Legislature(2005 - 2006)BELTZ 211

04/07/2005 01:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SB 145 Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Including But Not Limited to:
Heard & Held
Moved CSSB 131(L&C) Out of Committee
Moved CSSB 139(L&C) Out of Committee
                        SB 108-INSURANCE                                                                                    
CHAIR CON BUNDE  announced SB 108 to be up  for consideration. He                                                               
stated  that he  was waiting  for a  CS to  be delivered,  but he                                                               
would like to hear the bill anyhow.                                                                                             
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Commerce,  Community &  Economic  Development  (DCCED), said  she                                                               
wanted  to comment  on Sections  28  and 29,  union health  trust                                                               
language, in  more detail.  She explained  that she  brought this                                                               
issue  before  the  Legislature for  deliberation  and  a  policy                                                               
decision. She related  how she tried to clarify  a provision that                                                               
already exists in statute that says:                                                                                            
     Except as  otherwise provided in  this title,  a person                                                                    
     that provides coverage for the  cost of medical care...                                                                    
     is subject to  this title unless the  person shows that                                                                    
     they are  subject to a  jurisdiction of  another agency                                                                    
     of  this  state  or  the federal  government  with  the                                                                    
     appropriate certificate, license  or document issued by                                                                    
     the   other  governmental   agency   that  permits   or                                                                    
     qualifies the  person to  provide coverage  for medical                                                                    
This language  requires entities  providing medical care  to have                                                               
oversight someplace and  if they don't, they would  have it under                                                               
Title 21. In  March of last year  one of the unions  asked her if                                                               
her  division  regulated  it.  To formulate  a  reply,  she  sent                                                               
letters to the five union  health trusts asking for documentation                                                               
of who regulates them.                                                                                                          
MS. HALL  said she  received responses, which  have taken  a long                                                               
time  to  go  through  and more  information  was  needed  still.                                                               
Approximately  19,000   state  employees'  health   benefits  are                                                               
provided by  union health trusts  and she wanted  the Legislature                                                               
to have  some discussion  and make  a policy  call as  to whether                                                               
some  standards should  be set  to  insure the  viability of  the                                                               
trusts. She hadn't had any  specific contact with people from the                                                               
health trusts,  but had some  contact from union members.  One of                                                               
the issues  she thought  was important to  deal with  was bonding                                                               
limits because  those are exceedingly  high, but she  really felt                                                               
strongly about getting financial  statements that show the assets                                                               
and liabilities of  the health trusts stating,  "Frankly, I think                                                               
most of them have that and if they don't they should."                                                                          
She  said  there have  been  allegations  that no  actuary  would                                                               
certify  various  things,  but  in fact,  that  is  exactly  what                                                               
actuaries  do. She  went to  the  point of  getting an  actuarial                                                               
opinion  to make  sure she  understood what  an actuary  does and                                                               
noted that she has two of them on her staff.                                                                                    
     They  do look  at the  contribution rate,  which is  an                                                                    
     equivalent of  premium. It's not the  contribution rate                                                                    
     by the Legislature to the  fund; it is the contribution                                                                    
     that is the  total money necessary to  fund the benefit                                                                    
     plan. It  will be  a combination  of the  monies funded                                                                    
     through  the  GF,  through the  budget,  and  what  the                                                                    
     employees  are   charged  in  addition  to   the  money                                                                    
     provided by  the state.  And it  also would  include an                                                                    
     actuarial analysis of the adequacy  of reserves to make                                                                    
     sure  there   is  adequate  money  set   aside  to  pay                                                                    
     benefits, both current and  future liabilities. I think                                                                    
     those  are critical  pieces. We  talked about  solvency                                                                    
     regulation  of  a  number  of   entities  and  I  think                                                                    
     entities entrusted with the welfare  of the benefits of                                                                    
     their members  provided through their  state employment                                                                    
     should  have a  similar kind  of protection.  Those are                                                                    
     the lists in the bill of the minimum standards.                                                                            
