03/22/2016 01:30 PM Senate LABOR & COMMERCE

          SB 104-PERSON W/DISABILITY SAVINGS ACCOUNTS                                                                       
                                                                                                                                
2:18:17 PM                                                                                                                    
CHAIR   COSTELLO  reconvened   the  meeting   and  announced   the                                                              
consideration  of SB  104. She  relayed  that this  is the  second                                                              
hearing and public  testimony was closed on 2/4/16.  The intent is                                                              
to  take members'  questions, adopt  a  committee substitute,  and                                                              
look to the will of the committee.                                                                                              
                                                                                                                                
2:19:00 PM                                                                                                                    
SENATOR GIESSEL  moved to  adopt the  CS for  SB 104, labeled  29-                                                              
LS0702\L, as the working document.                                                                                              
                                                                                                                                
CHAIR  COSTELLO  objected  for   an  explanation  of  changes  and                                                              
requested Mr. Jessee first provide testimony.                                                                                   
                                                                                                                                
2:19:24 PM                                                                                                                    
JEFF  JESSEE,  Chief  Executive   Officer,  Alaska  Mental  Health                                                              
Authority, stated  that he and the  board consider SB 104  to be a                                                              
very  important   piece  of  legislation.   He  related   that  he                                                              
previously was the  senior attorney for the Disability  Law Center                                                              
and had to advise  people with disabilities not  to accumulate any                                                              
resources. The  reason is that it  would make them  ineligible for                                                              
Medicaid. He described  SB 104 as a huge step  forward in allowing                                                              
people with  disabilities to do  things for themselves  and become                                                              
more self-sufficient.  It  allows these individuals  to set  aside                                                              
assets for  legitimate purposes  related  to their disability.  He                                                              
noted that  there is a claw-back  provision so that the  state can                                                              
recover  some  of   the  Medicaid  payments  it   made,  once  the                                                              
individual has passed away.                                                                                                     
                                                                                                                                
MR.  JESSEE  reported  that the  Alaska  Mental  Health  Authority                                                              
trustees last  week unanimously  voted to  fund the Department  of                                                              
Revenue  fiscal  note  for  SB 104  with  $60,000  in  FY2017  and                                                              
$40,000 in FY2018.                                                                                                              
                                                                                                                                
CHAIR  COSTELLO  expressed surprise  for  the generous  offer  and                                                              
appreciation for  the work the Mental Health  Trust Authority does                                                              
on behalf of Alaskans.                                                                                                          
                                                                                                                                
2:21:50 PM                                                                                                                    
SENATOR STEVENS asked if the contributions are tax deductible.                                                                  
                                                                                                                                
MR. JESSEE deferred the question.                                                                                               
                                                                                                                                
2:22:38 PM                                                                                                                    
CHAIR  COSTELLO asked  Mr. Eiler  to explain  the changes  made in                                                              
the CS.                                                                                                                         
                                                                                                                                
2:22:57 PM                                                                                                                    
WESTON   EILER,  Staff,   Senate  Labor   and  Commerce   Standing                                                              
Committee and Senator  Mia Costello, explained that  the committee                                                              
substitute (CS),  version L,  for SB 104  houses the  ABLE Savings                                                              
Program in  the Department of  Revenue rather than  the Department                                                              
of Commerce,  Community and Economic  Development. The  reason for                                                              
the shift  is that  the Division of  Banking and Securities  would                                                              
have been in  charge of auditing and regulating  the same accounts                                                              
it was  administering. The  CS also  changes the  plan from  a 529                                                              
(A) approach,  and looks towards  having the State of  Alaska join                                                              
a consortium of  states to achieve greater economies  of scale for                                                              
the programs.                                                                                                                   
                                                                                                                                
Section  8 on  pages  15-16, amends  AS  47.10.115(b) relating  to                                                              
permanent  fund  dividends held  in  foster  care trusts.  The  CS                                                              
provides that the  proceeds of the trust will  be distributed when                                                              
the youth  has reached  21  years of age,  is no  longer in  state                                                              
care and has reached  18 years of age or is  emancipated. The idea                                                              
is that this provides bridge funding for these youths as they                                                                   
prepare for adult life.                                                                                                         
                                                                                                                                
2:26:17 PM                                                                                                                    
JANE   CONWAY,  Staff,   Senator  Cathy   Giessel,  Alaska   State                                                              
Legislature spoke  to the following  prepared overview  of changes                                                              
to from  the original  version I  to the current  version L  of SB
:                                                                                                                            
                                                                                                                                
