Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 562, H.D. 2, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to transfer the management of the Deferred Compensation Program from the Department of Human Resources to the Employees' Retirement System.

The bill also requires the Employees' Retirement System to pay interest on retirement allowances that have not commenced within ninety days of the date of a member's retirement.

Your Committee finds that the Employees' Retirement System, because of the nature of its mission, is experienced with long-term investments and the administration of investments for the benefit of state and county employees and retirees. In this role, the Employees' Retirement System would be well-qualified to exercise oversight over the aspects of fund management necessary to oversee the deferred compensation program, including hiring and managing financial managers, contracting with third party administrators and consultants, and negotiating lower fees and service costs. Consolidation of retirement and deferred compensation programs under a single agency like the Employees' Retirement System could be favorable to employees and retirees who need to examine their financial objectives in order to maintain a healthy financial retirement.

Your Committee has amended this bill by clarifying that the interest on delinquent retirement allowances shall be calculated at four and one-half per cent per year instead of at the rate set in section 478-2, Hawaii Revised Statutes, which could be at the allowable prime rate, but not to exceed ten per cent per year. Although a fixed, determined rate lends more predictability to the Employees' Retirement System's responsibility of paying the retirement allowance on time, your Committee recognizes that there may be other bases for determining the appropriate interest rate for delinquent pension allowances. As such, your Committee understands that the rate of interest may be a proper subject for further discussion on this measure.

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. 562, H.D. 2, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 562, H.D. 2, S.D. 2.