust's governing board shall procure:

(b) The State and counties and their officers, agents, and employees shall not be liable in any manner for acts and omissions arising out of the operations of the trust or of the governing board."

SECTION 3. Section 89-2, Hawaii Revised Statutes, is amended by amending the definition of "employee organization" to read as follows:

""Employee organization" means any organization of any kind in which public employees participate and which exists for the primary purpose of dealing with public employers concerning grievances, labor disputes, wages, hours, amounts of contributions by the State and counties to the Hawaii [public employees health] employer-union health benefits trust fund[,] or a voluntary employees' beneficiary association trust, and other terms and conditions of employment of public employees."

SECTION 4. Section 89-3, Hawaii Revised Statutes, is amended to read as follows:

"§89-3 Rights of employees. Employees shall have the right of self-organization and the right to form, join, or assist any employee organization for the purpose of bargaining collectively through representatives of their own choosing on questions of wages, hours, and other terms and conditions of employment, including retiree health benefit contributions, and to engage in lawful, concerted activities for the purpose of collective bargaining or other mutual aid or protection, free from interference, restraint, or coercion. An employee shall have the right to refrain from any or all of such activities, except for having a payroll deduction equivalent to regular dues remitted to an exclusive representative as provided in section 89-4."

SECTION 5. Section 89-6, Hawaii Revised Statutes, is amended to read as follows:

"§89-6 Appropriate bargaining units. (a) All employees throughout the State within any of the following categories shall constitute an appropriate bargaining unit:

(b) Because of the nature of the work involved and the essentiality of certain occupations that require specialized training, supervisory employees who are eligible for inclusion in bargaining units (9) through (13) shall be included in bargaining units (9) through (13), respectively, instead of bargaining unit (2) or (4).

(c) The classification systems of each jurisdiction shall be the bases for differentiating blue collar from white collar employees, professional from institutional, health and correctional workers, supervisory from nonsupervisory employees, teachers from educational officers, and faculty from nonfaculty. In differentiating supervisory from nonsupervisory employees, class titles alone shall not be the basis for determination. The nature of the work, including whether a major portion of the working time of a supervisory employee is spent as part of a crew or team with nonsupervisory employees, shall be considered also.

(d) For the purpose of negotiating a collective bargaining agreement, the public employer of an appropriate bargaining unit shall mean the governor together with the following employers:

Any decision to be reached by the applicable employer group shall be on the basis of simple majority, except when a bargaining unit includes county employees from more than one county. In such case, the simple majority shall include at least one county.

(e) In addition to a collective bargaining agreement under subsection (d), each employer may negotiate, independently of one another, supplemental agreements that apply to their respective employees; provided that any supplemental agreement reached between the employer and the exclusive representative shall not extend beyond the term of the applicable collective bargaining agreement and shall not require ratification by employees in the bargaining unit.

(f) For the purposes of negotiating contributions by the State and the counties to a voluntary employees' beneficiary association trust as part of a collective bargaining agreement, all prospective retirees who retire on or after July 1, 2005, shall be considered members of the bargaining unit to which they belonged immediately prior to their retirement from the State of Hawaii or the counties.

[(f)] (g) The following individuals shall not be included in any appropriate bargaining unit or be entitled to coverage under this chapter:

[(g)] (h) Where any controversy arises under this section, the board [shall], pursuant to chapter 91, shall make an investigation and, after a hearing upon due notice, make a final determination on the applicability of this section to specific individuals, employees, or positions."

SECTION 6. Section 89-9, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read as follows:

"(a) The employer and the exclusive representative shall meet at reasonable times, including meetings sufficiently in advance of the February 1 impasse date under section 89-11, and shall negotiate in good faith with respect to wages, hours, the amounts of contributions by the State and respective counties to the Hawaii employer-union health benefits trust fund or a voluntary employees' beneficiary association trust to the extent allowed in subsection (e), and other terms and conditions of employment [which] that are subject to collective bargaining and [which] that are to be embodied in a written agreement as specified in section 89-10, but [such] the obligation does not compel either party to agree to a proposal or make a concession[; provided that the parties may not negotiate with respect to cost items as defined by section 89-2 for the biennium 1999 to 2001, and the cost items of employees in bargaining units under section 89-6 in effect on June 30, 1999, shall remain in effect until July 1, 2001]."

2. By amending subsections (d) and (e) to read as follows:

"(d) Excluded from the subjects of negotiations are matters of classification, reclassification, benefits of but not contributions to the Hawaii employer-union health benefits trust fund[,] or a voluntary employees' beneficiary association trust; recruitment[,]; examination[,]; initial pricing[,]; and retirement benefits except as provided in section 88-8(h). The employer and the exclusive representative shall not agree to any proposal [which] that would be inconsistent with the merit principle or the principle of equal pay for equal work pursuant to section 76-1 or [which] that would interfere with the rights and obligations of a public employer to:

The employer and the exclusive representative may negotiate procedures governing the promotion and transfer of employees to positions within a bargaining unit; the suspension, demotion, discharge, or other disciplinary actions taken against employees within the bargaining unit; and the layoff of employees within the bargaining unit. Violations of the procedures so negotiated may be subject to the grievance procedure in the collective bargaining agreement.

(e) Negotiations relating to contributions to the Hawaii employer-union health benefits trust fund or a voluntary employees' beneficiary association trust shall be for the purpose of agreeing upon the amounts which the State and counties shall contribute under [section 87-4,] sections 87A-32 through 87A-37, toward the payment of the costs for a health benefits plan, as defined in section [87-1(8),] 87A-1, and group life insurance benefits, and the parties shall not be bound by the amounts contributed under prior agreements; provided that section 89-11 for the resolution of disputes by way of arbitration shall not be available to resolve impasses or disputes relating to the amounts the State and counties shall contribute to the Hawaii employer-union health benefits trust fund[.] or a voluntary employees' beneficiary association trust established under chapter."

SECTION 7. There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for fiscal year 2005-2006, for the purpose of offsetting the Hawaii employer-union health benefits trust fund for the loss of members from bargaining unit (5), who transfer to the voluntary employees' beneficiary association trusts.

The sum appropriated shall be expended by the department of budget and finance for the purposes of this Act.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2050, and shall be repealed on July 1, 2008; provided that sections 89-2, 89-3, 89-6, and 89-9, Hawaii Revised Statutes, are reenacted in the form in which they read on June 30, 2005.