Authorizes the State to establish an Internal Revenue Service approved special pay plan for all eligible employees of the State and county which will not enhance or diminish existing special pay benefits. Allows employees under the age of fifty-five who elect early withdrawal from the special pay plan within sixty days of the effective date of separation from service to be reimbursed by the employer the difference between the Federal Insurance Contribution Act (FICA)and any Medicare tax savings to the employee and any early withdrawal penalty imposed by the Internal Revenue Service. Also, reenacts leaves of absence law relating to the pay of officers and employees on active military service and nonforfeiture for absence. (SB687 HD1)

A BILL FOR AN ACT

SECTION 1. The purpose of this bill is to clarify laws pertaining to leaves of absence for public employees.

PART I

SECTION 2. The purpose of this part is to implement an Internal Revenue Service approved special pay plan for all eligible employees of the State and county, which shall not enhance and not diminish existing special pay benefits. A special pay plan is a qualified retirement plan, under section 401(a) of the Internal Revenue Code, that reduces the federal tax burden on special compensation payments made on behalf of state employees which, if paid directly to an employee, would be compensation income within the meaning of the Internal Revenue Code.

SECTION 3. Section 78-23, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) Whenever an employee is to be discharged, voluntarily or involuntarily, the employee, at the option of the appointing authority, may be discharged and paid forthwith, in lieu

of the employee's vacation allowance, the amount of compensation to which the employee would be entitled or which the employee would be allowed during the vacation period if the employee were permitted to take the employee's vacation in the normal manner, through a contribution to a qualified retirement plan under section 401(a) of the Internal Revenue Code, which is considered supplemental compensation for each full day of accumulated vacation leave that is credited on the effective date of separation from service, and in such case the employee's position may be declared vacant and may be permanently filled by a new appointee before the expiration of any vacation period following the date of the discharge. Any employee under the age of fifty-five may withdraw the employee's contribution to the special pay plan within sixty days of the effective date of separation from service; provided that the employer shall reimburse the employee an amount equal to the difference between any Federal Insurance Contribution Act (FICA) and medicare tax savings to the employee, and any early withdrawal penalty imposed by the Internal Revenue Service. For an employee hired after June 30, 1997, who is to be discharged, voluntarily or involuntarily, the amount of compensation to be paid in lieu of vacation allowance under this section shall be computed using the rate of pay and amount of accumulated and accrued vacation on the date the employee is discharged. Prompt notice upon such forms and in such manner as may be required shall be given by the department head of any action taken under this provision."

PART II

SECTION 4. The legislature finds that the tragic events of September 11, 2001, have increased security concerns both nationally and locally. Homeland security on both the national and state levels has meant an increase in the activation and visibility of the national guard, particularly at vital state facilities.

In Hawaii, the need has never been stronger for the protection of important state facilities, including the State's airports and the Hawaii convention center. Despite the enormous risks involved, the legislature finds that the Hawaii national guard has met this challenge with resolve and determination.

The legislature finds, however, that a law that was passed in the regular session of 2000, prior to the events of September 11, 2001, threatens to reduce both the recruitment and retention of national guard members in Hawaii, as well as other military reserve components, at the very time when their services are needed more than ever to assist in state security efforts.

In particular, Act 253, Session Laws of Hawaii 2000, which reformed the civil service system, repealed chapter 79, Hawaii Revised Statutes, relating to leaves of absence. Chapter 79, among other things, provided for military leave with pay for members of the Hawaii national guard and the military reserves.

This repeal will require people to go on military duty only by using their vacation time or by taking a leave of absence without pay. The legislature finds that the repeal of the sections of chapter 79 relating to military leave with pay will have a serious negative impact on recruitment and retention, and is especially concerned about the impact of this repeal on the Hawaii national guard.

Accordingly, the purpose of this part is to reenact those portions of chapter 79 that provided military leave with pay for state and county employees who are members of the Hawaii national guard and the military reserves.

SECTION 5. Chapter 78, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"§78-     Pay of officers and employees on active military service. (a) All officers and employees of the State and the several counties who are appointed for at least six months of service shall be entitled, while on active duty or during periods of camps of instruction or field maneuvers as members of the Hawaii national guard or organized reserves, including the officers' reserve corps and the enlisted reserve corps, under call of the President of the United States or the governor of the State, to receive pay as provided by law. During the absence of the officer or employee, while in the performance of ordered military or naval duty as a member of the national guard, air national guard, naval militia, or organized reserves, including the officers' reserve corps and the enlisted reserve corps, the officer or employee shall receive the officer's or employee's salary or compensation as such officer or employee, but only for a period not exceeding fifteen working days in any calendar year.

(b) Notwithstanding subsection (a), if the officer or employee is called to active duty or otherwise required to report for camp training or field maneuvers by official military orders a second time within a calendar year, the officer or employee may elect to use the fifteen working days of the succeeding calendar year to which the officer or employee is entitled for such purposes within the current calendar year; provided that the officer's or employee's entitlement to fifteen working days under this section for the succeeding calendar year shall be canceled and the officer or employee shall so agree in writing.

§78-     Nonforfeiture for absence. Every officer and employee of the State and the several counties who is a member of the Hawaii national guard or organized reserves, including the officers' reserve corps and the enlisted reserve corps, shall be entitled to be absent from the officer's or employee's duties or service while engaged in the performance of ordered military or naval duty and while going to and returning from such duty.

No officer or employee shall be subjected, directly or indirectly, by reason of the absence to any loss or diminution of vacation or holiday privileges or be prejudiced by reason of the absence with reference to promotion or continuance in office, employment, reappointment to office, or reemployment."

PART III

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2050.