     There  are  some  additional standards  that  generally                                                                    
     relate to the  kinds of things we require  - an outside                                                                    
     appeals  process.  The  complaints   that  come  to  my                                                                    
     division, some  valid, some not, as  are all complaints                                                                    
     that we get. There is  an appeal process, but it's very                                                                    
     formalized   in   the   current  practice,   which   is                                                                    
     arbitration   or   the   court  system.   That's   very                                                                    
     intimidating  to many  people.  I've had  people in  my                                                                    
     office  in tears  because they  are intimidated  by the                                                                    
     process  and I've  tried  to help  them  even though  I                                                                    
     don't have any regulatory authority....                                                                                    
     I  am  willing  to  look  at things  that  seem  to  be                                                                    
     onerous.  I've  heard  estimates and  I  think  they're                                                                    
     probably fairly accurate that it  would cost $40,000 to                                                                    
     $50,000 for  an actuarial opinion.  When I look  at the                                                                    
     millions  of  dollars  that are  in  those  trusts,  it                                                                    
     doesn't seem to  me to be a huge amount  to pay. And as                                                                    
     I said, it's  my understanding that most  of the trusts                                                                    
     do  this  anyway,  but  I think  it's  again  a  policy                                                                    
     decision of  the Legislature to  decide whether  or not                                                                    
     you   think  those   standards   should  be   statutory                                                                    
     standards or not.                                                                                                          
1:58:44 PM                                                                                                                    
CHAIR BUNDE said  she mentioned that state  employees are covered                                                               
by  union health  plans  and  asked if  any  private people  were                                                               
covered by those plans.                                                                                                         
MS. HALL  replied that is one  of the questions she  has asked of                                                               
the union health trust.                                                                                                         
     In trying  to determine the  exact kind of  entity they                                                                    
     are - we  have some that apparently  have a combination                                                                    
     of other entities' coverage  within the state employees                                                                    
     pieces - and  I can't answer that yet,  until I receive                                                                    
     the information that I've  requested from those groups.                                                                    
     The  intent  of  the  bill is  not  as  was  originally                                                                    
     interpreted   to   cover    some   of   the   political                                                                    
     subdivisions  -  municipalities,   school  districts  -                                                                    
     those  types  of  entities  at   all.  They  are  in  a                                                                    
     different category...  It doesn't cover -  I think it's                                                                    
     probably not  an accurate term, but  private unions, so                                                                    
     to  speak  - Teamsters  -  the  Teamsters health  trust                                                                    
     would not come under this.  Those are entities that are                                                                    
     all  regulated  under  the ERISA  [Employee  Retirement                                                                    
     Income  Security Act  of 1974]  self-insured plans  and                                                                    
     probably  60 percent  of  Alaskans  covered by  private                                                                    
     insurance  are  actually  covered under  some  type  of                                                                    
     self-insured plan  that is actually governed  by ERISA.                                                                    
     These  governmental plans  fall  outside  of the  ERISA                                                                    
2:00:24 PM                                                                                                                    
JEFFREY HART, Department of  Transportation and Public Facilities                                                               
(DOTPF), said  he began  paying dues  as a  member of  the Public                                                               
Employees Local  71 30-years ago and  has been serving as  a shop                                                               
steward  for  the  past  14  years. At  first,  he  favored  some                                                               
additional review  over Local 71's  trust fund,  especially after                                                               
the recent  under-funding of the  state PERS and TRS  systems and                                                               
listening  to debates  as  to why  our  nation's social  security                                                               
system is  in disarray. It  would seem that  additional oversight                                                               
would give  comfort to those  who don't deal  with it on  a daily                                                               
basis.  However, he  changed his  support of  Sections 28  and 29                                                               
because they would add extra  costs and tasks to state government                                                               
employees who already  have a heavy workload.  In addition, those                                                               
sections are  unnecessary because  their health plan  is adequate                                                               
