REPORT TITLE:
Public Employees' Retirement


DESCRIPTION:
Establishes a defined contribution retirement plan for public
employees.  (HB146 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        146
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT
RELATING TO THE EMPLOYEES' RETIREMENT SYSTEM.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that public employees of
 
 2 the State and counties should be given the opportunity to have a
 
 3 flexible retirement plan that has a shorter vesting period and
 
 4 more portability than is currently available in the retirement
 
 5 system.  Instead of a defined benefit plan, a defined
 
 6 contribution plan would provide this option.  Hawaii's public
 
 7 employees are now participating in a defined benefit pension plan
 
 8 which pays workers a certain monthly amount of money based on a
 
 9 formula.  In a defined contribution plan, the employer deposits a
 
10 fixed amount into a personal investment account for each
 
11 participating employee and later, the retirement benefit is based
 
12 on these funds plus all returns from employee-managed
 
13 investments.  The employee has the power to invest his own funds
 
14 and make transfers to other plans or reinvest them into another
 
15 retirement account even though the funds remain with the employer
 
16 until the employee retires or leaves employment.  Furthermore,
 
17 the legislature finds that Hawaii has a population that is
 
18 longer-lived, on average, than in other states.  In anticipation
 
19 of the increasing number of elderly in the population, and the
 
20 need to provide better retirement benefits to these people, it
 

 
Page 2                                                     146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 behooves the State to provide a defined contribution plan to
 
 2 public employees so that they can look forward to a retirement
 
 3 that is adequately financed in their later years.  A defined
 
 4 contribution plan will allow the employer to better plan for
 
 5 employee retirement benefits, something that it cannot adequately
 
 6 predict and plan for under the current defined benefit pension
 
 7 system.  Salary increases, employee turnover, mortality rates,
 
 8 and the like all can impact the employer's future obligations in
 
 9 ways that are often not predictable.  The purpose of this Act is
 
10 to establish a defined contribution retirement plan for all new
 
11 incoming public employees.
 
12      SECTION 2.  Chapter 88, Hawaii Revised Statutes, is amended
 
13 by adding a new part VIII to be appropriately designated and to
 
14 read as follows:
 
15                "PART VIII.  RETIREMENT FOR CLASS D
 
16                   PUBLIC OFFICERS AND EMPLOYEES
 
17                   A.  Applicability of Part II
 
18      §88-A Applicability.  The following provisions of part II
 
19 of this chapter shall apply to this part:
 
20      (1)  Subpart A, except the definitions provided in section
 
21           88-21, unless expressly adopted in section 88-B;
 

 
 
 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (2)  Subpart B, except sections 88-45, 88-46, 88-48, and
 
 2           88-52 to 88-62;
 
 3      (3)  Subpart C, except sections 88-71 to 88-76, 88-80,
 
 4           88-81, 88-83 to 88-85, 88-87 to 88-89, and 88-96 to
 
 5           88-98;
 
 6      (4)  Subpart D, except sections 88-112 and 88-113; and
 
 7      (5)  Subpart E, except sections 88-134 to 88-139. 
 
 8                          B.  Definitions
 
 9      §88-B  Definitions.(a)  The following words and phrases as
 
10 used in this part shall have the same meanings as defined in
 
11 section 88-21, unless a different meaning is plainly required by
 
12 the context:  "accumulated contributions"; "actuarial
 
13 equivalent"; "beneficiary"; "county"; "employee"; "medical
 
14 board"; "retirant"; "retirement allowance"; "service"; and
 
15 "system".
 
16      (b)  The following words and phrases as used in this part
 
17 shall have the following meanings, unless a different meaning is
 
18 plainly required by the context:
 
19      "Accidental death":  death which is the natural and
 
20 proximate result of an accident occurring at some definite time
 
21 and place while the member was in the actual performance of duty,
 
22 or due to the result of some occupational hazard, and not caused
 
23 by recklessness on the part of the member.
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "Board":  the board of trustees of the employees' retirement
 
 2 system established by section 88-24.
 
 3      "Plan":  a defined contribution plan established pursuant to
 
 4 section 457 of the Internal Revenue Code that is available to
 
 5 qualified participants under this chapter.
 
 6      "Member:  a class D member as described in section 88-47.
 
 7      "Ordinary death":  death which is not accidental and which
 
 8 occurs while in service or on authorized leave without pay.
 
