02/02/2009 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB87 | |
| HB64 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 87 | TELECONFERENCED | |
| *+ | HB 64 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 2, 2009
3:18 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Mike Chenault
Representative John Coghill
Representative Bob Lynn
Representative Robert L. "Bob" Buch
Representative Lindsey Holmes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 87
"An Act waiving payment of premiums for major medical insurance
under the defined benefit retirement plan for public employees
for disabled peace officers who have at least 20 years of
credited service as peace officers."
- HEARD AND HELD
HOUSE BILL NO. 64
"An Act relating to gift certificates and gift cards, and to
unclaimed property; and making a violation of certain gift card
prohibitions an unlawful trade practice."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 87
SHORT TITLE: MED BENEFITS OF DISABLED PEACE OFFICERS
SPONSOR(s): REPRESENTATIVE(s) MILLETT
01/26/09 (H) READ THE FIRST TIME - REFERRALS
01/26/09 (H) L&C, STA, FIN
02/02/09 (H) L&C AT 3:15 PM BARNES 124
02/02/09 (H) Heard & Held
02/02/09 (H) MINUTE(L&C)
BILL: HB 64
SHORT TITLE: GIFT CARDS
SPONSOR(s): REPRESENTATIVE(s) GATTO, GARDNER, GRUENBERG
01/20/09 (H) PREFILE RELEASED 1/16/09
01/20/09 (H) READ THE FIRST TIME - REFERRALS
01/20/09 (H) L&C, FIN
02/02/09 (H) L&C AT 3:15 PM BARNES 124
02/02/09 (H) Heard & Held
02/02/09 (H) MINUTE(L&C)
02/09/09 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
REPRESENTATIVE CHARISSE MILLETT
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 87.
RYAN MAKINSTER, Staff
to Representative Charisse Millett
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 87 on behalf of the prime
sponsor, Representative Charisse Millett.
JEFF BRIGGS
Alaska Professional Fire Fighters Association (APFFA)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 87.
KEVIN BROOKS, Deputy Commissioner
Office of the Commissioner
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 87.
PAT SHIER, Director
Division of Retirement & Benefits
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 87.
REPRESENTATIVE CARL GATTO
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions as a joint
prime sponsor during the discussion of HB 64.
REPRESENTATIVE BERTA GARDNER,
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions as a joint
prime sponsor during the discussion of HB 64.
RACHEL LEWIS, Unclaimed Property Manager
Treasury Division
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 64.
MARY FAIRBANKS, Marketing Director
Dimond Center
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 64.
ACTION NARRATIVE
3:18:16 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:18 p.m. Representatives Neuman,
Coghill, Chenault, Buch, Holmes, and Olson were present at the
call to order. Representative Lynn arrived as the meeting was
in progress.
HB 87 - MED BENEFITS OF DISABLED PEACE OFFICERS
3:18:55 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 87, "An Act waiving payment of premiums for major
medical insurance under the defined benefit retirement plan for
public employees for disabled peace officers who have at least
20 years of credited service as peace officers."
3:19:26 PM
REPRESENTATIVE MILLETT, Alaska State Legislature, introduced her
staff, Ryan Makinster. She briefly explained HB 87. She
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offered that if peace officers who are between their 20 and 25
years of employment become disabled, they will not receive any
major medical coverage until they reach the age of 60. She
offered her belief that this gap was an unintended consequence
of legislation that passed the legislature in 1986 that created
Tier II and Tier III state employees. She said she anticipates
that HB 87 will be held over to allow time to provide additional
actuarial information.
3:20:36 PM
RYAN MAKINSTER, Staff to Representative Millett, Alaska State
Legislature, explained on behalf of the prime sponsor, that HB
87 seeks to make a change for a gap in the Public Employees
Retirement System (PERS) disabled coverage. He explained that
public safety employees are eligible to retire after 20 years of
service, instead of the 25 years of service required for other
state employees. Thus, the period of time from 20 to 25 years
causes a problem for the public safety employees. He related
that under the current statute, a person is eligible for
disabled coverage for full major medical benefits if they are
disabled while he/she is a member. Retired public safety
employees are not technically members of the plan during that
five-year gap period, he stated. He commented that the bill
drafter also restructured the proposed statute somewhat, but
those changes were only technical in nature.