to meet participant's needs and it could be improved if needed.                                                                 
2:03:52 PM                                                                                                                    
CHRIS PACE said  he is a trustee with the  Alaska State Employees                                                               
Association (ASEA) health  plan, but he is testifying  on his own                                                               
behalf. He wanted  to clarify a few points.  ASEA's recent Ditman                                                               
opinion  poll  indicates that  75  percent  of the  members  were                                                               
satisfied  with their  current coverage.  Additionally, it  found                                                               
that  52  percent were  not  interested  in additional  well-baby                                                               
coverage. The  plan has about  200,000 claims per year  and about                                                               
40  or  .002  percent  of  them get  appealed  to  the  Board  of                                                               
Trustees. The  appeal procedure is  similar to what  is described                                                               
in the PERS  discussion except after the Board  of Trustees hears                                                               
an  appeal,  it  would  go  to arbitration  rather  than  to  the                                                               
Superior Court.                                                                                                                 
The board shares the same plan  as the appellant and they have to                                                               
be  adjudicated consistently  and  fairly across  the board.  The                                                               
trustees  have the  statutory authority  to make  changes in  the                                                               
benefit plan. The  ASEA plan was taken verbatim  from the state's                                                               
PERS  plan with  minor modifications  to tailor  the deductibles,                                                               
co-pays and out-of-pocket limits to the needs of the group.                                                                     
2:07:15 PM                                                                                                                    
MR.  PACE emphasized  that one  of  the major  factors ASEA  been                                                               
confronted  with is  controlling  dramatically increasing  health                                                               
care costs.  So it contracted  with a  PPO hospital and  joined a                                                               
health  care coalition  with other  labor unions,  municipalities                                                               
and  private employers.  Some members  were  unhappy about  being                                                               
steered to an Anchorage PPO hospital.                                                                                           
The state website  estimates that nationally up to  15 percent of                                                               
spouses  and  dependents  may  not,  in  fact,  be  eligible  for                                                               
benefits; ASEA members  were concerned with that as  well as with                                                               
building reserves.  Currently, ASEA's plan has  reserves equal to                                                               
about  four months  of  past claims  experienced  in addition  to                                                               
other amounts  for incurred, but  not reported, claims.  The plan                                                               
in SB  108 discusses  about two  and a half  months for  the same                                                               
purpose. A  union plan has  to be more conservative  with reserve                                                               
levels, because  it doesn't have  the same financial  resources a                                                               
state plan has.  ASEA carries stop-loss reinsurance  in the event                                                               
of  catastrophic claims  and both  plans  use consultants  rather                                                               
than actuaries to  forecast trends. ASEA has  an annual financial                                                               
audit performed by  an independent CPA and he  emphasized that it                                                               
has a  letter of agreement with  the State of Alaska  allowing it                                                               
to separate from the state's  plan. On request, ASEA provides the                                                               
annual audit and actuarial reports  to the Division of Retirement                                                               
and Benefits  that performs  the oversight.  ASEA is  the largest                                                               
union in the state and the trust is large.                                                                                      
2:10:10 PM                                                                                                                    
MR. PACE said he believes that  SB 108 is attempting to create an                                                               
oversight  function  that  is  already  being  performed  by  the                                                               
Division of Retirement and  Benefits. ASEA's administrative costs                                                               
are kept at about 3 percent  and the state's are about 5 percent.                                                               
If this bill  becomes law, that adds to  the administrative costs                                                               
and any added  costs would have to  be passed on and  come out of                                                               
paychecks. He summarized:                                                                                                       
     To me that's the unfortunate  thing about this bill. It                                                                    
     will  only result,  I  think, in  moving  money out  of                                                                    
     employee's   paychecks   and   into  the   pockets   of                                                                    
     actuaries,  bond  brokers  and  accountants.  It's  not                                                                    
     going to  do anything  to improve the  actual benefits;                                                                    
     it  won't  change  the appeals;  it  won't  change  the                                                                    
     reality  that  we've  got  to   go  to  PPOs  and  cost                                                                    
     containment.  It's going to  add just a redundant level                                                                    
     of   state  regulatory   oversight   to  the   existing                                                                    