 9                 C.  Membership, Credited Service
 
10      §88-C  Election.(a)  Any class A, class B, or class C
 
11 member who:
 
12      (1)  Is in service on June 30, 1999, or who returns to
 
13           service after the effective date of this Act, and has
 
14           vested benefit status as provided in section 88-96(b);
 
15           and
 
16      (2)  Is in a position covered by Title II of the Social
 
17           Security Act, may elect to become a class D member
 
18           effective June 30, 2000, or upon return to service, by
 
19           filing an election form with the board.
 
20      The election shall be made prior to June 30, 2000, or within
 
21 thirty days of return to service, whichever is later, and shall
 
22 be irrevocable.  A class A, class B, or class C member who makes
 
23 such an election shall be refunded all accumulated and post-
 

 
Page 5                                                     146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 retirement contributions, if any, upon becoming a class D member.
 
 2 The refund shall be made by December 31, 2000.  For a member who
 
 3 elects to become a class D member, upon the effective date of the
 
 4 election, all rights as a class A, class B, or class C member
 
 5 shall be extinguished.  
 
 6      (b)  A member who makes and files a written election under
 
 7 this section elects to do all of the following:
 
 8      (1)  Cease to be a member of class A, class B, or class C,
 
 9           effective 12:00 midnight June 30, 2000, which election
 
10           shall be irrevocable;
 
11      (2)  Become a qualified participant in the defined
 
12           contribution plan effective 12:01 a.m., July 1, 2000;
 
13           and
 
14      (3)  Waive all rights to a pension, an annuity, a retirement
 
15           allowance, an insurance benefit, or any other benefit
 
16           under this Act effective 12:00 midnight June 30, 2000.
 
17 This part does not affect a person's right to health benefits
 
18 provided under chapter 87, or to participate in a deferred
 
19 compensation plan under chapter 88E.
 
20      (c)  If married at the time of the election, the election to
 
21 become a class D member is not effective unless the election is
 
22 signed by the individual's spouse. 
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (d)  The board shall provide information explaining the
 
 2 effects of the election described in this section.
 
 3      §88-D Credited service.  Credited service includes:
 
 4      (1)  Service by an employee rendered since becoming a
 
 5           member;
 
 6      (2)  Service credited under part II as a class A, class B,
 
 7           or class C member for members who make the election
 
 8           described in section 88-C;
 
 9      (3)  Service for members who return to service in the manner
 
10           described in section 88-E;
 
11      (4)  Service in the armed forces as provided by subpart E of
 
12           part II;
 
13      (5)  Mandatory maternity leave as provided in part II;
 
14      (6)  Service rendered prior to becoming a class D member as
 
15           described in section 88-51 that is not included in
 
16           paragraphs (1) to (5).  Upon certification by the
 
17           system, that service shall be credited at the rate of
 
18           one month of service credit for each month of service
 
19           rendered following the return to membership; and
 
20      (7)  Unused sick leave as provided in section 88-63;
 
21           provided that any additional service credit shall not
 
22           be used in determining eligibility for retirement or
 
23           for any other purpose as a class D member.
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      §88-E Break in service; reemployment.(a)  Any class D
 
 2 member who terminates service prior to accumulating four years of
 
 3 credited service, excluding unused sick leave, shall cease to be
 
 4 a member and shall forfeit all credited service; provided that:
 
 5      (1)  If the former class D member becomes a member again
 
 6           within one calendar year from the date of termination,
 
 7           all service credit for previous service shall be
 
 8           restored upon repayment of all employer and employee
 
 9           contributions previously distributed.  If the former
 
10           class D member becomes a member again more than one
 
11           calendar year after the date of termination, one month
 
12           of service credit for previous service shall be
 
13           restored for each month of service rendered following
 
14           the return to membership, and upon repayment of all
 
15           employer and employee contributions previously
 
16           distributed.
 
17      (2)  If the former class D member becomes a class A, class
 
18           B, or class C member within one calendar year from the
 
19           date of termination, all class D service credit for
 
20           previous service shall be restored upon repayment of
 
21           all employer and employee contributions previously
 
22           distributed.  If the former class D member becomes a
 
23           class A, class B, or class D member more than one
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           calendar year after the date of termination, one month
 
 2           of class D service credit for previous service shall be
 
 3           restored for each month of service rendered following
 
 4           the return to membership, and upon repayment of all
 
 5           employer and employee contributions previously
 
 6           distributed.
 