3:22:29 PM
MR. MAKINSTER, in response to Chair Olson, explained that the
fiscal note for fiscal year (FY) 2010, should list $12.8 to
reflect thousands instead of millions. Additionally, one-time
programming costs will be incurred to add the necessary
requirements of HB 87 to the Division of Retirement and
Benefits' computer system.
3:23:15 PM
REPRESENTATIVE COGHILL asked whether it would cause a
constitutional issue if the legislature increased the
requirements for public safety employees retirement age from 20
to 25 years of service.
REPRESENTATIVE MILLETT offered her belief that the benefits
could not be diminished. She explained HB 87 would increase the
unfunded liability by $567,000, by lowering the years of service
eligibility for occupational disability medical coverage from 25
to 20 years. She elaborated that payment amount would be
amortized over 25 years. The fiscal note also reflects that
more employees will be added into this category over time.
Thus, for FY 11, the increase in annual employer contribution
would be $67 thousand.
REPRESENTATIVE COGHILL inquired as to whether the gap is for all
medical insurance or if an employee who becomes a disabled
person in the gap situation would have any health insurance at
all.
MR. MAKINSTER answered that the disabled person would have major
medical coverage, but would be responsible for the premiums,
which otherwise are paid for by the plan.
MR. MAKINSTER, in response to Representative Coghill, answered
that he was not sure of the premium amounts.
REPRESENTATIVE COGHILL said it seemed as though the effect of
the changes will be to transfer some of the risk. He recalled
several discussions years ago that the trade-off for a 20-year
retirement, whose purpose was to retain a young and vibrant
workforce, was that its members would not be eligible for
benefits until year 25. He said he could not recall if the
disability factor was part of the discussion. He inquired as to
whether the state would pick up the risk of paying the premium
or if it is passed on to the employee.
MR. MAKINSTER offered that he is researching the original intent
of the early retirement plan for public safety employees to
determine if provisions for disability were inadvertently
omitted.
3:27:30 PM
REPRESENTATIVE NEUMAN asked for the reason that the gap in
premium coverage for disability is just now surfacing as an
issue if the statute changed in 1986.
MR. MAKINSTER answered that until recently, no employee has been
affected. He offered that some employees have recently entered
the 20 to 25 year window. He recalled that a public safety
employee Fairbanks was recently affected.
3:28:30 PM
MR. MAKINSTER, in further response to Representative Neuman,
explained that the perceived gap referred to the technical
definition of "disabled member," since eligibility requires that
the person must be part of the retirement system. However, the
way the statute has been interpreted, in order to be a member a
person must be part of the defined benefit membership plan.
However, if an employee opted out of the plan at 20 years,
he/she is not considered eligible. In further response to
Representative Neuman, Mr. Makinster reiterated that the sponsor
is seeking clarification on the original intent of the coverage
for those employees who are eligible for retirement after 20
years of service.
3:30:14 PM
REPRESENTATIVE COGHILL referred to the fiscal note that mentions
the total population affected by HB 87 equals 2,275 Tier II and
Tier III peace officer and firefighter members. He inquired as
to what the normal demographic for injuries is by age group and
stratification.
MR. MAKINSTER offered that was not certain but offered that the
DOA would be testifying and could answer questions about the
actuarial amounts.
3:33:26 PM
CHAIR OLSON, in response to Representative Chenault, offered to
have someone from the consultant group, Buck Consultants of
Denver, Colorado, participate at the next hearing to explain the
cost estimates for allowing paid medical benefits for peace
officer and firefighter members with 20 years of service instead
of 25 years of service.
