04/07/2005 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB131 | |
| SB108 | |
| SB145 | |
| HB81 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 145 | TELECONFERENCED | |
| + | HB 81 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 108 | TELECONFERENCED | |
| += | SB 131 | TELECONFERENCED | |
| = | SB 139 | ||
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
April 7, 2005
1:35 p.m.
MEMBERS PRESENT
Senator Con Bunde, Chair
Senator Ralph Seekins, Vice Chair
Senator Ben Stevens
Senator Johnny Ellis
Senator Bettye Davis
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 139
"An Act relating to termination and oversight of boards,
commissions, and agency programs; extending the termination date
of the Board of Marital and Family Therapy; and providing for an
effective date."
MOVED CSSB 139(L&C) OUT OF COMMITTEE
SENATE BILL NO. 131
"An Act amending the Alaska Wage and Hour Act as it relates to
the employment of a person acting in a supervisory capacity;
providing definitions for persons employed in administrative,
executive, and professional capacities, for persons working in
the capacity of an outside salesman, and for persons working in
the capacity of a salesman employed on a straight commission
basis."
MOVED CSSB 131(L&C) OUT OF COMMITTEE
SENATE BILL NO. 108
"An Act relating to the regulation of insurance, insurance
licensing, surplus lines, insurer deposits, motor vehicle
service contracts, guaranteed automobile protection products,
health discount plans, third-party administrators, self-funded
multiple employer welfare arrangements, and self-funded
governmental plans; and providing for an effective date."
HEARD AND HELD
SENATE BILL NO. 145
"An Act authorizing the making of loans for upgrade of
commercial fishing tender vessels and gear."
MOVED SB 145 OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 81(L&C)
"An Act establishing an administrative fine and procedure for
construction contractors in certain circumstances; increasing
the amount of a civil penalty for persons acting in the capacity
of contractors or home inspectors; modifying the elements of a
crime involving contractor registration and residential
contractors; modifying the exemptions from regulation under AS
08.18 for contractors; and exempting the administrative hearings
for imposing an administrative fine on construction contractors
from the hearings conducted by the office of administrative
hearings in the Department of Administration."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 139
SHORT TITLE: EXTENSIONS OF OCCUPATIONAL BDS/AGENCIES
SPONSOR(s): RULES BY REQUEST OF LEG BUDGET & AUDIT
03/09/05 (S) READ THE FIRST TIME - REFERRALS
03/09/05 (S) L&C, FIN
03/31/05 (S) L&C AT 1:30 PM BELTZ 211
03/31/05 (S) Scheduled But Not Heard
04/05/05 (S) L&C AT 1:30 PM BELTZ 211
04/05/05 (S) Heard & Held
04/05/05 (S) MINUTE(L&C)
04/07/05 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 131
SHORT TITLE: WAGE & HOUR ACT: EXEC/PROF/ADMIN/SALES
SPONSOR(s): LABOR & COMMERCE
03/04/05 (S) READ THE FIRST TIME - REFERRALS
03/04/05 (S) L&C, FIN
03/17/05 (S) L&C AT 1:30 PM BELTZ 211
03/17/05 (S) Heard & Held
03/17/05 (S) MINUTE(L&C)
04/07/05 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 108
SHORT TITLE: INSURANCE
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/14/05 (S) READ THE FIRST TIME - REFERRALS
02/14/05 (S) L&C, FIN
03/31/05 (S) L&C AT 1:30 PM BELTZ 211
03/31/05 (S) Heard & Held
03/31/05 (S) MINUTE(L&C)
04/07/05 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 145
SHORT TITLE: LOANS FOR COMMERCIAL FISHING TENDERS
SPONSOR(s): SENATOR(s) STEDMAN
03/16/05 (S) READ THE FIRST TIME - REFERRALS
03/16/05 (S) L&C, FIN
