ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 18, 2009
3:19 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. 90
"An Act relating to bonding limitations and confidentiality of
records and information of the Alaska Industrial Development and
Export Authority; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 101
"An Act exempting the full value of life insurance and annuity
contracts from levy to satisfy unsecured debt, and amending the
description of earnings, income, cash, and other assets relating
to garnishment of life insurance proceeds payable upon the death
of an insured."
- MOVED HB 101 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 90
SHORT TITLE: AIDEA: BONDING LIMITS; CONFIDENTIALITY
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/28/09 (H) READ THE FIRST TIME - REFERRALS
01/28/09 (H) L&C, FIN
02/18/09 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 101
SHORT TITLE: EXEMPTIONS: LIFE INSURANCE; ANNUITIES
SPONSOR(s): REPRESENTATIVE(s) COGHILL
01/30/09 (H) READ THE FIRST TIME - REFERRALS
01/30/09 (H) L&C, JUD
02/18/09 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
TED LEONARD, Executive Director
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 90.
VALORIE WALKER, Deputy Director, Finance
Alaska Industrial Development & Export Authority (AIDEA)
POSITION STATEMENT: Answered questions during the discussion of
HB 90.
CHRIS ANDERSON, Deputy Director, Credit
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the discussion of
HB 90.
BRIAN BJORQUIST, Senior Assistant Attorney General
Labor and State Affairs Section
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 90.
AMANDA MORTENSEN, Intern
Representative John Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions on behalf
of the prime sponsor of HB 101, Representative John Coghill.
LINDA HULBERT
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 101.
ACTION NARRATIVE
3:19:08 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:19 p.m. Representatives Buch,
Chenault, Coghill, Holmes, Neuman, and Olson were present at the
call to order. Representative Lynn arrived as the meeting was
in progress.
HB 90-AIDEA: BONDING LIMITS; CONFIDENTIALITY
3:19:52 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 90, "An Act relating to bonding limitations and
confidentiality of records and information of the Alaska
Industrial Development and Export Authority; and providing for
an effective date."
3:19:58 PM
TED LEONARD, Executive Director, Alaska Industrial Development
and Export Authority (AIDEA), stated that the Alaska Industrial
Development and Export Authority's (AIDEA) mission is to provide
financing to promote economic growth and diversification in
Alaska. He opined that AIDEA fulfills its mission by providing
Alaska businesses and nonprofits agencies with long-term
commercial and development financing at a reasonable cost. He
related that HB 90 would allow AIDEA more flexibility when it
issues bonds to ensure the authority receives the most favorable
rates and to reduce overall costs to AIDEA and Alaskans. He
explained that the bill would clarify and assure borrowers and
development applicants that certain records will be kept
confidential.
3:21:52 PM
MR. LEONARD reviewed the bill sections, stating that Section 1
of HB 90 would amend the bond limitation's section by excluding
refunding and conduit revenue bonds. He related that this
section limits the amount of bonds that can be issued in a 12-
month period to $400,000. He offered that the main types of
bonds that AIDEA issues are general obligation (GO) bonds,
revenue bonds, conduit revenue bonds, and refunding bonds. He
clarified that GO bonds and revenue bonds are typically issued
for project development and to fund AIDEA's loan participation
bonds. He explained that GO bonds pledge the general assets of
the authority while revenue bonds pledge the revenue of the
bond. He further explained that revenue bonds were issued for
Snettisham Dam, and are repaid directly from the receipts AIDEA
receives from the Alaska Electric Light and Power (AEL&P). He
explained that refunding bonds are used to refinance and replace
existing bond debt in order to obtain more favorable terms. He
offered an analogy by stating that when mortgage rates drop,
homeowners want to refinance to obtain lower finance rates. He
reiterated that similarly, refunding bonds replace existing debt
with new debt at more favorable terms. He highlighted that
refunding bonds cannot be issued unless economic benefits can be
demonstrated to the bond market. Thus, the refunding bonds are
self-limiting since the bonds are only used to replace existing
debt.
3:23:51 PM
MR. LEONARD offered that conduit bonds are used to provide
financing to businesses and nonprofits, where AIDEA acts as a
"conduit" for the issuance for the taxable and tax exempt bonds.
He explained that under its program, AIDEA has financed over 309
projects through $1.2 billion in conduit bonds. He related that
the bonds are slowly repaid by the developer through the revenue
derived from the developer's project. However, the AIDEA has no
financial obligation or risk for the debt when it issues conduit
revenue bonds. He highlighted that the Internal Revenue Service
(IRS) limits the amount of conduit revenue bonds that the state
can issue to $260 million annually. He indicated that AIDEA
must obtain approval from the bond committee before issuing
conduit revenue bonds.