MR.  PACE said  he  liked the  consumer  protection section  that                                                               
restricts  the  late-night  ads for  discount  health  insurance.                                                               
Those  ads really  confuse some  of his  members who  are already                                                               
upset about money  being taken out of their  paychecks for health                                                               
benefits. They  keep telling the  board they  want to go  over to                                                               
the discount companies and don't  understand how risky that would                                                               
CHAIR BUNDE thanked  him for his testimony and  announced that he                                                               
would take teleconference testimony.                                                                                            
2:12:40 PM                                                                                                                    
FRANK PUSCHAK of Anchorage said he  had been a state employee for                                                               
21  years and  he is  a  trustee of  one of  the affected  health                                                               
trusts,   but  he   is  speaking   in   his  personal   capacity.                                                               
Professionally, he had been a  bank examiner for 28 years, having                                                               
examined trust departments and trust companies. He opposed                                                                      
Sections 28 and 29 of SB 108 saying:                                                                                            
     Our  trust  is  a   legal  entity  accountable  to  the                                                                    
     Superior Court  of Alaska. The trustees  are elected by                                                                    
     the  members.  Under the  terms  of  our health  trust,                                                                    
     Section 5,  the minimum  standard they must  appeal to,                                                                    
     are that  the trustees are required  to discharge their                                                                    
     duties and  administer the trust fund  assets solely in                                                                    
     the  interest  of  participating  employees  and  their                                                                    
     beneficiaries   and  for   the  exclusive   purpose  of                                                                    
     providing  benefits  to   participating  employees  and                                                                    
     beneficiaries and to defray  rereadable expenses of the                                                                    
     benefit  plan. They  are required  to  carry out  their                                                                    
     duties  with   the  care,   skill,  and   prudence  and                                                                    
     diligence under  the circumstances then  prevailing for                                                                    
     a  person acting  in like  capacity  and familiar  with                                                                    
     such matters.  This is called  the prudent man,  but it                                                                    
     is not  the prudent man  standard to the person  on the                                                                    
     street;  it is  the prudent  man standard  of a  person                                                                    
     with fiduciary experience.                                                                                                 
     Our plan  is subject to  a number of  federal statutes,                                                                    
     which I enumerated in the  last committee meeting and I                                                                    
     included on  my testimony  that I submitted  earlier by                                                                    
     email. So, I won't redo that.                                                                                              
     There  have been  138,084  medical,  dental and  vision                                                                    
     claims  submitted since  July 1  of the  current fiscal                                                                    
     year.  Of  that  number,  there  have  been  47  claims                                                                    
     submitted to the  Board of Trustees for  an appeal. The                                                                    
     appeal   process    is   done   by    our   third-party                                                                    
     administrator,  then  the  Board of  Trustees  and  the                                                                    
     arbitration,  which  is  binding. Now,  if  that's  not                                                                    
     enough,  since we're  subject  to  Superior Court,  the                                                                    
     Superior Court can then  override the arbitrator. While                                                                    
     I agree  that arbitration  can be expensive,  our trust                                                                    
     provides the  cost to be  shared between the  trust and                                                                    
     the  appellant.  But,  again,   it's  in  my  fiduciary                                                                    
     responsibility  - we  just can't  have everybody  going                                                                    
     off  and putting  things  into  arbitration, because  I                                                                    
     have an  obligation to reduce  the cost. And so  we had                                                                    
     to go  to something. If  there is another way  that can                                                                    
     provide  the independent  third-party  at lesser  cost,                                                                    
     I'm open  to it, but,  in fact,  our plan is  even more                                                                    
     accountable than  the state select benefit  plan. Under                                                                    
     that plan,  the commissioner  of Administration  is the                                                                    
     sole arbitrator and nobody can override that.                                                                              
     Again,  with respect  to  the  fiduciary standard,  I'm                                                                    
     really  not  aware  of  what   the  state  follows  for                                                                    
     fiduciary  standards.  Again,   we  have  followed  the                                                                    