04/07/05 (S) L&C AT 1:30 PM BELTZ 211
BILL: HB 81
SHORT TITLE: CONTRACTOR LICENSE ENFORCEMENT
SPONSOR(s): REPRESENTATIVE(s) ANDERSON
01/19/05 (H) READ THE FIRST TIME - REFERRALS
01/19/05 (H) L&C, JUD, FIN
01/21/05 (H) L&C AT 3:15 PM CAPITOL 17
01/21/05 (H) Heard & Held
01/21/05 (H) MINUTE(L&C)
01/26/05 (H) L&C AT 3:15 PM CAPITOL 17
01/26/05 (H) Moved CSHB 81(L&C) Out of Committee
01/26/05 (H) MINUTE(L&C)
02/02/05 (H) L&C RPT CS(L&C) NT 5DP 1NR
02/02/05 (H) DP: LYNN, KOTT, LEDOUX, GUTTENBERG,
ANDERSON;
02/02/05 (H) NR: ROKEBERG
02/09/05 (H) JUD AT 1:00 PM CAPITOL 120
02/09/05 (H) Moved CSHB 81(L&C) Out of Committee
02/09/05 (H) MINUTE(JUD)
02/11/05 (H) JUD RPT CS(L&C) NT 3DP 3NR
02/11/05 (H) DP: GRUENBERG, KOTT, ANDERSON;
02/11/05 (H) NR: DAHLSTROM, COGHILL, MCGUIRE
03/02/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/02/05 (H) Heard & Held
03/02/05 (H) MINUTE(FIN)
03/07/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/07/05 (H) Moved CSHB 81(L&C) Out of Committee
03/07/05 (H) MINUTE(FIN)
03/09/05 (H) FIN RPT CS(L&C) NT 3DP 6NR
03/09/05 (H) DP: HAWKER, FOSTER, MEYER;
03/09/05 (H) NR: MOSES, JOULE, STOLTZE, CROFT,
KELLY, CHENAULT
03/16/05 (H) TRANSMITTED TO (S)
03/16/05 (H) VERSION: CSHB 81(L&C)
03/18/05 (S) READ THE FIRST TIME - REFERRALS
03/18/05 (S) L&C, JUD
04/07/05 (S) L&C AT 1:30 PM BELTZ 211
WITNESS REGISTER
TOM MAHER, Staff
Senator Therriault
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 139 for sponsor.
BARBARA GABIER,
Division of Occupational Licensing
Department of Commerce, Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Supported CSSB 139(L&C).
JOHN SEDOR
Anchorage Society for Human Resource Management
Society for Human Resource Management, Alaska State Council
Anchorage AK
POSITION STATEMENT: Explained CSSB 131(L&C).
LINDA HALL, Director,
Division of Insurance
Department of Commerce, Community & Economic Development (DCCED)
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Commented on SB 108.
JEFFREY HART, Shop Steward
Public Employees Local 71 and
Department of Transportation &
Public Facilities Employee
Juneau, AK 99801-7898
POSITION STATEMENT: Opposed Sections 28 and 29 in SB 108.
CHRIS PACE
Juneau AK
POSITION STATEMENT: Opposed Sections 28 and 29 in SB 108.
FRANK PUSCHAK
Anchorage AK
POSITION STATEMENT: Opposed SB 108.
COLLEEN SAVOIE, Consultant
Marsh USA
Public Employees Local 71
Anchorage AK
POSITION STATEMENT: Opposed SB 108.
MARY STOLL, Counsel
Public Employees Local 71 Trust
ASEA Local 52 Trust
Seattle WA
POSITION STATEMENT: Opposed SB 108.
TIM BARRY
Staff to Senator Stedman
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Presented SB 145 for the sponsor.
GREG WINEGAR, Director
Division of Investments
Department of Commerce, Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Supported SB 145.
JERRY MCCUNE, President
Cordova Fishermen United
Juneau AK
POSITION STATEMENT: Supported SB 145.
REPRESENTATIVE TOM ANDERSON
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of HB 81.
GREY MITCHELL, Director
Division of Labor Standards and Safety
Department of Labor & Workforce
Development
PO Box 21149
Juneau, AK 99802-1149
POSITION STATEMENT: Supported CSHB 81(L&C).
MIKE PRAX
North Pole AK
POSITION STATEMENT: Opposed HB 81.
PATRICK DALTON
Delta Junction AK
POSITION STATEMENT: Opposed HB 81.
TERRY DUSZYNSKI
Building Inspector
Fairbanks AK
POSITION STATEMENT: Supported HB 81.
MARY GIRVAN
Delta Junction AK
POSITION STATEMENT: Asked question regarding HB 81.
NANCY DOBBERPUHL
Fairbanks AK
POSITION STATEMENT: Opposed HB 81.
JIM CALLAHAN
Fairbanks AK
POSITION STATEMENT: Opposed HB 81.
NELS CHURCH
Fairbanks AK
POSITION STATEMENT: Waived his time to testify on HB 81.