MR. LEONARD summarized that the refunding bonds and conduit
bonds help promote the AIDEA's mission without substantially
increasing the amount of its outstanding debt. He stated that
the purpose of the bill is to ensure that the 12 month bond
limitation would not hamper AIDEA's ability to issue debt that
would provide the authority and businesses with more favorable
terms or lower capital cost. He further stated that the bill
helps to ensure that AIDEA's conduit revenue bond program is not
limited from providing conduit revenue bonds for businesses.
3:25:44 PM
REPRESENTATIVE HOLMES related her understanding with respect to
refunding bonds that AIDEA can issue up to $400,000 in a 12-
month rolling period. She asked for clarification for the
exception for refunding bonds.
3:26:44 PM
MR. LEONARD responded that the issue is one of timing. He
highlighted that if the municipal market is positive, and rates
dropped, and AIDEA issued $250 million in refunding bonds for an
economic development project, and turned $100 million of
variable debt to fixed debt, that the total issuance of bonds
would be $350 million. If that happened during the same time
period, then AIDEA could not issue debt through the conduit
program for perhaps six months or longer, until the 12-month
period passed, he stated. He said he anticipates that the
conduit revenue bond program may become more active since the
Congress just passed legislation that changes what can be
included in industrial development bonds, such as allowing
intangible assets to be included. Thus, the changes make it
easier to issue bonds under the tax exempt status, he added.
REPRESENTATIVE HOLMES inquired as to whether refunding bonds
always refund underlying debt or can debt be added to an
existing bond.
MR. LEONARD related his understanding that the refunding bonds
could also include issuance cost, but he offered his belief that
new debt could not be added in the process.
3:29:08 PM
VALORIE WALKER, Deputy Director, Finance, Alaska Industrial
Development & Export Authority (AIDEA), stated that she agrees
with Mr. Leonard. She explained that refunding bonds could
include cost of issuance and additional amounts to fund reserves
but the costs would be related to the original issue of bonds.
3:29:51 PM
REPRESENTATIVE HOLMES related her understanding that additional
costs could be added but that the underlying obligation would
not be doubled.
MR. LEONARD agreed.
3:30:06 PM
MS. WALKER, in response to Representative Buch, stated that
Bradley Lake was Alaska Energy Authority bonds so this bill
would not apply to those bonds.
MR. LEONARD, in response to Representative Chenault, explained
that conduit revenue bonds amount to $464 million outstanding
since 1995.
REPRESENTATIVE CHENAULT related his understanding that by
excluding refunding bonds and conduit revenue bonds AIDEA would
expand its ability to bond for different projects. However,
currently the AIDEA is restricted by a total amount of $400
million. He inquired as to how much additional bonding
authority would be provided by this bill.
MR. LEONARD responded that it would depend on how many bonds
come to us. He explained that the AIDEA has $200 million in
outstanding bonds. Additionally, $463 million in conduit
revenue bonds are outstanding. However, he reminded members
that the conduit revenue bonds do not appear on AIDEA's
financial statements, except as a note to mention the program.
He reiterated that refunding bonds are self limiting to bonds
that are outstanding. Thus, those bonds are replaced with new
bonds. An overall limitation exists on the conduit revenue
bonds with the state, but the AIDEA is essentially a "conduit
for nonprofits and businesses" to have access to the capital
market.
3:33:41 PM
REPRESENTATIVE CHENAULT expressed his concern that the state
could double its bonding authority. He inquired as to whether
AIDEA would need to come back to the legislature for approval
prior to issuing bonds. He summarized that he did not want
AIDEA to have unlimited bonding authority.
MR. LEONARD explained that the conduit revenue bonds do not
affect AIDEA's bonding capacity since they are "conduit" bonds.
He related that the conduit revenue bonds help economic
development access to the capital markets. Additionally, small
businesses in manufacturing or that meet certain criteria can
use tax-exempt bonding authority instead of a taxable bond,
which can lower the rate.
3:36:12 PM
MS. WALKER explained that HB 90 would limit AIDEA's ability to
issue new money bonds to $400 million in any 12-month period.