3:33:49 PM
JEFF BRIGGS, Alaska Professional Fire Fighters Association
(APFFA), explained that his association, the Professional Fire
Fighters Association (APFFA) first learned about the medical
coverage gap last winter. He related that the issue is referred
to by the PFFA as the "PERS gap". He related that Anchorage
members belong to a municipal retirement system so the only
firefighter in his department that is currently affected by the
PERS gap is someone who transferred in from another fire
department. He surmised that most of their organization's
members are in PERS, with 14 years employment tenure. Thus, his
department's employees are still 6 or 7 years away from the PERS
gap. However, he offered his understanding that quite a few
firefighter members in Fairbanks and a few members in Juneau are
affected by the PERS gap. One of the concerns the APFFA has is
that an employee who is injured with 10 years plus a day's
service will receive more benefits than someone with 25 years
employment. Thus, once an employee is injured at the 20-year
service mark, he/she is penalized. He recalled that the
Anchorage Fire Department suffered a large exodus of retirees,
who were then rehired as contractors to train younger
firefighters. In his experience, the injury rate for senior
firefighters has not been an issue since the senior firefighters
have substantial training and experience, and are less likely to
be injured on the job, he opined.
MR. BRIGGS related his understanding that the reason for the 20-
year retirement was to entice peace officers and firefighter
members to stay on the job longer to seek an early retirement.
He offered his belief that his department has not been harmed by
the PERS gap to date. However, as time passes more firefighters
could be affected, he noted. He related that firefighters are
in the business of taking risks, and understand that any given
day could result in their injury or death. He related his own
experience, noting that a few weeks ago he had to dive through a
window into a burning house with limited visibility in order to
perform a rescue. He opined that firefighters continually weigh
risks versus benefits. He concluded by stating that
firefighters should not have to worry about whether they have
medical coverage in the event that they are injured while on the
job attempting to rescue or save someone.
3:37:46 PM
KEVIN BROOKS, Deputy Commissioner, Office of the Commissioner,
Department of Administration (DOA), explained that the DOA is
aware of the unfunded status of Public Employees Retirement
System (PERS) and Teacher Retirement System (TRS). He related
that HB 87 would add over $500,000 to the unfunded status.
Therefore, the DOA is concerned since this bill would add to the
unfunded status. He explained that the DOA is currently
investigating the history of the PERS gap. He stated that based
on prior testimony, the issue arose in 1986, with the passage of
enabling legislation for Tier II implementation. He offered
that a few years ago the DOA undertook an exhaustive review of
all pension plans when Senate Bill 141 passed the legislature.
The Department of Law is also assisting the DOA in researching
the legislative history on this "gap" issue, he advised.
3:39:11 PM
MR. BROOKS, in response to Chair Olson, stated that the DOA has
asked the actuaries some questions about the unfunded status.
Additionally, the DOA is also considering impacts that other
legislation may have that could make changes to the tiers or
defined benefit plans. He said he hopes to receive an analysis
in a few weeks from the actuaries. He offered to provide
commentary and written comments at that time. He welcomed to
present any additional questions by the committee to the
actuaries. However, he highlighted that the DOA is charged fees
for any services the actuaries provide. Thus, he said that the
DOA carefully prepares concise questions for their
consideration. In further response to Chair Olson, Mr. Brooks
answered that the DOA is neutral on HB 87 at this time.
However, once additional information is acquired, he said he
thought that the DOA's position would probably broaden.
3:41:18 PM
MR. BROOKS, in response to Representative Neuman, answered that
the bill as written is specifically defined. He said he did not
perceive that HB 87, in and of itself would open dialogue on
defined benefits and defined contributions.
REPRESENTATIVE COGHILL stated his interest in reviewing new
figures on the fiscal note, since it will make a big difference
whether the projected costs are $567,000 or $10 billion. He
surmised that the committee will need to make a policy decision
on the cost to keep work force employed. He inquired as to
whether members still contribute to the retirement system if
they are employed during the 20 - 25 year time period.
Additionally, he inquired as to whether members make co-payments
on their medical claims.