RANDY DOLL
Fairbanks AK
POSITION STATEMENT: Supported HB 81.
SUE ELLISON
ABC Inc.
Fairbanks AK
POSITION STATEMENT: Supported HB 81 with an amendment.
JEFF ALLING
Alcan Builders
North Pole AK
POSITION STATEMENT: Opposed HB 81.
ROGER BURGGRAFF
Fairbanks AK
POSITION STATEMENT: Opposed HB 81.
TODD LARKIN
North Pole AK
POSITION STATEMENT: Opposed HB 81.
SETH CHURCH
Fairbanks AK
POSITION STATEMENT: Supported amending Section 12 of CSHB
81(L&C).
MIKE MUSICK
Fairbanks AK
POSITION STATEMENT: Supported HB 81.
JACK HEBERT
Fairbanks AK
POSITION STATEMENT: Supported HB 81.
LISA PEGER
Fairbanks AK
POSITION STATEMENT: Opposed HB 81.
RANDY GRIFFIN
Fairbanks AK
POSITION STATEMENT: Opposed HB 81.
ALAN WILSON, Co-chair
Legislative Committee
Alaska Homebuilding Association
Juneau AK
POSITION STATEMENT: Supported HB 81.
ACTION NARRATIVE
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 1:35:06 PM. All members were
present.
SB 139-EXTENSIONS OF OCCUPATIONAL BDS/AGENCIES
CHAIR CON BUNDE announced SB 139 to be up for consideration and
that it provides the ramp down mechanism should a board be
discontinued and increases sunset dates.
TOM MAHER, staff to Senator Therriault, stated that the sponsor
supported the proposed amendments.
SENATOR RALPH SEEKINS moved to adopt CSSB 139(L&C), version I.
CHAIR BUNDE explained that the changes were proposed by the
administration and objected so he could explain them. The first
change transferred the board's statutory authority to the
department and the second change added a new section (4). He
withdrew his objection and CSSB 139(L&C), version I, was
adopted.
BARBARA GABIER, Division of Occupational Licensing, supported
the CS.
SENATOR SEEKINS moved to report CSSB 139(L&C) from committee
with individual recommendations and attached fiscal note.
Senators Ben Stevens, Ellis, Davis, Seekins and Chair Bunde
voted yea; and CSSB 139(L&C) moved from committee.
SB 131-WAGE & HOUR ACT: EXEC/PROF/ADMIN/SALES
CHAIR CON BUNDE announced SB 131 to be up for consideration.
SENATOR SEEKINS moved to adopt CSSB 131(L&C), version F.
SENATOR ELLIS objected for an explanation.
JOHN SEDOR, Anchorage Society for Human Resource Management,
said he also represented the Alaska State Council and explained
the CS to the committee. He said that Section 1 adds "computer
systems analyst, computer programmer, software engineer or other
similarly skilled workers", which references a federal
regulation saying that computer systems workers can be exempt
either under the executive exemption, the administrative
exemption or, specific to computer systems workers, the hourly
exemption where they are paid over $27.63 an hour for a 40-hour
workweek and making over $1,000 for the week.
He said that Section 2 requires that all exemptions must meet
the two times minimum wage test. Also, various federal
definitions had been clarified. He said that adding the
definition of highly compensated employees (paid over $100,000)
was suggested, but was not included since it was already in
federal regulations.
Section 3 deleted the supervisory capacity, which does not exist
under the federal system as an exemption. Section 5 references
the Fair Labor Standards Act, which is consistent with other
provisions of current statute that encourage the department to
look at federal regulations in determining its own regulations.
1:43:49 PM
CHAIR BUNDE noted there were no questions at this time and
pointed out that it was his intent to change the two-year
timeframe for establishing a claim to six months. He offered
that as conceptual Amendment 1.
1:44:37 PM
SENATOR SEEKINS supported having six-months for claims, either
choate or inchoate, instead of the standard two-year statute of
limitations saying, "I probably would have been a little bit
tougher."
CHAIR BUNDE said he just wanted to have a reasonable time in
which to establish a claim.
1:45:54 PM
SENTOR ELLIS asked if he meant six months from the date of
separation.
CHAIR BUNDE answered no, six months from the effective date of
the bill.
SENATOR SEEKINS asked if he meant six months to bring the
lawsuit or to bring the lawsuit to its final adjudication.
CHAIR BUNDE replied, "Bring the lawsuit."