     language outlined  in ERISA, which is  what governs the                                                                    
     non-governmental  plans.   I  have  enclosed   with  my                                                                    
     previous email  a copy of  our health plan  compared to                                                                    
     the state's like  benefit plan and you are  able to see                                                                    
     that  there  are  some   slightly  better  benefits  at                                                                    
     definitely lower cost.                                                                                                     
     Our trust  was formed because  the state wanted  to get                                                                    
     rid  of the  expense  and effort  of administering  it.                                                                    
     Under  Article   19.03  of  our  contract,   our  union                                                                    
     relieved  the  state  of  any  and  all  obligation  to                                                                    
     provide health insurance benefits.  This bill would add                                                                    
     additional work to the state  and expense and certainly                                                                    
     add  additional expense  and work  to our  health trust                                                                    
     for things that are already  being done at better cost.                                                                    
     We already have  consultants who advise us  and help us                                                                    
     formulating policies, plans,  rates, and everything. An                                                                    
     independent  CPA  firm  audits our  records  and  those                                                                    
     records are  made public. We  follow the ERISA  code in                                                                    
     providing everything  to our  members that  is required                                                                    
     under ERISA even though they  are not obliged to follow                                                                    
     it. There's  an old saying,  "If it ain't  broke, don't                                                                    
     fix it."  However, I do  agree with the  corollary that                                                                    
     says,  'If it  ain't broke,  it can  be improved.'  and                                                                    
     that's what I'm  willing to do and I'm open  to any and                                                                    
     all suggestions from my members.                                                                                           
     I  have been  a regulator  for  28 years  and when  the                                                                    
     bankers complain to me  about having over-regulation, I                                                                    
     would say, 'Well, Dirty Harry  did stick his .44 at you                                                                    
     and said, 'Make  my day.' However, there is  a point at                                                                    
     which  regulation has  become  onerous  in the  banking                                                                    
     industry  and   this  is  another  example   of  it.  I                                                                    
     encourage you  to consider  all the  other parts  of SB
     108 in dealing with insurance,  because there are a lot                                                                    
     of  scams and  other things  going out  to the  public.                                                                    
     But, in  the case of  our governmental trust,  they are                                                                    
     being    administered   properly.    The   fiduciaries,                                                                    
     themselves,  when  they  run for  election  must  first                                                                    
     certify  that  they  meet all  the  requirements  of  a                                                                    
     fiduciary  under  ERISA with  respect  to  any kind  of                                                                    
     criminal    violations,   convictions    or   whatever.                                                                    
     Furthermore,  they must  also attest  to the  fact that                                                                    
     they  understand  what  they  are  going  to  do  as  a                                                                    
     fiduciary and  that position requires a  high degree of                                                                    
     understanding  of  employee  benefit  plans,  fiduciary                                                                    
     standards  and  investment  policy. So,  again,  if  it                                                                    
     ain't broke,  don't fix it  and I encourage you  to let                                                                    
     us go  about doing our  business as best we  can, which                                                                    
     is pretty good.                                                                                                            
2:18:36 PM                                                                                                                    
COLLEEN SAVOIE, Consultant for Marsh  USA representing the Public                                                               
Employees  Local 71,  said she  wanted to  highlight a  couple of                                                               
items that  had been discussed  previously. The first one  is the                                                               
need for  financial oversight  of these  plans that  already have                                                               
published annual  audits. This  bill would  have an  actuary that                                                               
certifies to the  financial condition of the  plan, but actuaries                                                               
are unwilling to "insure" financial solvency of any plan.                                                                       
2:19:49 PM                                                                                                                    
Another issue of  concern was the claims  oversight because there                                                               
is  already a  mechanism  by which  appeals  are resolved.  These                                                               
trusts have a  medical review, a review by the  Board of Trustees                                                               
and finally,  arbitration. It's important to  understand that the                                                               
process needs to  be formal so that the trust  can make sure that                                                               
