Opinion ID: 2518920
Heading Depth: 3
Heading Rank: 2

Heading: The Trustees' decision to adopt a two-tier rate structure is subject to a review for an abuse of discretion.

Text: HRS chapter 87A does not expressly provide whether the EUTF Trustees owe to the employee-beneficiaries the common law fiduciary duty of impartiality in determining the rate structure of the health benefits plan. According to Plaintiffs, this silence indicates that the fiduciary duty of impartiality applies to the Trustees because [n]othing in Chapter 87A modifies the common law duties of trustees, or suggests that the EUTF trustees were vested with discretion to ignore or override their fiduciary duty of impartiality. In fact, the word `discretion' appears nowhere in the text of Chapter 87A. [8] Defendants reply that [a] grant of discretionary authority does not hinge on incantations of the word `discretion' or any other magical word. (Citing Block v. Pitney Bowes, Inc., 952 F.2d 1450, 1453 (D.C.Cir.1992).). We agree with Defendants. Although the text of chapter 87A does not use the word discretion in requiring the Board to decide upon the structure of the health benefits plan, the legislature clearly intended that the Board have broad discretion in its design. Therefore, the Trustees' decision to adopt a two-tier structure is reviewed for an abuse of discretion. This court has recognized that [w]here discretion is conferred upon a trustee with respect to the exercise of a power, its exercise is not subject to interference by the court except to prevent an abuse by the trustee of his discretion. Miller v. First Hawaiian Bank, 61 Haw. 346, 351, 604 P.2d 39, 43 (1980) (citing Dowsett v. Hawaiian Trust Co., 47 Haw. 577, 581, 393 P.2d 89, 93 (1964); Restatement (Second) of Trusts § 187 (1959)). Here, contrary to Plaintiffs' contention, it is apparent that the Trustees were granted discretion with respect to the design of the health benefits plan rate structure. HRS § 87A-16 provides that [t]he Board shall establish the health benefits plan or plans. . . . Chapter 87A does not provide any guidance for the development of such plans, but only states in HRS § 87A-15 that the plans shall be provided at a cost affordable to both the public employers and the public employees. By empowering the Trustees to establish the health benefits plan, the legislature granted the Trustees discretion in developing the plan. Cf. Citizens Against Reckless Dev. v. Zoning Bd. of Appeals, 114 Hawai`i 184, 194-95, 159 P.3d 143, 153-54 (2007) (By empowering agencies generally with the authority to adopt rules regarding the manner in which declaratory ruling petitions shall be considered and disposed of, the legislature has granted agencies discretion with regard to the consideration of declaratory rulings.). The legislative history of chapter 87A strongly supports this interpretation. The conference committee report states that [t]his bill will give the governing boards of the Trust Fund and the Health Fund, during the transition period, complete discretion, authority, and flexibility to devise and maximize the levels and types of benefits available for public employees and retirees. Conf. Comm. Rep. No. 124, in 2001 House Journal, at 1098. Thus, broad discretion was conferred upon the EUTF Trustees with respect to the structure of the health benefits plans. As such, the Trustees' decision to adopt a two-tier rate structure is subject only to review for an abuse of discretion. See Miller, 61 Haw. at 351, 604 P.2d at 43.