STAND. COM. REP. NO. 3368

                                   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 Ways and Means, to which was referred H.B.
No. 2446, S.D. 1, 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.

     (3)  Authorizes the Employees' Retirement System to
          establish a benefit restoration plan in order to
          protect the benefits of current and future retirees

     Your Committee finds that placing a two-year time limit to
file for service-related accidental death benefits is consistent

 
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with the time limit imposed on service-connected disability
retirement benefit filings.

     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 also finds that it behooves the State to
enable the Employees' Retirement System to establish a benefit
restoration plan to address the dilemma created by Section 415 of
the Internal Revenue Code of 1986, as amended, 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 of the Internal Revenue Code.  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, 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), of the Internal Revenue Code,
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 Ways and Means that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
2446, S.D. 1, and recommends that it pass Third Reading.


 
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                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair



                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
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