 7      (b)  Any class D member who terminates service with a vested
 
 8 right and who subsequently becomes a class A, class B, class C,
 
 9 or class D member shall retain all service credit for previous
 
10 service upon repayment of all employer and employee contributions
 
11 previously distributed and shall be credited with additional
 
12 service credit for service rendered following the return to
 
13 membership.
 
14      (c)  Any retirant who retired under this part and returns to
 
15 service requiring membership in the system as a class D member
 
16 shall be reenrolled as an active member, and the retirant's
 
17 retirement allowance or distribution, if any, shall be suspended.
 
18 At such time as the member again retires, the retirement
 
19 allowance or distribution shall be the allowance or distribution
 
20 to which the member was entitled under the mode of retirement
 
21 selected when the member previously retired and which was
 
22 suspended; plus, for the period of service during the member's
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 reemployment as a class D member, the distribution to which the
 
 2 member is entitled for that service at the time of the member's
 
 3 final retirement.
 
 4      (d)  Any retirant who retired under this part and returns to
 
 5 service requiring membership in the system as a class A, class B,
 
 6 or class C member shall be reenrolled as an active member, and
 
 7 the retirant's distribution, if any, shall be suspended.  At such
 
 8 time as the member again retires, the retirement allowance shall
 
 9 consist of the distribution to which the member was entitled
 
10 under this part when the member previously retired and which was
 
11 suspended; plus, for the period of service during the member's
 
12 reemployment, the allowance to which the member is entitled for
 
13 that service based on the mode of retirement initially selected
 
14 and computed for the member's age, average final compensation,
 
15 and other factors in accordance with the benefit formula of a
 
16 class A, class B, or class C member in existence at the time of
 
17 the member's final retirement.
 
18      §88-F  Crediting and charging member's account.(a)  The
 
19 board shall promptly credit the account of a member who makes an
 
20 election under section 88-C to terminate membership in class A,
 
21 class B, or class C with any amount transferred from class A,
 
22 class B, or class C pursuant to section 88-C.
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (b)  For a member who elects to terminate membership in
 
 2 class A, class B, or class C, the board shall transfer a lump sum
 
 3 amount from the member's former account to the member's account
 
 4 in class D, an amount using the following factors:
 
 5      (1)  The member's accumulated contributions, if any, from
 
 6           the member's respective fund as of the effective date
 
 7           of this part;
 
 8      (2)  For a vested member, the excess, if any, of the
 
 9           actuarial present value of the member's accumulated
 
10           benefit obligation over the member's accumulated
 
11           contributions; and
 
12      (3)  The actuarial present value shall be computed as of
 
13           12:00 midnight on the effective date of this part and
 
14           shall be based on the following:
 
15           (A)  Eight per cent effective annual interest,
 
16                compounded annually;
 
17           (B)  A fifty per cent male and fifty per cent female
 
18                gender neutral blend of the mortality tables used
 
19                to project retirant longevity in the most recent
 
20                actuarial valuation report; and
 
21           (C)  A benefit commencement age, based upon the
 
22                member's estimated credited service as of 12:00
 
23                midnight of the effective date of this part.  The
 

 
Page 11                                                    146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                benefit commencement age shall be the younger of
 
 2                the following, but shall not be younger than the
 
 3                member's age as of 12:00 midnight of the effective
 
 4                date of this part:
 
 5                (i)  Age sixty; or
 
 6               (ii)  Age fifty-five, if the member's estimated
 
 7                     credited service equals or exceeds thirty
 
 8                     years.
 
 9      (c)  For a nonvested member who elects to terminate
 
10 membership in class A, class B, or class C and who has
 
11 accumulated contributions standing to the member's credit the
 
12 board shall direct the transfer of a lump sum amount to the
 
13 member's class D account from the nonvested member's accumulated
 
14 contributions, if any, as of 12:00 midnight on the last day of
 
15 the payroll period that includes the date of the election and
 
16 using calculations based on eight per cent effective annual
 
17 interest, compounded annually, from the first day of the payroll
 
18 period immediately following the date of election to the date of
 
19 the transfer.
 