This section of the bill requests the ability to exclude
refunding bonds and conduit revenue bonds. However, the
limitation of $400 million in any 12 month period would still
apply. She highlighted that this issue arose when AIDEA
initially issued bonds the bonds tended to be small bonds
ranging from under $1 million or under $10 million. However,
the IRS rules changed. She explained that the conduit revenue
bonds are used by tax-exempt organizations under Section
501(c)(3) of the Internal Revenue Code. Typically, the conduit
revenue bonds are used by hospitals, for very large dollar
amounts. She related that the AIDEA has no control over the
timing of conduit revenue bonds. She stated that AIDEA is
currently working on refunding a conduit revenue bond that three
weeks ago was not known. She related that the bond could be for
$127 million. In the event that AIDEA needed to refund an
outstanding variable rate debt or issue a refunding bond, that
the $127 million could limit the AIDEA's authority to issue any
additional bonds during a 12-month period, or to issue bonds for
a conduit, since the bonds are all lumped together.
3:38:19 PM
MR. LEONARD, in response to Representative Chenault, answered
that the AIDEA is not over the limit on its bonding authority
since the $400 million refers to the limit that AIDEA can issue
in bonds during a 12-month period. He related that since the
1980s that AIDEA has issued about $1.2 billion in conduit
revenue bonds and the amount left outstanding is $463 million.
3:39:13 PM
MR. LEONARD, in response to Chair Olson, stated that the state's
Standard & Poor's rating is AA. He stated that the state went
from a rating of A to AA, which is better than many states.
3:39:45 PM
REPRESENTATIVE BUCH inquired if Section 2 of HB 90 would remove
the obligation for AIDEA to come to the legislature for approval
would not be necessary.
MR. LEONARD responded that Section 2 of HB 90 removes the sunset
authority. Additionally, this would allow AIDEA to issue bonds
under $10 million, but requires AIDEA to seek legislative
approval on any bonds issued over $10 million. However, the
limit in Section 1 would still apply, which is not to exceed
$400 million during a 12-month period.
3:40:55 PM
REPRESENTATIVE CHENAULT inquired as to whether there are any big
projects that would need legislative approval.
MR. LEONARD answered that while no official action has been
taken, that Fairbanks Natural Gas, as well as possible Alaska
Energy Authority's (AEA) energy projects could need legislative
approval.
MR. LEONARD, in response to Representative Chenault, answered
that AEA has bonding authority. He surmised that AIDEA probably
has better capacity to service debt than for AEA to start its
own program.
REPRESENTATIVE CHENAULT inquired as to whether AEA could bond
more since the state would be "on the hook" versus if AIDEA
bonded that AIDEA or the consumer would be "on the hook".
MR. LEONARD offered his belief that AEA could not own a project,
but AIDEA could bond and have a development project, such as the
Red Dog Mine in Western Alaska. He acknowledged that he is not
an expert on AEA's statutes.
3:43:27 PM
REPRESENTATIVE COGHILL, in response to Chair Olson, related his
understanding that Fairbanks Natural Gas, LLC was seeking a $250
million bond. However, he offered that private capital is
available. Thus, asking for bonding would create a big hurdle
for him since private capital is available, he opined.
MR. LEONARD offered that AIDEA will look at any project. He
stated that AIDEA does not conduct due diligence on projects
initially.
REPRESENTATIVE COGHILL clarified that the project is conceptual
and that the $250 million is also conceptual and has not been
vetted.
3:45:35 PM
MR. LEONARD, in response to Chair Olson offered possible
projects for AIDEA involvement include the Red Dog Mine for an
estimated $300 million for a deep port, and Ketchikan shipyard
for an additional $40 to $50 million for expansion of its dock.
He related that AIDEA has not yet been asked for assistance, but
that it is ready and willing to help.
REPRESENTATIVE COGHILL mentioned that a preliminary agreement
has been reached on the Healy Clean Coal issue.
MR. LEONARD related that AIDEA has assets of approximately $930
million. Thus, AIDEA has its own bonding capacity, but that as
it issues bonds its ability goes down, except when it issues
conduit revenue bonds.
3:47:42 PM
MR. LEONARD, in response to Representative Neuman, explained
that the bill was formulated as AIDEA projected its programs and
realized the potential existed that could affect the conduit
revenue bond program and in terms of the confidentiality
sections, whether borrowers' proprietary information could be
kept confidential.
MR. LEONARD, in response to Representative Neuman, explained
that when AIDEA issues a conduit revenue bond, the bond market
understands AIDEA's role. He related his understanding that the
bonds are based on the borrower's financial statements and the
project. He said, "They realize they cannot go back against
AIDEA for those bonds so they know they are not buying AIDEA
bonds. They're actually buying Fairbanks Hospital bonds." He
related that this helps businesses use AIDEA's expertise and
bond attorneys to issue these bonds. He pointed out that AIDEA
does charge an application fee of $500, plus one percent for the
$1 million, then a half a percent from $1 to $5 million, and a
quarter percent from $5 to $15 million. Thus, in essence when
people buy these bonds, they have knowledge that AIDEA is not
pledging its assets or its credit.
3:50:38 PM
REPRESENTATIVE NEUMAN related that with the economy collapsing,
he confessed a general uneasiness that a state agency would be
used as a conduit for businesses that cannot obtain their own
bonding authority.
MR. LEONARD said:
In actuality, that is the function of AIDEA. AIDEA is
there to allow access to capital markets. We do that
through our loan participation program. We have about
$400 million in small loans to businesses, and our
conduit revenue bond, again, is the way that
nonprofits can get to the capital markets.
3:51:38 PM
REPRESENTATIVE COGHILL related his understanding that AIDEA,
along with AEA and the Alaska Housing Finance Corporation (AHFC)
were specifically designed to turn some of Alaska's oil riches
into a method to reinvest in economic development. He offered
that the argument all along as been whether this is "real
economy" or "subsidized economy".
3:52:11 PM
REPRESENTATIVE NEUMAN inquired as to the amount of delinquent
bonds.
MR. LEONARD responded that none of AIDEA's bonds are delinquent.
He opined that of about $370 million that the loan delinquency
rate is one-tenth of a percent.
3:52:53 PM
CHRIS ANDERSON, Deputy Director, Credit, AIDEA, estimated that
right now the delinquency ratio is close, at .13 of a percent
which is for loans that are delinquent 90 days or more. She
related that is the lowest rate in the past two and a half
years. She said, "Our delinquencies on the participation
program, at least currently are in very good shape."
3:53:44 PM
REPRESENTATIVE COGHILL made a motion to adopt Amendment 1,
labeled, 26-GH1043\A.1, Bannister, 12/9/10, which read:
Page 2, line 30, through page 3, line 3:
Delete all material.
Renumber the following bill sections accordingly.
There being no objection, Amendment 1 was adopted.
3:54:05 PM
MR. LEONARD explained that the language in Section 4 of HB 90 is
existing statute for AS 44.88.215 (b).
3:54:33 PM
BRIAN BJORQUIST, Senior Assistant Attorney General, Labor and
State Affairs Section, Department of Law, explained that a
mistake was made in the process of developing the bill, but
since no changes were made to the AS 44.88.215 (b), the entirety
of Section 4 of the bill can be deleted.
3:55:07 PM
MR. LEONARD explained that Section 2 of HB 90 would reinstate
the authority's ability to issue bonds that existed prior to
July 1, 2007, which essentially removes the sunset provision.
This also would clarify in statute that AIDEA may use proceeds
from refunding bonds to fund reserves and finance certain costs
and expenses associated with issuing the refunding bonds. He
stated that due to the statutory sunset AIDEA currently requires
legislative approval to issue any bonds except the refunding
bonds and conduit revenue bonds. He reiterated that Section 2
would eliminate the sunset and enable the authority to issue
most types of bonds less than $10 million, but would require
AIDEA to seek legislative approval on bonds over $10 million
that would assist the financing of AIDEA-owned development
projects. He mentioned that provision refers primarily to GO
bonds and refunding bonds on its own projects.
3:56:31 PM
REPRESENTATIVE HOLMES related her understanding that under
existing law and this proposed bill that AIDEA can issue bonds
under $10 million, but must come to legislature for approval on
bonds over $10 million.
MR. LEONARD responded that this section would restore the
language prior to the sunset. He confirmed that AIDEA would
need to have legislative approval for bonding over $10 million.
3:57:21 PM
MR. LEONARD explained that Section 3-6 of HB 90 would help
clarify that certain records and information provided to AIDEA
are confidential, and would establish processes for the
authority to determine confidentiality. He reiterated borrowers
held concerns about the type of records that AIDEA would keep
confidential and the type of process AIDEA would use to
determine confidentiality. He stated that Section 6 further
clarifies by adding a definition for trade secrets based on
existing AS 45.50.940. He detailed that Section 5 establishes a
process for AIDEA to determine which records will be kept
confidential. The applicant must request confidentiality, and
make an adequate showing to the executive director that the
records should be kept confidential, who will then decide if the
records or information meet the statutory criteria for
confidentiality. He related that these sections give applicants
greater assurance from the beginning of the process which
records are confidential. He noted that during the due
diligence process, that in order to determine the applicant's
financial ability, "we delve very deeply into the records and
their business." He stated that applicants expressed concern
that a competitor might request public records and confidential
information would be released.