3:43:44 PM
PAT SHIER, Director, Division of Retirement & Benefits,
Department of Administration (DOA), answered yes, if public
safety employees remain employed, both the employer and employee
make contributions into the employee's retirement system. In
further response to Representative Coghill, Mr. Shier noted that
employees can pay the amount of the premium. He clarified that
the cost is not really a premium to health plan, but would be
paid from the retirement health trust unless the employee was
disabled. In that instance, the disabled employee would incur
the cost of the premiums, he related. He provided the current
amount of the premium for an employee who was disabled between
the 20 - 25 years of service as $590 per month. The amount of
the premium would vary, he noted. Thus, the coverage for the
retiree and a child would be $833; for a retiree and spouse
would be $1179; and for the retiree and family would be $1423
per month. He offered that a disabled retiree might seek to get
coverage elsewhere if they could, but would need to pay the
premium costs if he/she wanted to stay in the current state
health plan.
3:46:05 PM
REPRESENTATIVE COGHILL reiterated his belief that the committee
will need to make a policy decision on the benefits and costs
necessary to keep the public safety work force employed.
MR. BROOKS, in response to a prior question by Representative
Chenault, clarified that $567,000 estimate is an estimate of the
change in the present value of the future benefits. Therefore,
paying the cost over time could result in a greater cash stream.
3:47:51 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 87. He announced that
HB 87 would be held over.
HB 64-GIFT CARDS
3:48:26 PM
CHAIR OLSON announced that the final order of business would be
to take up HOUSE BILL NO. 64, "An Act relating to gift
certificates and gift cards, and to unclaimed property; and
making a violation of certain gift card prohibitions an unlawful
trade practice."
3:49:01 PM
REPRESENTATIVE CARL GATTO explained HB 64 by describing a
scenario in which a grandfather purchases a gift card in the
amount of $100 for his granddaughter. However, he related the
granddaughter did not use the card for one year. Thus, due to
an activation fee, a monthly fee, and a delay of one year by the
granddaughter in using the card, the value of the card is
reduced to $35. He further related that his scenario describes
the essence of the problem.
REPRESENTATIVE GATTO summarized that the purpose of HB 64 is to
restrict vendors from charging activation and monthly charges on
gift cards. Instead, the gift cards will retain their original
value forever. Further, he stated the seller must notify the
state's Department of Revenue (DOR), Treasury Division's
Unclaimed Property program of any unclaimed property at the end
of three years. Thus, in instances of gift cards, the vendor
must inform the DOR that the recipient has not yet used the gift
card and must remit the $100 to the DOR. The DOR will then
attempt to locate the gift card owner. He related that the
store already had use of the purchaser's money for three years,
but then the SOA should receive the money. In instances in
which the gift card recipient later discovers the card and uses
it, the store can subsequently contact unclaimed property to get
reimbursed.
3:51:43 PM
REPRESENTATIVE LYNN stated his intention to cosponsor the bill.
REPRESENTATIVE COGHILL related that certificates are not
mentioned.
REPRESENTATIVE GATTO explained that in instances in which a gift
card is a promotional item that it can have an expiration date.
He related that certificates are usually an offer of two nights
at a hotel for a discount. He explained those items are
considered a gift and are not included in the bill. He
commented that he recently saw advertising that read, "No
activation fees, no minimum amount, no kidding." He surmised
that even the gift card companies are now aware that other gift
card companies are finding ways to raise revenue rather than to
supply a service for people who don't know what to buy for
someone so they give their family and friends gift cards.
REPRESENTATIVE NEUMAN recalled other states' efforts the past
five years to restrict fees for gift cards. He inquired as to
whether the restrictions are similar to provisions in HB 64.
REPRESENTATIVE GATTO answered that national chain stores such as
Costco Wholesale Corporation (Costco) and Wal-Mart Stores, Inc.
are covered under federal law. He offered that he reviewed
legislation other states have passed, incorporating provisions
that will best address issues in Alaska.
3:55:20 PM
REPRESENTATIVE GATTO explained that some states have so many
exceptions that most businesses can still charge activation, and
monthly fees, and cards expire after a year. He related that
his intention is not to create burdens for recordkeeping. Most
cards have barcodes for tracking purposes, he stated.
3:56:04 PM
REPRESENTATIVE HOLMES asked for clarification on HB 64 with
respect to the expiration date. She related her understanding
under proposed AS 45.45.940(a)(1), that a gift card would retain
its full-face value in perpetuity. Thus, expiration dates are
not allowed on gift cards, she surmised. She related her
further understanding that under proposed AS 34.45.240 (a), that
if the gift card is not claimed within three years that it is
presumed to be abandoned. She asked for an explanation of what
happens after three years when a gift card is considered
abandoned.
