HB831.DOC

SECTION 1. The legislature finds that the cost of health insurance policy premiums has been increasing over time. Because future costs of health insurance policy premiums are difficult to predict, the legislature finds that changing the current structure of state and county employers paying a percentage of health insurance policy premiums for retired employee-beneficiaries of the Hawaii employer-union health benefits trust fund in favor of a health reimbursement arrangement for such retired employee-beneficiaries is fiscally responsible and prudent.

The purpose of this Act is to provide for the establishment of a defined contribution plan or health reimbursement arrangement, as qualified under sections 105 and 106 of the Internal Revenue Code, for retired employee-beneficiaries of the Hawaii employer-union health benefits trust fund who were hired on or after July 1, 2013.

SECTION 2. Chapter 87A, Hawaii Revised Statutes, is amended by adding to part VI a new section to be appropriately designated and to read as follows:

"87A- Health reimbursement arrangement. (a) Notwithstanding any law to the contrary, this section shall apply to employee-beneficiaries who were hired on or after July 1, 2013, and who retire from state or county government employment.

(b) If the board establishes a separate trust fund for purposes of receiving employer contributions that will prefund other post-employment health and other benefit plan costs for retired employee-beneficiaries and their beneficiaries, as set forth in section 87A-42, the health reimbursement arrangement described in subsection (c) shall be paid solely from such separate trust fund.

(c) The separate trust fund shall establish and administer health reimbursement arrangement individual accounts for employee-beneficiaries hired on or after July 1, 2013, as qualified under sections 105 and 106, Internal Revenue Service. The health reimbursement arrangement accounts shall not have any associated liability for purposes of accounting statement 43 or 45, Governmental Accounting Standards Board.

(1) The fund may hire an administrator to manage and invest health reimbursement arrangement accounts on behalf of the separate trust fund. Except as herein set forth, all interest earned from such investments will inure to the individual health reimbursement arrangement accounts. All expenses of administering health reimbursement accounts will be debited primarily from separate trust fund investment earnings and secondarily from health reimbursement arrangement account balances.

(2) For all employee-beneficiaries hired on or after July 1, 2013, and who have achieved ten years of credited service, excluding sick leave, the separate trust fund shall contribute $0.58 per hour worked or $100.00 monthly, whichever is greater, per employee-beneficiary. The separate trust fund shall deposit this amount into employee-beneficiaries' individual health reimbursement arrangement accounts beginning the month immediately following an employee-beneficiary achieving ten years of credited service, excluding sick leave.

(d) Employee-beneficiaries hired on or after July 1, 2013, shall vest in their health reimbursement arrangement accounts upon achievement of ten consecutive uninterrupted years of credited service, excluding breaks in service, as defined in, sections 87A-35 and 87A-36, and sick leave. Once employee-beneficiaries vest in their health reimbursement arrangement accounts, account balances shall not be subject to forfeiture by the employee-beneficiaries.

(e) All vested health reimbursement arrangement accounts shall be available to respective employee-beneficiaries upon retirement from the employees' retirement system of the State of Hawaii, and be available to eligible dependent-beneficiaries upon the death of the employee-beneficiary. If a vested employee-beneficiary should die prior to retirement, the employee-beneficiary's health reimbursement arrangement account shall be available to the eligible dependent-beneficiary. Upon the death of the employee-beneficiary without an eligible dependent-beneficiary, unused amounts in that employee-beneficiary's health reimbursement arrangement shall be distributed to all remaining health reimbursement arrangement participants in the form of a dividend. Under no circumstances shall unused amounts be returned to the separate trust fund.

(f) Only eligible medical expenses, including the cost of retiree medical premiums, dental and vision premiums, long-term care insurance and long-term care expenses, and other expenses enumerated in section 213(d) of the Internal Revenue Code, as determined by the fund, may be reimbursed from health reimbursement arrangement accounts.

(g) Health reimbursement arrangement accounts shall be managed pursuant to the Internal Revenue Code. All contributions into health reimbursement arrangement accounts shall be exempt from taxation and shall not be included in the definition of compensation for purposes of the calculation of other employee benefits, including the definition of pensionable compensation.

(h) Upon termination of the plan described in this section, vested health reimbursement arrangement account balances will continue to be available to employee-beneficiaries upon their retirement and for current retired employee-beneficiaries. Termination of the plan described in this section shall not cause the surrender by employee-beneficiaries of any vested account balances."

SECTION 3. Section 87A-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Health reimbursement arrangement" means the predetermined monthly sum of money paid to a retired employee-beneficiary who was hired on or after July 1, 2013."

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.

INTRODUCED BY:

_____________________________

By Request

HOUSE OF REPRESENTATIVES	H.B. NO.	831
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII