STAND. COM. REP. NO. 2896

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  H.B. No. 2446
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred H.B. No. 2446 entitled: 

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

begs leave to report as follows:

     The purpose of this measure is to simplify and facilitate
the administration and processing of pension benefits.

     Specifically, the measure:

     (1)  Amends the service-connected accidental death benefit
          filing procedure by placing a two-year time limit for
          claimants to file for such benefits; and

     (2)  Allows the Employees' Retirement System to exclude
          interest on deficiency payments made by contributory
          plan members.

     The Employees' Retirement System supported the measure and
stated that if enacted, the measure would not result in a
significant increase in employer contributions.

     Your Committee finds that placing a two-year time limit to
file for service-related accidental death benefits is consistent
with the time limit imposed on service-connected disability
retirement benefit filings.


 
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     Your Committee also finds that with regard to deficiency
payments, a deficiency occurs when a contributory member's
retirement contribution fails to equal the full amount required
by law.  Under existing law, interest is calculated and assessed
against the deficient amount that the member must pay in order to
obtain full retirement benefit credit.  Since the existence of
the deficiency is usually not the member's fault, your Committee
believes that it is unfair to require the member to pay the
interest.

     Your Committee has amended the measure by adding a section
to the measure that authorizes the Employees' Retirement System
to establish a benefit restoration plan in order to protect the
benefits of current and future retirees and by making technical,
nonsubstantive amendments to conform the measure to recommended
drafting procedures.

     The amendment made by your Committee to enable the
Employees' Retirement System to establish a benefit restoration
plan was done at the behest of the Employees' Retirement System
to address the dilemma created by Section 415 of the Internal
Revenue Code of 1986, as amended (IRC), which imposes limits on
the annual amount of retirement benefits that retirees may
receive from retirement plans.

     As a result of the Technical and Miscellaneous Act of 1988
(TAMRA), the Employees' Retirement System elected to allow
employees who became members before January, 1990, to retire
without the pension benefit limitations established under
Section 415, IRC.  However, the pension benefits of employees who
are members after December 1989, cannot exceed the maximum
permitted by this law.

     To address this situation, the Small Business Job Protection
Act of 1996 (SBJPA), enabled governmental entities to establish a
separate benefit plan in order to pay retirees amounts which
exceed the pension benefit limits of the law.

     Your Committee believes that by establishing a separate plan
as permitted by the Section 415(m), IRC, which will be funded on
a "plan year-to-plan year" basis, current and future retirees
will be able to receive unreduced pension benefits, without
pension benefit cutbacks or repayments.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of H.B. No. 2446, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as

 
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H.B. No. 2446, S.D. 1, and be referred to the Committee on Ways
and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
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