REPRESENTATIVE GATTO explained that if Representative Holmes
discovers a $100 gift card 5 years after its issuance, she could
go to the store and ask to redeem it. He said he thought the
store owner would probably honor the gift card. If so, the
store owner would contact the state Department of Revenue (DOR),
Treasury Division, Unclaimed Property office to match the
recipient's name with the funds the store remitted three years
earlier when the store determined the gift card was abandoned.
He pointed out that current law requires stores to remit funds
on gift cards that have not been redeemed within a 3-year
period.
3:58:42 PM
REPRESENTATIVE HOLMES asked what happens if the store goes out
of business.
REPRESENTATIVE GATTO related a scenario in which a company where
he had purchased a lifetime service went out of business.
3:59:23 PM
REPRESENTATIVE BERTA GARDNER, Alaska State Legislature,
explained that the provision in HB 64 that unclaimed property
reverts to the state is existing law. She clarified that when a
merchant sells gift card and it is unused and considered
abandoned, that the merchant is supposed to remit the value of
the gift card to the DOR.
3:59:56 PM
REPRESENTATIVE HOLMES referred to page 3, to proposed
AS 45.45.940 (c)(1), to the exceptions for awards, loyalty, or
promotional programs. She inquired as to what happens if some
money exchanges hands. She related an example such that a
person has almost enough award points and pays something in cash
to obtain the reward.
REPRESENTATIVE GATTO answered that he had a feeling that type of
transaction would be considered an award, such as a mileage
plan.
4:01:13 PM
REPRESENTATIVE BUCH asked whether HB 64 would create an
opportunity for the state to reclaim funds from merchants who
did not remit unused gift card funds to the state.
REPRESENTATIVE GARDNER recalled she once performed bookkeeping
services for a small store. She related that the store tracked
gift cards and certificates sold and the value of any gift
certificates redeemed. She stated it was not a problem for that
business to identify at any time the total amount of gift cards
that were used and unused. She said she thought it was a
reasonable accounting practice for other stores to have that
ability.
4:02:49 PM
REPRESENTATIVE NEUMAN expressed concern about the time and
effort it might take for businesses to comply. He offered his
belief that gift cards probably contain language that informs
them of the provisions. He stated that someone has to pay the
administrative costs for gift cards. He said he probably has
some gift cards whose value has diminished and that the unstated
"buyer beware" should apply.
REPRESENTATIVE GATTO answered that two things are
considerations. First, he noted that the cost to retailers to
sell gift cards is minimal, he surmised, since most are stores
use computers to track inventory. Secondly, he pointed out the
value to stores for unused gift cards. He explained that
retailers can use the money spent on gift cards that are not
redeemed. He surmised that some stores may sell large
quantities of gift cards and use that money to run their
business instead of having to borrow the money. He related that
the value of unused gift cards represents interest free money
for merchants, which has a value.
4:05:17 PM
REPRESENTATIVE COGHILL said that "in perpetuity" still bothers
him. He suggested that at some point gift cards should expire.
Additionally, it seemed to him that one aspect is that unspent
portion of gift cards is one way in which businesses profit.
Thus, it could be argued that businesses already profit from the
gift cards.
REPRESENTATIVE GATTO answered an earlier question, stating that
current law requires businesses to remit the value of unused
gift cards after three years. He advised that if a business
does not comply and undergoes an audit, that the business is
liable.
4:06:57 PM
REPRESENTATIVE COGHILL asked how other states handle expiration
dates and why it is important to impose since the longer a
person keeps a card, the fewer goods the person could buy.
REPRESENTATIVE GATTO offered that a three year expiration date
is in the mid-range for expiration dates. However, a retailer
could tell a consumer that he/she no longer has the card since
the merchant remitted its value to the state or he/she can honor
the card and get reimbursed. He offered that an alternative
approach would be for retailers to reissue expired cards or to
contact the state to reclaim the original card after three
years. He surmised that after the three year lapse, that
probably not very many people would make a claim.