SENATOR ELLIS asked if there would be any effective notice to
the people affected by this bill.
CHAIR BUNDE responded that was a good question, but he thought
labor organizations would make sure their members knew about it.
SENATOR ELLIS pointed out that wouldn't cover all the people
they are talking about.
CHAIR BUNDE replied that he could make the same argument for
people who should know now they have two years.
1:48:17 PM
SENATOR ELLIS asked who requested the bill.
CHAIR BUNDE replied that the request came from business owners
and others.
SENATOR ELLIS said he supported the legislation overall, but the
conceptual amendment needed more thought.
CHAIR BUNDE withdrew conceptual Amendment 1.
SENATOR ELLIS moved to pass CSSB 131(L&C) from committee with
individual recommendations. Senators Davis, Ellis, Ben Stevens,
Seekins and Chair Bunde voted yea; and CSSB 131(L&C) moved from
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
care.
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
regulation.
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
oversight.
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
be.
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
explained:
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
requirements.
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.
SB 145-LOANS FOR COMMERCIAL FISHING TENDERS
CHAIR CON BUNDE announced SB 145 to be up for consideration.
TIM BARRY, staff to Senator Stedman, sponsor, said that this
legislation was requested by a number of fishing tenders in the
state. It makes a small change in the Alaska Commercial Fishing
Loan Act to allow Alaskan owners of fish tenders to be eligible
for loans to improve the quality of seafood products. Under the
current law, the Division of Investments in the Department of
Commerce, Community & Economic Development (DCCED) offers low-
interest loans to fishing permit holders to upgrade their
equipment in order to improve the quality of their seafood
product. Fishing tenders who buy fish on the fishing grounds
from fishermen and transport the product to processing plants
are an important part of the seafood handling process, however
they are not defined currently as fishermen and are, therefore,
not eligible for the improvement loans. SB 145 is supported by
the Alaska Independent Tendermen's Association, the Southeast
Alaska Fishermen's Alliance and Cordova District Fishermen
United.
CHAIR BUNDE asked what exactly upgrading equipment means.
MR. BARRY replied that purchase of vessels is not part of this
program, but it would cover a refrigerated seawater hold, for
instance.
2:35:28 PM
GREG WINEGAR, Director, Division of Investments, supported SB
145 saying it was consistent with state and industry efforts to
improve quality of seafood products. The division already gives
these loans to commercial fishing harvesters and the program has
been self-supporting for many years. SB 145 would not require
appropriations or additional staff.
2:36:49 PM
JERRY MCCUNE, President, Cordova Fishermen United, supported SB
145 saying it's important to have tenders with good equipment.
2:37:37 PM
CHAIR BUNDE asked if anyone is opposed to this bill.
MR. MCCUNE answered no.
2:38:38 PM
SENATOR BEN STEVENS moved to pass SB 145 from committee with
individual recommendations and attached fiscal note. Senators
Davis, Ellis, Ben Stevens, Seekins and Chair Bunde voted yea;
and SB 145 moved from committee.
CSHB 81(L&C)-CONTRACTOR LICENSE ENFORCEMENT
CHAIR CON BUNDE announced CSHB 81(L&C) to be up for
consideration.
2:41:18 PM
REPRESENTATIVE TOM ANDERSON, sponsor, explained that HB 81 is
intended to help enforce Alaska's current laws that were changed
last session regarding construction contractor licensing and
registration. Section 2 gives the Department of Law (DOL) and
the Division of Occupational Licensing the authority to issue
administrative fines for violations. Currently, violations are
prosecuted by the district attorney through the court system and
many times cases never go to trial because they are prioritized
below other cases like rape and murder. His intent with Section
2 was to streamline enforcement efforts and to help make
government more efficient by not clogging up the judicial system
with cases that are relatively minor compared to other cases it
has to handle.
The bill doesn't change any of the laws affecting handymen who
can work on construction projects less than $5,000 and allows
them work on projects worth more than $5,000 with proper
licensure. It also allows owner-builders to construct a single-
family duplex, triplex, four-plex or commercial building every
two years. Current law states one year. This change was in
response to testimony from a private home inspector who observed
people abusing the current exemption by building units every
year for each member of their family and then selling the units
without being a general contractor.
REPRESENTATIVE ANDERSON related that he has heard complaints
from several individuals about the two-year occupancy
requirements in the owner-builder exemption and he thought the
committee could make an amendment in that regard. He said this
bill is strongly supported by several building associations.