20                D.  Eligibility; Vesting; Benefits
 
21      §88-G  Vesting requirements.  A member is immediately one
 
22 hundred per cent vested in the member's contributions in the
 
23 plan.  A member shall vest in the employer contributions made on
 
24 the member's behalf according to the following schedule:
 

 
Page 12                                                    146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (1)  Upon completion of two years of service, fifty per
 
 2           cent;
 
 3      (2)  Upon completion of three years of service, seventy-five
 
 4           per cent; and
 
 5      (3)  Upon completion of four years of service, one hundred
 
 6           per cent.
 
 7 For purposes of vesting requirements under this section, a class
 
 8 A, class B, or class C member who made an election to participate
 
 9 in the plan shall be credited with the years of service accrued
 
10 under the plan on the effective date of participation in the
 
11 plan.
 
12      §88-H  Contribution by employer and member.(a)  This
 
13 section is subject to the vesting requirement of section 88-G.
 
14      (b)  A member's employer shall contribute to the member's
 
15 account an amount equal to four per cent of the member's
 
16 compensation.
 
17      (c)  A member may periodically elect to contribute up to
 
18 three per cent of the member's compensation to the member's
 
19 account.  The employer shall make an additional matching
 
20 contribution to the member's account, in an amount equal to the
 
21 contribution made by the member under this section.
 
22      (d)  A member may make contributions in addition to
 
23 contributions made under subsection (c) to the member's account
 

 
Page 13                                                    146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 as permitted by the board rules and the Internal Revenue Code.
 
 2 The employer shall not match contribution by the member under
 
 3 this section.
 
 4      §88-I  Hearing.  A member may request a hearing on a claim
 
 5 involving the member's rights under the defined contribution
 
 6 plan.  Upon written request, the board shall provide for a
 
 7 hearing pursuant to chapter 91.  A member may be represented by
 
 8 counsel or other dully authorized agent the the hearing.
 
 9      §88-J Eligibility for distribution of accumulated balance
 
10 from the defined contribution plan.(a)  A member who retires or
 
11 terminates service is eligible to receive distribution of the
 
12 accumulated balance in any of the following methods of
 
13 distribution of the accumulated balance:
 
14      (1)  A lump sum distribution to the member;
 
15      (2)  A lump sum direct rollover to another qualified plan,
 
16           to the extent allowed by law;
 
17      (3)  Periodic distributions as authorized by the board; and
 
18      (4)  No current distribution, in which case the accumulated
 
19           balance shall remain in the member's account until a
 
20           method of distribution is elected to the extent allowed
 
21           by law.
 
22      (b)  A member may retire upon the written application to the
 
23 board specifying the desired date of retirement which shall be
 

 
Page 14                                                    146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 not less than thirty days nor more than ninety days subsequent to
 
 2 the date of filing.  If the member dies after the date of filing
 
 3 the application to retire but prior to the effective date of
 
 4 retirement, the member's designated beneficiary may receive the
 
 5 member's accumulated balance which shall be computed as though
 
 6 the member had died on the effective date of retirement under the
 
 7 mode of retirement selected.
 
 8      (c)  Any election of a mode of retirement shall be
 
 9 irrevocable.
 
10      §88-K  Ordinary disability retirement.(a)  Upon
 
11 application of a member in service or on leave without pay, or
 
12 the person appointed by the family court as guardian of an
 
13 incapacitated member, any member who has ten or more years of
 
14 credited service shall be retired by the board of trustees on an
 
15 ordinary disability retirement allowance if the medical board,
 
16 after a medical examination of the member, certifies that:
 
17      (1)  The member is mentally or physically incapacitated for
 
18           the further performance of duty at the time of
 
19           application;
 
20      (2)  The incapacity is likely to be permanent; and
 
21      (3)  The member should be retired.
 
22      (b)  Retirement shall become effective upon the date
 
23 specified by the board, which shall be no earlier than thirty
 
24 days after the date the application is filed.
 

 
Page 15                                                    146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (c)  A member who is determined to be permanently
 
 2 incapacitated for the further performance of duty pursuant to
 
 3 subsection (a) shall receive an ordinary disability retirement
 
 4 allowance as if the member had been a class C member equal to the
 
 5 member's accrued normal retirement allowance unreduced for age.
 
 6      §88-L Service connected disability.  A member who would be
 
 7 eligible to receive a service connected disability retirement
 
 8 allowance pursuant to section 88-79 shall receive a retirement
 
 9 allowance as if the member had been a class C member equal to the
 
10 member's accrued normal retirement allowance unreduced for age,
 
11 but not less than fifteen per cent of average final compensation.
 