4:08:31 PM
RACHEL LEWIS, Unclaimed Property Manager, Treasury Division,
Department of Revenue (DOR) explained that during her 14 years
as the unclaimed property manager, that gift cards and
certificates have not had much attention. She offered her
understanding that HB 64 would clarify current statutes that are
somewhat unclear.
MS. LEWIS, in response to Representative Coghill, answered that
paper certificates are included as unclaimed property. She
explained that the fair trades practices attempts to define it
as goods and services of value. She surmised that a card would
not have to be plastic.
REPRESENTATIVE COGHILL recalled purchasing a 12-month supply of
manicures and pedicures. However, the retailer allowed
redemption after its expiration date. He asked for
clarification for the process of unclaimed property.
MS. LEWIS responded that she receives more complaints about
expired spa treatments since many of them can cost $500 and
often the client doesn't realize the certificate has expired
until they want to use it. She related that the recipient will
send a copy of the certificate, that she sends a letter to the
business owner that after 3 years the certificate must be
remitted as unclaimed property unless the owner decides to honor
it. Ms. Lewis offered that most of the time, the business owner
will decide to remove the expiration date and honor the spa
treatment. She commented that businesses learn how the law is
applied. Thus, she educates businesses most of the time instead
of enforcing the law, she stated.
4:12:02 PM
MS. LEWIS, in response to Representative Holmes, opined that the
process of having gift cards turned over to the state is
efficient. She related that the use of unclaimed property is
fairly well known at the national level, but she surmised that
the awareness level about them is low in-state. She related
that she has provided seminars to certified public accountants
(CPA) firms, to advise them that any un-cashed payroll checks or
vendor payments that have not been redeemed must be reported as
unclaimed property, as well as any gift cards or certificates
that have not been redeemed.
4:13:30 PM
MS. LEWIS, in further response to Representative Holmes,
answered that retailers can be charged penalties and interest.
However, she highlighted that her emphasis is more on education
instead of enforcement.
4:13:52 PM
REPRESENTATIVE HOLMES referred to a legislative research report
in committee member's packets. She offered her belief that some
states are moving away from this type of procedure.
MS. LEWIS responded that other states have changed their laws
with respect to gift card during the past three years She
surmised that currently about 35 bills have been introduced in
various states to remove fees and expiration dates on gift
cards. She recalled discussions with her counterparts during
conferences who advise that some lobbying groups have
successfully lobbied for expiration dates, which adversely
impacts consumers. However, two states, Washington and
Illinois, promote programs that offer decals for retailers to
use that inform consumers that their gift certificates never
expire. She offered that those types of programs give consumers
confidence to make purchases. She explained the process for
unclaimed property such that the state receives unclaimed
property every day, that it is logged either by name, check
certificate, bond, or stock number or issuance. Thus, the
system is elaborate. Ms. Lewis highlighted that this year the
unclaimed program received $16,000 worth of unused and
unredeemed gift cards for approximately 400 individuals. She
noted that of those, about half were identified by name with the
individual value of their unclaimed property ranging from $156
down to just a few dollars. She related that some gift cards
are reported by large retailers that typically provide mail
order services. She commented that their system has been in
place for over 22 years to assist in returning funds to
consumers. In further response to Representative Holmes, Ms.
Lewis answered that the physical location of where the gift card
was purchased determines which state law applies.
4:18:10 PM
REPRESENTATIVE NEUMAN recalled that he attended a fundraiser for
an organization and purchased a certificate for taxidermist
mount that expired in one year. He inquired as to how this bill
would affect reporting for income taxes.
MS. LEWIS explained that items gift certificates that are
donated to an organization do not fall under unclaimed property,
since the recipient makes the donation to the charity and
obtains the certificate as a gift for income tax purposes. In
further response to Representative Neuman, Ms. Lewis reviewed
the process for unclaimed property. She related that in
instances in which a business, such as a taxidermist, sells a
certificate that expires in a year, and the customer does not
redeem the certificate, that the taxidermist would remit to the
state the value of the certificate after three years lapses.