all  participants are  treated equally  and fairly.  Finally, she                                                               
pointed out again that the  trustees are trained fiduciaries with                                                               
ultimate responsibility to the participants  of these trust funds                                                               
and they have the right to bring suit in Superior Court.                                                                        
2:21:06 PM                                                                                                                    
MARY STOLL  said she  is trust counsel  to both  Public Employees                                                               
Local 71 Trust  and the ASEA Local 52 Trust  and that trusts have                                                               
a very small incidence of appeals  in comparison to the number of                                                               
claims that are actually paid every year.                                                                                       
She also heard Ms. Hall  reference self-funded plans that are not                                                               
regulated by ERISA  because they are governmental  plans that are                                                               
exempt under  its definitions  and pointed  out that  ERISA plans                                                               
are reviewed by the both the  federal court and the Department of                                                               
Labor. Both  of her  plans follow  ERISA as  a guideline  and she                                                               
     There  are  specifically  two  requirements  that  they                                                                    
     cannot  follow because  there are  Department of  Labor                                                                    
     regulations  that  are  specific ERISA  plans,  one  of                                                                    
     which would be the  appeals process wherein arbitration                                                                    
     cannot be  binding. You have  to bring suit  in federal                                                                    
     court if you have a complaint.                                                                                             
     The second issue would be  the requirement of filing an                                                                    
     annual report  called a Form  5500 with the  IRS, which                                                                    
     government plans  are exempted  from. If the  intent is                                                                    
     to cover  self-funded plans that  are not  regulated by                                                                    
     ERISA,  the municipalities,  school  districts are  not                                                                    
     regulated  by  ERISA  and  I can't  find  a  reason  to                                                                    
     distinguish  between  those   self-funded  groups  from                                                                    
     these state union groups that are self-funded.                                                                             
     I'm aware  of no  self-funded governmental plan  in the                                                                    
     State of  Alaska, which  has failed  financially. Their                                                                    
     concerns about  this in-depth actuarial  reporting seem                                                                    
     to be unwarranted given the  fact that they are already                                                                    
     providing  actuary  reports  to the  state,  that  post                                                                    
     their   financial  statements.   That  information   is                                                                    
     available  to  the state  and  they  are not  suffering                                                                    
     financial at this point. They  are well-run trusts with                                                                    
     well-trained and  diligent fiduciaries who  are relying                                                                    
     on  the  advice  of  advisors  who  carry  professional                                                                    
     diligence insurance,  malpractice insurance,  et cetera                                                                    
     and  are reviewed  at  least every  other  year by  the                                                                    
     trust for  whether they're providing the  services they                                                                    
     are hired to provide.                                                                                                      
     I agree with  Mr. Puschak that this is  not a situation                                                                    
     where  it's broken;  it really  does  not need  fixing.                                                                    
     It's  adding financial  burden to  the trust,  which is                                                                    
     unwarranted.  They  already  provide  equal  or  better                                                                    
     coverage than the state plan  is providing. By imposing                                                                    
     the  Division of  Insurance into  the processes  of the                                                                    
     Board of  Trustees, I think  it would enable  them from                                                                    
     providing a  plan best suits their  participants. These                                                                    
     plans  don't go  blithely about  their plan  decisions;                                                                    
     they  conduct  independent  and scientific  surveys  to                                                                    
     determine  what their  participants  want  and I  think                                                                    
     you've  heard  testimony  that they  respond  to  those                                                                    
     requests  and desires  by their  participants and  they                                                                    
     fit  it  into  the   limited  budgets  that  they  have                                                                    
     available to provide an excellent health plan.                                                                             
     Speaking  to the  appeals process,  and again,  I think                                                                    
     Ms.  Hall's testimony  confirmed  what  we had  already                                                                    
     suspected  - that  the concerns  are raised  by a  very                                                                    
     small  percentage  of  participants stemming  from  the                                                                    
     Anchorage  area PPO  arrangement and  from the  appeals                                                                    