12      §88-M  Death benefit.(a)  The surviving spouse or
 
13 reciprocal beneficiary and dependent child or children of a
 
14 member at the time of the member's death shall be eligible for a
 
15 death benefit if the member suffers either an ordinary death
 
16 while in service or on authorized leave without pay after
 
17 accumulating ten years of credited service or an accidental
 
18 death.
 
19      (b)  In the case of ordinary death, the death benefit shall
 
20 be determined as if the member had been a class C member, as
 
21 follows:
 
22      (1)  For the surviving spouse or reciprocal beneficiary, an
 
23           allowance equal to one-half of the member's accrued
 

 
Page 16                                                    146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           normal retirement allowance unreduced for age, payable
 
 2           until remarriage, marriage, or entry into a new
 
 3           reciprocal beneficiary relationship as if the member
 
 4           had retired the day prior to death; and for each
 
 5           dependent child an allowance equal to ten per cent of
 
 6           the member's accrued normal retirement allowance
 
 7           unreduced for age, payable until the dependent child
 
 8           attains age eighteen; provided that the aggregate death
 
 9           benefits for all the dependent children shall not
 
10           exceed twenty per cent of the member's accrued normal
 
11           retirement allowance unreduced for age; or
 
12      (2)  For the surviving spouse or reciprocal beneficiary, if
 
13           the member was eligible for retirement at the time of
 
14           death in service, and death occurred after June 30,
 
15           2000, an allowance that would have been payable as if
 
16           the member had retired the day prior to death and had
 
17           elected to receive a retirement allowance under option
 
18           B of section 88-283; and
 
19      (3)  If there is no surviving spouse or reciprocal
 
20           beneficiary, each dependent child shall receive an
 
21           allowance equal to twenty per cent of the member's
 
22           accrued normal retirement allowance unreduced for age,
 
23           payable until the dependent child attains age eighteen;
 

 
Page 17                                                    146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           provided that the aggregate death benefits for all the
 
 2           dependent children shall not exceed forty per cent of
 
 3           the member's accrued normal retirement allowance
 
 4           unreduced for age.
 
 5      For the purpose of determining eligibility for the ordinary
 
 6 death benefit, a year round school employee shall be considered
 
 7 in service during the July and August preceding a transfer to a
 
 8 traditional school schedule if the employee was in service for
 
 9 the entire prior school year and has a contract for the upcoming
 
10 traditional school year.
 
11      (c)  In the case of accidental death, the death benefit
 
12 shall be determined as if the member had been a class C member,
 
13 as follows:
 
14      (1)  For the surviving spouse or reciprocal beneficiary, an
 
15           allowance equal to thirty per cent of the member's
 
16           average final compensation, payable until remarriage;
 
17      (2)  If there is a surviving spouse or reciprocal
 
18           beneficiary, each dependent child under eighteen shall
 
19           receive an allowance equal to the greater of:
 
20           (A)  Ten per cent of the member's accrued normal
 
21                retirement allowance, unreduced for age; provided
 
22                that the aggregate death benefits for all the
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                dependent children shall not exceed twenty per
 
 2                cent of the member's accrued normal retirement
 
 3                allowance unreduced for age; or
 
 4           (B)  Three per cent of the member's average final
 
 5                compensation; provided that the aggregate death
 
 6                benefits for all the dependent children shall not
 
 7                exceed six per cent of the member's average final
 
 8                compensation.
 
 9           The death benefit under this paragraph shall be payable
 
10           to each dependent child until the dependent child
 
11           attains age eighteen; and
 
12      (3)  If there is no surviving spouse or reciprocal
 
13           beneficiary, each dependent child under eighteen shall
 
14           receive an allowance equal to the greater of:
 
15           (A)  Twenty per cent of the member's accrued normal
 
16                retirement allowance, unreduced for age; provided
 
17                that the aggregate death benefits for all the
 
18                dependent children shall not exceed forty per cent
 
19                of the member's accrued normal retirement
 
20                allowance unreduced for age; or
 
21           (B)  Six per cent of the member's average final
 
22                compensation; provided that the aggregate death
 
23                benefits for all the dependent children shall not
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                exceed twelve per cent of the member's average
 
 2                final compensation.
 
 3           The death benefit under this paragraph shall be payable
 
 4           to each dependent child until the dependent child
 
 5           attains age eighteen.
 