2:43:28 PM
CHAIR BUNDE asked if his experience is that a handyman very
quickly reaches the $5,000 limit.
REPRESENTATIVE ANDERSON replied that he didn't set that limit;
it is in current statute and not enforced.
2:45:11 PM
SENATOR SEEKINS asked if the $5,000 limit was for labor only or
labor and materials.
REPRESENTATIVE ANDERSON replied that he didn't know, but he
thought it was an individual's portion of the contract.
SENATOR SEEKINS asked if he has a $20,000 contract and five
people did $4,000 worth, would they be exempt from the
limitation or is it the job itself.
REPRESENTATIVE ANDERSON answered by reading:
This exemption does not apply when the work is divided
into contracts of amounts less than $5,000 for the
purpose of evasion of the law. For work priced at
$2,500 or more, some public liability and property
damage insurance is required.
2:46:37 PM
SENATOR SEEKINS said he thought that section was confusing and
asked how a person would be assessed a penalty and who would do
it. He said, "I have a natural aversion to having hearing
officers who are employees of the department that's bringing the
action."
REPRESENTATIVE ANDERSON responded that was a fair concern and he
added that the Administrative Regulation Review Committee had
considered Senator Therriault's central panel in this
legislative cycle and explained:
I think, though, that if we were to do that, it
obviously adds a fiscal impact to the legislation and
we've been really proud that there hasn't been such. I
think Greg can add to that, but that's one of the
rationales why we didn't just throw it in that panel.
2:48:00 PM
GREY MITCHELL, Director, Division of Labor Standards and Safety,
Department of Labor and Workforce Development (DOLWD), agreed
with trying to avoid a fiscal note. If the hearings go to the
Office of Administrative Hearings, it would need a fiscal note.
His division already has hearing officers who are trained in
fair hearing procedures. They work in a different section from
enforcement staff, so there is some separation. He would not let
a hearing officer who has any previous knowledge of a case hear
that particular case.
2:49:15 PM
SENATOR SEEKINS explained that he was concerned that all those
people were getting their paychecks from the same department.
CHAIR BUNDE said he had a list of people who wanted to testify
on this issue and if their concerns had been met with previous
testimony, he asked them to indicate their agreement.
2:51:21 PM
MIKE PRAX, North Pole contractor representing himself, said he
opposed HB 81. The sponsor claims that it closes a loophole in
current law and that loop is "a bunch of onerous state
regulations that are creating a noose that is strangling out
society." He pointed out that the department already has the
power to issue a citation on probable cause - a fairly low
standard.
This bill gives them the authority to levy a $1,000
fine on a citizen based on probable cause and then
leaves the citizen to face a complicated
administrative procedure. And if he doesn't fill in an
application and write down his reasons for the
application for review ahead of time in a timely
fashion, he is even denied judicial review of the
fine.
He urged the committee to hold the bill.
PATRICK DALTON, Delta Junction, opposed HB 81 that puts
enforcement teeth into a poor law. Many homeowners have been
victims of slothful craftsmanship, but the other side of the
equation is that a lot of good independent craftsmen can't
afford expensive licensing and bonding. They find it hard to
survive during the long winter slump and when spring arrives and
the building season starts, they face a grim choice - ignore the
regulations and work without a contractor's license or simply
starve. He also pointed out that without these people working,
there would be an acute shortage of small homebuilders.
2:56:09 PM
TERRY DUSZYNSKI, Fairbanks building inspector, supported HB 81.
He works with a lot of owner-builders and thought they should be
able to continue to build small homes. He has also dealt with a
number of people who are building homes for sale who really
don't know what they are doing and need the education that
licensure provides.
2:57:52 PM
MARY GIRVAN, Delta Junction, wanted to know what the original
legislation is that established the $5,000 limit.
CHAIR BUNDE replied that it was established last year in HB 542.
2:58:46 PM
NANCY DOBBERPUHL, Fairbanks, said that the people from Fairbanks
and Delta Junction have expressed a lot of her concerns. She
spoke for herself, her children, her grandchildren and any
Alaskans who are tired of senseless regulations. She should be
able to hire who she wants and pay them a fair wage for work she
will be able to see if it's good or not. She thought HB 81 was a
bad bill.
3:01:01 PM
JIM CALLAHAN, Fairbanks, said he is a "handyman" and just
realized the upper limit was lowered from $10,000 to $5,000 last
year. He also wants honest business practices and consumer
protection, but at the end of the day the difference between
$5,000 and $10,000 is that contractors will get more of the pie.
