Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Labor and Public Employment, to which was referred S.B. No. 687, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this bill, as received by your Committee, is to clarify laws pertaining to leaves of absences for public employees by:

For purposes of facilitating discussion, your Committee solicited a proposed H.D. 1 for public review and comment. As proposed, S.B. No. 687, H.D. 1, would:

1. Implement an IRS approved special pay plan for all eligible employees of the State and counties that would not enhance or diminish existing special pay benefits;
2. Allow employees under the age of 55 who elect early withdrawal from the special pay plan within 60 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; and
3. Reenact the leaves of absence law relating to the pay of officers and employees on active military service.

AIG VALIC testified in support of this measure. The Hawaii Government Employees Association, Local 152 supported the intent of the proposed draft. The Department of Human Resources Development opposed the proposed draft.

Your Committee finds that establishing special pay retirement plans established under section 401(a) of the Internal Revenue Code (IRC) could result in significant savings for the State and its employees and therefore, warrants further consideration.

With respect to military leave, your Committee finds that, under existing statutes, if a public employee takes a leave of absence when called to serve our State and country, the public employee is subject to loss of service credits which, in turn, could affect that employee's retirement benefits.

With the war with Iraq, your Committee finds that the reenactment of the military leaves of absence law will ensure that those public employees called to serve their country will not lose service credits while on active duty.

After careful consideration, your Committee has amended this measure by deleting the substance of S.B. No. 687, S.D. 1, and inserting the provisions of the proposed S.B. No. 687, H.D. 1. Your Committee has further amended this bill by:

1. Authorizing, rather than requiring, the State to pay out an employee's vacation allowance upon termination of employment into a qualified retirement plan;
2. Changing the effective date to July 1, 2050, to facilitate further discussion on the measure; and
3. Making technical, nonsubstantive amendments for purposes of clarity, style, and consistency.

As affirmed by the record of votes of the members of your Committee on Labor and Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 687, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 687, S.D. 1, H.D. 1, and be placed on the calendar for Third Reading.