     When Senate  Bill 104 was introduced, it was  written to                                                                   
     reflect  the  intention of  Alaska  setting up  its  own                                                                   
     ABLE Savings  Program to be  housed and administered  in                                                                   
     the Department of Commerce and Economic Development.                                                                       
                                                                                                                                
     Early on  we heard from  DCCED concerns that  they would                                                                   
     have  a conflict  of  interest  in housing  the  program                                                                   
     since  banking  and securities  would  be in  charge  of                                                                   
     auditing  the  very same  accounts  that they  would  be                                                                   
     administering.   Following  that,  we  then   approached                                                                   
     Dept.  of Revenue  to run  the program  (which is  where                                                                   
     most states  house their ABLE programs) and  they agreed                                                                   
     to work with us on the legislation.                                                                                        
                                                                                                                                
     In  looking for  expertise  in the  area  of 529  plans,                                                                   
     like  Alaska's  college  savings  plan,  we  called  the                                                                   
     folks there  who run that  program out of University  of                                                                   
     Alaska,  Fairbanks.  In  that  conversation  we  learned                                                                   
     that  T.Rowe Price,  one of  the financial  institutions                                                                   
     who  offer  the college  savings  plan  portfolios,  had                                                                   
     told UAA  that they had  no interest in offering  529(A)                                                                   
     plans in  Alaska, as there  is not a healthy  economy of                                                                   
     scale for them  to make it worth their investment  to do                                                                   
     so.                                                                                                                        
                                                                                                                                
     After  that conversation,  we learned  that is the  same                                                                   
     obstacle  that  other  states   were  experiencing:  not                                                                   
     large  enough numbers  of  possible  account holders  to                                                                   
     make  it economically  viable  for investment  companies                                                                   
     to offer ABLE accounts in most states.                                                                                     
                                                                                                                                
     Then we  learned about  a consortium  of states who  are                                                                   
     now  working  together  in   an  effort  to  offer  ABLE                                                                   
     accounts by  joining together and pooling  their numbers                                                                   
     to  attract and  incentivize  financial institutions  to                                                                   
     respond   to  an  RFP   with  ABLE  Account   investment                                                                   
     offerings. If  SB 104 passes, Alaska plans  to join that                                                                   
     consortium  of  8  states (and  more  states  poised  to                                                                   
     join),  be   part  of  the  RFP  process   to  select  a                                                                   
     financial   contractor  to   handle  the  accounts   and                                                                   
     benefit  from  the  economies  of  scale,  resulting  in                                                                   
     lower  account fees  for  Alaska ABLE  account  holders.                                                                   
     The  consortium would  also  provide a  call center  and                                                                   
     assist in marketing assistance for its members.                                                                            
                                                                                                                                
     Currently  our office  and  our Dept.  of Revenue  folks                                                                   
     are  part of  a  weekly  teleconference with  the  other                                                                   
     states  to share concerns,  ask questions  and learn  as                                                                   
     much as  they can about the  ABLE Act, as it is  a brand                                                                   
     new  federal  authorizing law  and  many states  are  in                                                                   
     some stage of implementation at this time.                                                                                 
                                                                                                                                
     This change  of course for  the program has  resulted in                                                                   
     restructured legislation language to reflect that:                                                                       
                                                                                                                                
                                                                                                                                
                                                                                                                                
     federal authorizing law                                                                                                    
                                                                                                                                
     the "consortium"  to achieve  a better economy  of scale                                                                   
     and share administrative tasks                                                                                             
                                                                                                                                
     that selects a financial contractor                                                                                        
                                                                                                                                
     institution if  it chooses to do  so and it deems  it an                                                                   
     economically viable choice                                                                                                 
                                                                                                                                
     These items remain the same:                                                                                             
                                                                                                                              
                                                                                                                                
     contractor, maintain  oversight, terminate or  not renew                                                                   
     a  contract   if  they  want   to  choose  a   different                                                                   
     contractor                                                                                                                 
                                                                                                                                
                                                                                                                                
     account                                                                                                                    
                                                                                                                                
                                                                                                                                
     for an ABLE account                                                                                                        
                                                                                                                                
                                                                                                                                
     accounts  allowed, that a  fee may  be required to  open                                                                   
     an  account,  guidelines  and   caps  for  the  accounts                                                                   
     themselves,  that the  accounts  can be  changed only  2                                                                   
     times  a year,  that  a  designated beneficiary  can  be                                                                   
     changed,  guidelines for  use of  the account,  rollover                                                                   
     options,     statement      requirements,     accounting                                                                   
     requirements, annual fees.                                                                                                 
                                                                                                                                