     process.  I can't  find anything  in this  Senate bill,                                                                    
     which  would  redress  either   of  those  two  issues.                                                                    
     There's  no  language in  the  bill  that would  change                                                                    
     either the  PPO or the  appeals process. The  bill just                                                                    
     adds  expense and  unnecessary oversight  and reporting                                                                    
     Ms. Hall  also referenced  two other groups,  which are                                                                    
     non-State  of  Alaska  employees participating  in  the                                                                    
     trust. That  is not the  case for ASEA Local  52 Trust,                                                                    
     but  it is  the  case for  Public  Employees Local  71.                                                                    
     Public Employees  71 has the Municipality  of Anchorage                                                                    
     employees  who  are  represented by  PE  71,  Anchorage                                                                    
     School District employees who are  represented by PE 71                                                                    
     and  the Haines  Borough and  City of  Haines employees                                                                    
     who are  represented. Those  groups would  be adversely                                                                    
     impacted by this decision, whereas  they aren't even in                                                                    
     the target of the  proposed legislation, which I think,                                                                    
     would  be unfair.  We also  have  responded, both  last                                                                    
     April and last March respectively  for each trust, to a                                                                    
     very in-depth  request for information by  the Division                                                                    
     of  Insurance.   We  complied  with  the   request  and                                                                    
     provided in-depth  information about the  operations of                                                                    
     the  trust, how  they  do comply  voluntarily with  the                                                                    
     ERISA standards,  training, provided  trust agreements,                                                                    
     letters  of  agreement,  plan booklets,  discussed  the                                                                    
     fact  that the  annual  audits at  least  for ASEA  are                                                                    
     posted  on their  website. The  information is  readily                                                                    
     available.  So, I'm  at a  little  bit of  a loss  that                                                                    
     there is  a question as  to how these funds  operate at                                                                    
     this juncture.                                                                                                             
     But,  just in  summary, there  are numerous  hopelessly                                                                    
     ambiguous sections  in this bill,  which would  make it                                                                    
     virtually impossible  to comply with any  certitude. In                                                                    
     addition,  the  bill  requires  verifications,  as  Ms.                                                                    
     Savoie  had  pointed  out,  from  actuaries,  which  an                                                                    
     actuary  could not  undertake  without  becoming a  co-                                                                    
     fiduciary  over the  trust and  I  think that's  highly                                                                    
     unlikely at  any cost that  an actuary  would undertake                                                                    
     that  position.  So,  based  upon  these  concerns  and                                                                    
     representations, it's  my hope that you  as a committee                                                                    
     will  delete the  bill of  Sections 28  and 29  and I'm                                                                    
     happy to take any questions you may have.                                                                                  
2:28:20 PM                                                                                                                    
CHAIR BUNDE  commented that current  the PERS and TRS  system was                                                               
referenced earlier and  he hoped everyone's goal was  not to cast                                                               
any aspersion  on the  people who  manage those  funds currently,                                                               
but to make sure the state  doesn't end up with a deficit problem                                                               
like those  funds have. He asked  if some level of  bonding would                                                               
be appropriate.                                                                                                                 
MS. STOLL replied that currently the  ASEA trust has a $4 million                                                               
bond in place  and didn't see having 10 percent  of annual claims                                                               
as being necessary.  She said that all year long  these boards go                                                               
through the  process of  evaluating their  reserves and  that the                                                               
people who  manage the trusts  are extremely  sophisticated being                                                               
trained   through  the   International  Foundation   of  Employee                                                               
Benefits. The funds are managed very reasonably.                                                                                
MS.  STOLL  said  that  she   wasn't  aware  of  any  self-funded                                                               
governmental  plan  in  Alaska,  which  has  failed  financially.                                                               
"These  funds are  both  doing  extremely well  and  to coin  Mr.                                                               
Puschak's statement, "It's not broken, it doesn't need fixing."                                                                 
CHAIR  BUNDE  announced that  there  were  no further  people  to                                                               
testify and set the bill aside to work on a CS.                                                                                 

Document Name Date/Time Subjects