 6                       E.  Other Provisions
 
 7      §88-N  Payment of administrative expenses.  The
 
 8 administrative expenses of the defined contribution plan shall be
 
 9 paid by the members, retirants, and beneficiaries who have not
 
10 closed their accounts in a manner determined by the board.
 
11      §88-O  Other public sector retirement benefits plan.  A
 
12 member shall not participate in any other public sector
 
13 retirement benefits plan for simultaneous service rendered to the
 
14 same public sector employer.  Except as otherwise provided in
 
15 this part, this part does not prohibit a member from
 
16 participating in a retirement plan established by this State or
 
17 other public sector employer under the Internal Revenue Code."
 
18      SECTION 3.  Chapter 88, Hawaii Revised Statutes, is amended
 
19 as follows:
 
20      1.  By amending section 88-23 to read:
 
21      "§88-23  General administration of system vested in board.
 
22 The general administration and the responsibility for the proper
 
23 operation of the retirement system and for making effective [the
 

 
Page 20                                                    146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 provisions of] this part [and], part VII, and part VIII of this
 
 2 chapter are vested in a board of trustees; subject, however, to
 
 3 the area of administrative control vested in the department of
 
 4 budget and finance by sections 26-8 and 26-35."
 
 5      2.  By amending section 88-31 to read:
 
 6      "§88-31  Medical board.  The board of trustees shall
 
 7 designate a medical board to be composed of three physicians not
 
 8 eligible to participate in the system.  If required, other
 
 9 physicians may be employed to report on special cases.  The
 
10 medical board shall arrange for and pass upon all medical
 
11 examinations required under this part [and], part VII, and part
 
12 VIII of this chapter, shall investigate all essential statements
 
13 and certificates by or on behalf of a member in connection with
 
14 application for disability retirement, and shall report in
 
15 writing to the board its conclusions and recommendations upon all
 
16 the matters referred to it."
 
17      3.  By amending section 88-41 to read:
 
18      "§88-41  Limitation of other statutes.  No other provision
 
19 in any other statute which provides wholly or partly at the
 
20 expense of the State or any county for pensions or retirement
 
21 benefits for employees of the State or of any county, their
 
22 surviving spouses or other dependents shall apply to members,
 
23 retirants, or beneficiaries of the system established by this
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 part [and], part VII, and part VIII of this chapter, their
 
 2 surviving spouses or other dependents, except such benefits as
 
 3 may be provided under Title II of the Social Security Act."
 
 4      4.  By amending subsection (a) of section 88-46 to read:
 
 5      "(a)  The head of each state department and the finance
 
 6 director of each county shall deduct from the compensation of
 
 7 each class A or class B member on each and every payroll under
 
 8 their respective jurisdiction, the percentage of compensation of
 
 9 each member as provided under section 88-45[.] and section 88-H.
 
10 The total amount of deductions made from the salaries of
 
11 employees and a record of the amount deducted from each member's
 
12 compensation shall be transmitted to the system monthly or at
 
13 such other times as may be agreed upon by the board of trustees.
 
14 The amounts deducted shall be paid into the annuity savings fund
 
15 and shall be credited to the individual account of the member
 
16 from whose compensation the deductions were made.  Regular
 
17 interest shall also be credited to the individual account of the
 
18 member in the annuity savings fund."
 
19      5.  By amending section 88-47 to read:
 
20      "§88-47  Membership.(a)  There shall be [three] four
 
21 classes of members in the system to be known as class A, class B,
 
22 [and] class C, and class D, defined as follows:
 

 
 
 
Page 22                                                    146
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (1)  Class A shall consist of members covered by section
 
 2           88-74(3), those members whose salaries are set forth in
 
 3           sections 26-52 and 26-53, and their county
 
 4           counterparts, managing directors or administrative
 
 5           assistant to the mayor, and other department heads,
 
 6           including agency heads appointed by the mayor, first
 
 7           deputies appointed by the county attorney and
 
 8           prosecuting attorney, the county clerk and deputy
 
 9           county clerk of each county, the administrative
 
10           director of the courts, the deputy administrative
 
11           director of the courts, the executive director of the
 
12           labor and industrial relations appeals board, the
 
13           executive director of the Hawaii labor relations board,
 
14           investigators of the department of the attorney
 
15           general, narcotics enforcement investigators, water
 
16           safety officers not making the election under section
 
17           88-271, public safety investigations staff
 
18           investigators, and those members in service prior to
 
19           July 1, 1984, including those who are on approved leave
 
20           of absence, who are covered by Title II of the Social
 
21           Security Act on account of service creditable under
 
22           this part.  This class shall consist of:
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           (A)  All employees who enter membership after June 30,
 