She explained that after three years, the certificate holder
could contact her office and submit a claim and if the item is
listed, a check would be remitted. If not, she stated that the
business owner would be contacted, advised that the certificate
needs to be remitted to the state.
4:21:30 PM
REPRESENTATIVE NEUMAN asked if it is legal to list an expiration
date on gift card or gift certificate since the items are
reportable under unclaimed property.
MS. LEWIS answered that placing an expiration date on a gift
card or certificate is not illegal but it is misleading.
4:22:53 PM
MS. LEWIS explained that the federal AS 34.45 Uniform Unclaimed
Property Act, under AS 34.45, prohibits businesses from charging
service fees on dormant accounts, thereby gradually diminishing
gift cards out of existence. She related that current law for
gift certificates is vague, identifying that they are reportable
as unclaimed property after three years.
MS. LEWIS, in response to Representative Neuman, offered that
unclaimed property provisions would be considered more as fair
trade and consumer protection laws.
4:24:26 PM
CHAIR OLSON inquired as to whether Ms. Lewis could provide
statistics with respect to what percentage of total unclaimed
property is from gift cards.
MS. LEWIS answered that of the currently, $4 million to $4.5
million in unclaimed property, that approximately $17,000 has
been reported as unclaimed property. She surmised the figures
are low since a lot of businesses are not aware of the need to
report.
4:25:15 PM
MS. LEWIS, in response to Chair Olson, answered that she could
get a rough idea by dividing the $17,000 by the 443 accounts
associated with the unclaimed property. Thus, the average claim
would equal about $35. However, some claims are for residual
amounts, while others are for the full amount of $500, she said.
In further response to Chair Olson, Ms. Lewis responded that it
is not costly to process claims or burdensome for retailers due
to electronic reporting. She related that some businesses balk
at reporting gift certificates when the identity of the person
is not known.
4:26:46 PM
MS. LEWIS, in response to Representative Coghill, explained that
most of the unclaimed property reported for gift cards was a
minimum of at least $25. She offered that the unclaimed
property provisions provides an exception such that in instances
in which the value of all the unclaimed property accounts is
under $100, and the sum of all the diminutive accounts are less
than $750, then a business can hold the property until the
threshold is met. She offered that the purpose of the unclaimed
property reporting is not to burden businesses to report
residual amounts remaining on gift cards. Instead, the purpose
is to ensure that a safeguard exists to ensure that property the
businesses are holding, that doesn't belong to them, is returned
to the recipient, and allow businesses to balance their books.
4:28:56 PM
REPRESENTATIVE COGHILL expressed concern for smaller companies.
He surmised that the larger the company, the more likely it
would track the gift cards. He recalled that Safeway has a rack
of gift cards. He commented that the diminishing amounts on
cards that might produce profit for the company would also have
to be reported. He asked for clarification on the accumulated
threshold.
MS. LEWIS agreed he is correct on the necessity of reporting the
gift cards.
4:29:51 PM
MS. LEWIS, in response to Chair Olson, noted there is not a
statute of limitations that applies. She related that some
companies go out of business and the agency files bankruptcy
claims on unsecured claims. She commented, "You would be
surprised at how many dollars that can be."
MS. LEWIS, in response to Representative Holmes, agreed that
gift certificates do not expire.
REPRESENTATIVE BUCH asked if the public is educated on unclaimed
gift cards, whether the Department of Revenue will be inundated
with claims.
MS. LEWIS answered that she hopes that elevating the gift card
issue will affect consumers in positive ways and elevates their
awareness that their money spent on gift cards is not lost.
4:33:29 PM
REPRESENTATIVE BUCH commented on the minimal fiscal note that it
seemed small in the event that a lot of Alaskan consumers were
to make claims.
REPRESENTATIVE CHENAULT applauded the concept of potentially
passing a bill that helped consumers, advising them of their
rights so they could interact with businesses directly, and not
have to have the state intervene on their behalf.
REPRESENTATIVE GATTO, in response to Representative Neuman,
answered that grocery stores offer discounts on gasoline for
customers who buy their groceries. He opined that the grocery
store is allowed to place an expiration on its own discounts as
the discount is not considered a gift card or certificate.
