Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 779, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to create a new class H membership of the Employee's Retirement System, that provides a defined benefit retirement allowance while providing a minimum hypothetical account balance that is based on employee contributions.

Furthermore, this measure requires employees hired on or after January 1, 2005, to be designated as class H members. It also allows employees in service on December 31, 2004, to elect to convert their class C membership to class H membership. The vesting period for class H membership is five years.

Your Committee finds that this measure establishes a new hybrid contributory retirement plan for state and county employees hired after December 31, 2004, and allows current noncontributory retirement plan members to return to a contributory type of retirement plan. Your Committee finds that creation of the hybrid plan will help address drawbacks of the current noncontributory retirement plan, especially with regard to recruiting specialized personnel and University of Hawaii faculty who may not remain in service for the full ten years under the noncontributory plan.

Your Committee has amended this measure by changing the effective date from January 1, 2005 to January 1, 2020, for the purposes of continued discussion on the matter and by making a few technical nonsubstantive changes.

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 S.B. No. 779, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 779, S.D. 2.