 2                1957, except employees in positions to which
 
 3                coverage under Title II of the Social Security Act
 
 4                is not extended;
 
 5           (B)  All employees who were members on July 1, 1957,
 
 6                who elected to be covered by the Social Security
 
 7                Act; and
 
 8           (C)  All former class A retirants who return to
 
 9                employment after June 30, 1984, requiring the
 
10                retirant's active membership;
 
11      (2)  Class B shall consist of all members who are not class
 
12           A [or], class C, or class D members; and
 
13      (3)  Except for members described in [section 88-47(a)(1),]
 
14           paragraph (1), class C shall consist of all employees
 
15           in positions covered by Title II of the Social Security
 
16           Act who:
 
17           (A)  First enter service after June 30, 1984;
 
18           (B)  Reenter service after June 30, 1984, without
 
19                vested benefit status as provided in section
 
20                88-96(b);
 
21           (C)  Make the election to become a class C member as
 
22                provided in part VII; or
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           (D)  Are former class C retirants who return to service
 
 2                requiring the retirant's active membership.
 
 3      (4)  Except for members described in paragraph (1), class D
 
 4           shall consist of all employees in positions covered by
 
 5           Title II of the Social Security Act who:
 
 6           (A)  First enter service after June 30, 2000;
 
 7           (B)  Reenter service after June 30, 2000, without
 
 8                vested benefit status as provided in section
 
 9                88-96(b);
 
10           (C)  Make the election to become a class D member as
 
11                provided in part VIII; or
 
12           (D)  Are former class D retirants who return to service
 
13                requiring the retirant's active membership.
 
14      (b)  None of the provisions of this part shall apply to
 
15 class C members except as specifically provided in part VII.
 
16      (c)  None of the provisions of this part shall apply to
 
17 class D members except as specifically provided in part VIII."
 
18      6.  By amending section 88-103 to read:
 
19      "§88-103  Records.(a)  The board of trustees shall keep a
 
20 record of all its proceedings which record shall be open to
 
21 public inspection.  It shall publish annually a report showing in
 
22 detail:  (1) the fiscal transactions of the system for the year
 
23 ending the preceding June 30, (2) the amount of the accumulated
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 cash and securities of the system, and (3) an actuarial valuation
 
 2 of the assets and liabilities of the system.  The board shall
 
 3 submit the report to the governor and shall furnish copies
 
 4 thereof to the heads of the various departments of the State and
 
 5 county for their use and the use of the members employed therein.
 
 6      (b)  The board shall include in its annual report submitted
 
 7 prior to January 1 of each odd-numbered year:  (1) a comparison
 
 8 of the investment performance of the system with the investment
 
 9 performances of the public employees' retirement systems of other
 
10 jurisdictions which have authority to make investments
 
11 substantially similar to the investment authorized under section
 
12 88-119, and (2) a comparison of the funded ratio on June 30 of
 
13 the preceding year with the funded ratios of the public
 
14 employees' retirement systems of other jurisdictions.
 
15      (c)  The board shall include in its annual report submitted
 
16 prior to January 1 of each odd-numbered year:  a statement of the
 
17 investment performance of the defined contribution plan and other
 
18 comparative information as needed by the members of class D."
 
19      SECTION 4.  There is appropriated out of the general
 
20 revenues of the State of Hawaii the sum of $           or so much
 
21 thereof as may be necessary for fiscal year 1999-2000 for the
 
22 purposes of this Act.
 
23      The sum appropriated shall be expended by the employees'
 
24 retirement system for the purposes of this Act.
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 5.  In codifying the new part added to chapter 88,
 
 2 Hawaii Revised Statutes, by section 2 of this Act, the revisor of
 
 3 statutes shall substitute appropriate section numbers for the
 
 4 letters used in the new sections' designations in this Act.
 
 5      SECTION 6.  Statutory material to be repealed is bracketed.
 
 6 New statutory material is underscored.
 
 7      SECTION 7.  This Act shall take effect on July 1, 2000,
 
 8 except section 4 which shall take effect on July 1, 1999.