4:00:01 PM
REPRESENTATIVE COGHILL related his understanding that more of a
burden would be placed on the executive director. He inquired
as to whether "adequate showing" is a term of art that is
understood or if it would result in a lawsuit.
4:01:14 PM
MR. BJORQUIST stated that the requirement for an adequate
showing would require that the applicant provide sufficient
information to the executive director to demonstrate that the
information fits within the list of types of documents that
under the statute are confidential. He related that rather than
listing confidential documents, a process is set up so the
person demonstrates the documents meet the criteria for
confidentiality. He said that the executive director, under
Section 5 would make a determination that it fits in the list.
Currently, anyone who provides information and fits into the
list of confidential documents is automatically confidential.
However, the difficulty is that a mechanism is not in place to
make a determination at the outset, whether the statutory
criteria have been met or not. Thus, the adequate showing and
the subsequent determination by the executive director merely
puts into place a process that would allow the determination to
occur earlier in the process, rather than leaving a question
about when the determination will be made and ultimately which
documents will be considered confidential.
4:03:28 PM
REPRESENTATIVE COGHILL related his understanding that this
narrows the process to make a clearer process for determining
confidentiality of proprietary documents. He inquired as to
whether the additional language in Section 5 will make the
process more entangled. In response to Mr. Leonard,
Representative Coghill stated he reviewed the definition of
"trade secrets" in AS 45.50.940. He expressed concern that
Section 5 of the bill may cause litigation as written.
4:05:24 PM
CHAIR OLSON offered that it not his intention to move HB 90
today.
4:05:32 PM
MR. LEONARD stated that Section 8 would add an effective date of
July 1, 2009.
4:06:05 PM
MR. BJORQUIST explained that this bill would take effect July 1,
2009. However, the 12-month period overlap before and after the
dates in Section 1 apply so the terms of this provision would
apply to any bonds issued after July 1, 2009, but would also
include any bonds issued 12-months prior to that date.
4:06:44 PM
CHAIR OLSON, after first determining no one wished to testify,
closed public testimony on HB 90. He clarified that Amendment 1
was previously adopted, and the bill would be held over.
HB 101-EXEMPTIONS: LIFE INSURANCE; ANNUITIES
4:07:47 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 101, "An Act exempting the full value of life
insurance and annuity contracts from levy to satisfy unsecured
debt, and amending the description of earnings, income, cash,
and other assets relating to garnishment of life insurance
proceeds payable upon the death of an insured."
4:07:55 PM
AMANDA MORTENSEN, Intern, Representative John Coghill, Alaska
State Legislature, speaking on behalf of the prime sponsor,
Representative John Coghill, explained that HB 101 would exempt
the full value of life insurance and annuity contracts from levy
to satisfy unsecured debt. This bill would protect Alaskan
families and their ability to plan for the future. She related
an example in which "person A" is involved in a car accident
hits "person B" and that person could sue for the assets of
"person A". This bill would protect "person A's" life insurance
and annuity contract so that his/her family could survive in the
event of "person A's" death. However, "person B" would not be
prevented from pursuing "person A's" other assets to fulfill a
settlement award. Additionally, HB 101 would protect the death
benefits of the spouse or a dependent of the debtor in the event
the debtor survives. Currently, retirement plans are protected
under federal law. This bill would help in instances in which
an employer does not provide an employee with retirement plan.
The employee would be allowed to use an annuity as a retirement
plan to provide financial security for their family. She
remarked that given the uncertainty of the federal social
security system that Alaskan families need to be able to
legitimately provide for their futures. She related that HB 101
falls under AS 09.38.025, which provides exemptions for the code
of civil procedure.
4:10:02 PM
MS. MORTENSEN explained that Section 1 removes the $10,000
exemption cap on life insurance and annuities and Section 2,
removes the language "or payable" to clarity potentially
ambiguous language that would allow garnishment of death
benefits prior to a person's death. She offered that 10 other
states have exempted life insurance and annuities from
creditors.
4:11:01 PM
LINDA HULBERT stated that she has lived in Alaska for 40 years.
She offered that for the past 20 years she has worked as an
agent for New York Life Insurance. She also offered that she
has been helping Alaskan families plan for estate and retirement
planning. She opined that HB 101 is very important to the
future of Alaska's families due to the economic environment.
