Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2006

State of Hawaii

Sir:

Your Committee on Labor, to which was referred S.B. No. 2206 entitled:

begs leave to report as follows:

The purpose of this measure is to provide for automatic post retirement allowance increases based upon the member's number of credited years of service and the number of years in retirement.

Testimony in support of this measure was submitted by the Hawaii State Teachers Association-Retired, the Hawaii State Teachers Association, and the Hawaii Government Employees Association Retirees Unit. Testimony in opposition to this measure was submitted by the Department of Budget and Finance. Comments on this measure were also submitted by the Employees' Retirement System (ERS).

Your Committee finds that the current post retirement allowance increases are grossly inadequate in combating the negative effect of inflation on pensions. However, your Committee finds that there is concern over the manner by which a new method for calculating post retirement allowance increases may be established. According to testimony provided, the method of calculation under this measure may be problematic in gaining favorable consideration by the Internal Revenue Service, thus jeopardizing the ERS's current tax-exempt status. Your Committee further finds that in the interest of protecting the ERS, the ERS should conduct a study on appropriate and viable options for establishing a new method for providing post retirement allowance increases that will be more favorable to retirees, especially those that have been retired for a number of years.

Accordingly, your Committee has amended this measure by replacing its contents with language that appropriates funds from the ERS' investment earnings to the ERS to conduct a study on appropriate options for calculating post retirement allowance increases.

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. 2206, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2206, S.D. 1, and be referred to the Committee on Ways and Means.