CHAIR OLSON expressed concern that it might cost the DOR more
money to process the claim for unclaimed property than the claim
is worth.
MS. LEWIS answered that people often have more than one piece of
unclaimed property.
4:36:58 PM
MARY FAIRBANKS, Marketing Director, Dimond Center, stated that
she had some questions. She inquired as to whether examples
could be given for the exceptions under proposed AS 45.45.940
(c)(3), and (4), that relate to banks and financial
institutions.
MS. LEWIS answered that the DOR does not have any jurisdiction
over financial institutions.
4:39:27 PM
REPRESENTATIVE HOLMES offered an explanation that it would seem
that proposed AS 45.45.940 (c)(4), would apply to entities like
the Dimond Center. She offered that if the Dimond Center issued
a card that could be used in a multiple number of stores in the
Dimond Center, that this provision would apply.
4:40:05 PM
CHAIR OLSON suggested Ms. Fairbanks should send a letter or e-
mail to the prime sponsor for clarification on issues she may
have on HB 64.
4:40:20 PM
MS. FAIRBANKS then testified that she agreed with the gentleman
who previously stated, "Buyer beware." She opined that if the
information is provided on the gift card listing the
restrictions and expiration date, and the person is willing to
buy the gift card, then why is it necessary to protect the
consumer.
REPRESENTATIVE GATTO answered that often the statements are in
tiny print and the card is at the cash register. He reiterated
his scenario in which a grandfather might want to buy a gift for
his granddaughter, but he isn't sure what she would like. Thus,
his expectation is that he is purchasing a $100 gift
certificate, not a card that will diminish in value or will
expire.
MS. FAIRBANKS related she thought the gift card disclaimers were
similar to instances in which a store posts a sign stating it
will only honor store credits on any returned merchandise. She
opined that consumers must bear the responsibility in that
instance.
4:41:55 PM
CHAIR OLSON, after first determining no one else wished to
testify, announced that he would hold HB 64 over.
4:42:11 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:42 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 87 2-2-09 Millett Letter of Support.pdf |
HL&C 2/2/2009 3:15:00 PM |
HB 87 |
| HB 87 Letter of Support 1264.pdf |
HL&C 2/2/2009 3:15:00 PM |
HB 87 |
| HB87 Analysis.pdf |
HL&C 2/2/2009 3:15:00 PM |
HB 87 |
| HB087-DOA-DRB-01-30-09.pdf |
HL&C 2/2/2009 3:15:00 PM |
HB 87 |
| HB64 ver E.PDF |
HL&C 2/2/2009 3:15:00 PM |
HB 64 |
| HB64 Sponsor Statement.PDF |
HL&C 2/2/2009 3:15:00 PM |
HB 64 |
| HB64 Sectional Analysis.PDF |
HL&C 2/2/2009 3:15:00 PM |
HB 64 |
| HB64 LegResearch Report.PDF |
HL&C 2/2/2009 3:15:00 PM |
HB 64 |
| HB64 News Article-McClatchyTribune.pdf |
HL&C 2/2/2009 3:15:00 PM |
HB 64 |
| HB64 Dept of Consumer Affairs-California.PDF |
HL&C 2/2/2009 3:15:00 PM |
HB 64 |
| HB064-LAW-CIV-1-31-09.pdf |
HL&C 2/2/2009 3:15:00 PM |
HB 64 |
| HB87 PSEA_Support.PDF |
HL&C 2/2/2009 3:15:00 PM |
HB 87 |
| HB87 ver A.pdf |
HL&C 2/2/2009 3:15:00 PM |
HB 87 |
| HB87_Actuarial Report by Buck Consultants.pdf |
HL&C 2/2/2009 3:15:00 PM |
HB 87 |
| HB87_Drygas_Bkgnrd.PDF |
HL&C 2/2/2009 3:15:00 PM |
HB 87 |
| HB87_Sponsor Statement_VerA.pdf |
HL&C 2/2/2009 3:15:00 PM |
HB 87 |