Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Labor, to which was referred S.B. No. 2873 entitled:

begs leave to report as follows:

The purpose of this measure is to establish the employers' contribution to the Employees' Retirement System at 15.75 per cent of the member's compensation for police and firefighters and 13.75 per cent for all other employees beginning in fiscal year 2005-2006.

This measure also:

Testimony in support of this measure was submitted by the Department of Budget and Finance and the Department of Finance of the County of Maui.

The Employees' Retirement System submitted comments on the measure.

Your Committee finds that employer contributions to the ERS are currently calculated based upon annual actuarial valuations in dollar amounts which account for normal cost and amounts required to amortize the projected unfunded liability within a statutorily established period of time. Your Committee further finds that funding requirements can fluctuate significantly from year to year and, therefore, a more stable methodology for calculating the employer contribution would be more beneficial.

Your Committee determines that establishing the employers' contribution to the ERS as a percentage amount will facilitate predictable budget requirements and cash flow, curb increases in employer contributions as a result of short-term adverse conditions, and provide employees with added security benefits. Additionally, the elimination of separate computation of EIRP contributions will also streamline the administration of the EIRP without materially affecting the amount of the contributions.

As affirmed by the record of votes of the members of your Committee on Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2873 and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.