                                                                                                                                
     "security" for a loan                                                                                                      
                                                                                                                                
                                                                                                                                
     claims during the life of the beneficiary                                                                                  
                                                                                                                                
                                                                                                                                
     ABLE account                                                                                                               
                                                                                                                                
                                                                                                                                
     confidential,  and  not open  to public  record  search,                                                                   
     but allows  the Dept. and  DHSS to exchange  information                                                                   
     re: eligibility                                                                                                            
                                                                                                                                
                                                                                                                                
     assets under means test programs                                                                                           
                                                                                                                                
                                                                                                                                
     fund to run the program                                                                                                    
                                                                                                                                
                                                                                                                                
     back funds if a beneficiary dies                                                                                           
                                                                                                                                
                                                                                                                                
     law for the program                                                                                                        
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                
     beginning in 2018                                                                                                          
                                                                                                                                
2:33:19 PM                                                                                                                    
SENATOR GIESSEL advised Senator Stevens that income from the                                                                    
accounts and contributions to the accounts are not taxed.                                                                       
                                                                                                                                
SENATOR STEVENS asked  if property rights attach  to ABLE accounts                                                              
that can be passed on to the heirs of the account holder.                                                                       
                                                                                                                                
MS. CONWAY deferred to Mr. Spielman.                                                                                            
                                                                                                                                
2:34:25 PM                                                                                                                    
STEWART  SPIELMAN,  Senior  Policy  Advisor  and  Counsel,  Autism                                                              
Speaks, Maryland,  explained  that the account  passes though  the                                                              
individual's  estate  like other  property  and  is subject  to  a                                                              
Medicaid claw  back. Any assets  that remain in the  account after                                                              
the  Medicaid claim  is paid  pass through  to the  estate of  the                                                              
deceased individual.                                                                                                            
                                                                                                                                
2:35:43 PM                                                                                                                    
CHAIR  COSTELLO  removed  her objection  and  finding  no  further                                                              
objection,  the committee substitute,  version L,  for SB  104 was                                                              
adopted.                                                                                                                        
                                                                                                                                
SENATOR GIESSEL  asked if  the committee would  like to  hear from                                                              
the head  of the  consortium that  Alaska would  join, should  the                                                              
bill pass.                                                                                                                      
                                                                                                                                
2:36:10 PM                                                                                                                    
CHASE REHNWEINKEL,  Director of Policy, Illinois  State Treasurer,                                                              
related that the  idea of the consortium developed  because states                                                              
were concerned that  the economy of scale would  not be sufficient                                                              
to sustain a program.  To address the concern, a  number of states                                                              
decided  to work  together  to  share services  while  maintaining                                                              
control over the individual accounts in their state.                                                                            
                                                                                                                                
SENATOR GIESSEL  asked which  states have  joined the  consortium,                                                              
how many  he anticipates  joining,  and the current  state  of the                                                              
request for proposals (RFP) process.                                                                                            
                                                                                                                                
MR.  RHNWEINKEL   said  Illinois,   Wisconsin,  Minnesota,   Iowa,                                                              
Kansas,   Missouri,   Pennsylvania,   and   Nevada   have   signed                                                              
interstate  agreements  to participate  in  the consortium  and  a                                                              
number of  other states  have indicated  interest. The  consortium                                                              
is  in the  process of  drafting  RFPs for  services  in order  to                                                              
provide investment and recordkeeping for the program.                                                                           
                                                                                                                                
CHAIR COSTELLO noted the individuals online to answer questions.                                                                
                                                                                                                                
SENATOR STEVENS  asked for  information about  the individual  tax                                                              
benefits.                                                                                                                       
                                                                                                                                
2:39:52 PM                                                                                                                    
PAM   LEARY,   State  Investment   Officer,   Treasury   Division,                                                              
Department of  Revenue (DOR), said  the contributions to  the fund                                                              
are after tax, but  the income earned on the contributions  is not                                                              
taxed.                                                                                                                          
                                                                                                                                
CHAIR  COSTELLO  found  no  further   questions  and  solicited  a                                                              
motion.                                                                                                                         
                                                                                                                                
2:40:41 PM                                                                                                                    
SENATOR GIESSEL  moved to report  the CS  for SB 104,  labeled 29-                                                              
LS0702\L,  from  committee  with  individual  recommendations  and                                                              
attached fiscal note(s).                                                                                                        
                                                                                                                                
CHAIR COSTELLO announced  that without objection  CSSB 104(L&C) is                                                              
reported from the Senate Labor and Commerce Standing Committee.