He related a story of a licensed person who did shoddy work to
support his position that licensing doesn't necessarily mean a
person does good work.
3:03:28 PM
NELS CHURCH waived his time.
3:04:01 PM
RANDY DOLL, Fairbanks, supported HB 81 and wanted to see even
steeper fines.
3:04:26 PM
SUE ELLISON, ABC Incorporated, Fairbanks, supported HB 81. ABC
is a general contractor licensed for residential endorsement.
She said HB 81 removed a cumbersome and time-consuming process
out of criminal into civil court. She recommended removing the
occupancy limitation because it puts undue stress on some people
and doesn't accomplish anything.
3:05:33 PM
JEFF ALLING, North Pole, said he owns Alcan Builders and does
heavy commercial construction and that he is coming at this from
a whole different angle. It's been his dream to retire in seven
or nine years and shortly after that he wants to perhaps build
one rental unit per year or build a house for one of his kids.
It could be argued under Section 5 (12) that his child is the
owner-builder, but that wouldn't be the case. It could also be
construed that he is acting as a contractor, which he wouldn't
be if he were retired. Also, he would be allowed to build only
one rental unit every two years and he would have to promise to
occupy it or show undue hardship for not occupying it. He came
to Alaska from Connecticut for independence and freedom and he
would like to be able to exercise his ambition when he retires.
3:07:34 PM
CHAIR BUNDE said that the sponsor had indicated interest in
amending that issue and would be back with a CS at a future
date.
3:08:05 PM
ROGER BURGGRAFF, Fairbanks, said the public was unaware of this
bill and he opposed it anyhow as being obnoxious, un-American
and un-Alaskan. It would put the handyman out of business. He
suggested raising the limit requiring a license back to $10,000
or more.
3:11:12 PM
TODD LARKIN, North Pole, said HB 81 would hurt consumers if it
were not amended. He charges $30 per hour for his labor and
works for two categories of people - contractors and every other
kind of customer from homeowners to real estate agents. When he
is serving the homeowners and real estate agents, his time is
broken up into service visits, which means he cannot get eight
billable hours without working 10 or 12 hours. When he works for
contractors on a temporary basis, he is able to string together
40 hours per week or more for one to three weeks at a time
without interruption. This, in effect, subsidizes his rates for
the other customers and allows him to keep rates at the current
level. If the committee doesn't correct HB 81 he will have to
raise his rates to achieve the same income. He noted that he had
offered the committee a conceptual amendment in writing.
3:14:05 PM
SETH CHURCH, Fairbanks, said HB 81 needed an amendment to the
occupancy provision in Section 12. If he currently had a house
under construction, he couldn't sell it without a notice of
completion or undue hardship. It lets the government decide if
he can sell his house.
3:16:32 PM
MIKE MUSICK, Fairbanks, said he is a licensed and bonded
homebuilder and supported HB 81.
3:19:01 PM
JACK HEBERT, Fairbanks, said he is a homebuilder and supported
HB 81. He hated to see the old days go as he has always been a
small builder, but he didn't feel that this bill changes that
much. He supported it because it sends out a message that they
all have to start playing by the same rules.
3:21:24 PM
LISA PEGER, Fairbanks, said she is an apartment owner and that
rentals always need repairs and this would actually drive
handymen away. No one will take small jobs and it would end up
hurting the small business people.
3:22:41 PM
RANDY GRIFFIN, Fairbanks, opposed HB 81, especially the
occupancy requirement in Section 12. He has lived in his house
for years, but it isn't finished and he wondered if he would be
able to sell it. He also suggested that maybe handymen could
hand their customer a notice saying they aren't bonded so the
customer knows that upfront.
3:24:59 PM
ALAN WILSON, Co-chair, Legislative Committee, Alaska State
Homebuilding Association, noted that this bill was introduced at
his request. Basically, he thought most issues would be taken
care of with the amendment that was going to be offered. It
makes it easier for enforcement to cite individuals similar to
parking or speeding tickets. It would simplify what is going on
now and will level the playing field in the construction
industry. He informed the committee that California has a $500
limit; Oregon and Washington both require all individuals to be
registered.
3:28:21 PM
CHAIR BUNDE thanked everyone for being courteous and said he
would hold the bill for further work. He then adjourned the
meeting at 3:28:53 PM.
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