She related that many retirement plans are being cancelled,
companies are not always making contributions to retirement
plans on behalf of their employees, and many families have
limited savings. This bill would allow Alaskan families to plan
and have life insurance without being subject to the loss of the
life insurance. Additionally, it would allow individuals to
plan for their retirement. She surmised that fewer defined
benefit plans exist. This bill would allow employees to set
aside money that would be protected and not taxed until the
retirement funds were used. She said she strongly supports HB
101. She reiterated that ten other states have adopted these
provisions. She surmised that the trend is for more states to
enact legislation to protect employees' retirement plans. She
related that Arizona passed similar legislation a few years ago.
She stressed the importance of this bill to assist families in
planning for their future. Plus, she opined that HB 101
encourages personal responsibility to plan and save for the
future. She asked the committee to consider passing HB 101.
4:13:00 PM
REPRESENTATIVE HOLMES inquired as to the typical range of life
insurance or annuity account that people currently hold.
MS. HULBERT explained that it really depends on the size of
family, their assets, and the number of children and
grandchildren. She ventured that policies typically range from
$100,000 to $250,000. She opined that some people are carrying
larger policies as they counted on other assets to protect their
families and the assets are difficult to sell. She said that it
is not uncommon to have polices in the $500 thousand range, and
sometimes up to $1 million in insurance. She explained that
annuity contracts may not be lump sum, but families may set
aside a certain amount per month, or a family may try to
preserve an inheritance. She concluded that pinning down a
typical amount is difficult due to the varied circumstances.
4:14:39 PM
REPRESENTATIVE HOLMES expressed concern that some people might
try to "game the system". She inquired as to how to offer
protection for an employee's retirement account without keeping
unscrupulous people from "gaming the system" and sinking money
into life insurance or annuity contracts in order to shelter
their assets.
MS. HULBERT responded that this statute addresses fraudulent
transfers. She opined that if a question arose that someone
tried to hide assets or protect assets, the courts would
consider the transfer of assets a fraudulent transfer, which
would be subject to the claims of creditors. She further opined
that HB 101 protects individuals but at the same time does not
allow abuse. She related that other states, including Alaska
have taken measures to ensure that fraudulent transfers are
subject to the claims of creditors.
4:16:35 PM
MS. MORTENSEN added that the state of Florida completely exempts
life insurance and annuities. She described an instance in
which a debtor transferred a non-exempt individual retirement
account (IRA) into an annuity with the intent to defraud
creditors, which was determined to be a fraudulent transfer.
Thus, cases of this type have been upheld in other states, she
said.
4:17:18 PM
CHAIR OLSON, after first determining no one wished to testify,
closed public testimony on HB 101.
4:17:27 PM
REPRESENTATIVE BUCH offered his belief that these are the kinds
of issues that this state needs to address. He thanked the
bill's sponsor for bringing the issue of retirement and life
insurance protections forward.
4:17:54 PM
REPRESENTATIVE HOLMES stated that she likes the intent of HB
101. She expressed some concern that she has not considered
other possible issues, such as whether an account is
automatically protected in instances in which a person inherits
a trust fund that is in the form of an annuity. She offered
that a few outlying scenarios need to be considered.
4:18:23 PM
REPRESENTATIVE COGHILL offered his belief that Alaska has tried
to stay "in the front of the pack" on trust fund issues and has
built in significant fraud protection. He opined that the
issues have been addressed through the years. He recalled at
least eight bills that have come before the House Judiciary
Standing Committee that fall into that category. He stated that
annuities generally deal with death benefit issues. He said
that he shared Representative Holmes's concern, but that he has
not observed any way to escape the law. He expressed interest
in Representative Holmes's review, since he supports legitimate
claims but does not want anyone to be able to game the system.
He opined that he has not found any loophole to date.
4:19:41 PM
REPRESENTATIVE HOLMES maintained her belief that HB 101 has good
intent. She noted that she will be privileged to hear the bill
when it comes to the House Judiciary Standing Committee for
review.
4:19:55 PM
CHAIR OLSON offered to hold the bill over.
4:20:13 PM
Representative Holmes responded that if the rest of the
committee wished to move the bill she will further review the
bill and take up any issues before the House Judiciary Standing
Committee.
4:20:22 PM
REPRESENTATIVE COGHILL moved to report HB 101, Version 26-
LS0176\R, out of committee with individual recommendations and
the accompanying fiscal notes. There being no objection, HB 101
was reported from the House Labor and Commerce Standing
Committee.
4:21:05 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:21 p.m.