Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Labor, to which was referred S.B. No. 812 entitled:

begs leave to report as follows:

The purpose of this measure is to simplify the method of the pension deduction for unemployment benefits to provide for no deduction of pension benefits if the claimant made any contribution to a retirement plan.

Testimony in support of this measure was submitted by the Department of Labor and Industrial Relations, the Hawaii State Retired Teachers Association, and the AARP Hawaii.

Your Committee finds that under section 3304(a)(15) of the Federal Unemployment Tax Act, for employers to receive credit against the federal unemployment tax, the weekly benefit amount of an individual must be reduced by the weekly amount of "governmental or other pension, retirement or retired pay, annuity, or any other similar period payment which is based on the previous work of the individual." This requirement applies only to payments made under a plan maintained or contributed to by a base-period or chargeable employer.

Your Committee further finds that under the current state law, pension benefits are deducted from an individual's unemployment insurance weekly benefit amount based upon the amount the employee contributed to the pension plan. Therefore, if the employee has made a zero to forty-nine percent contribution to the pension plan, then the pension benefit is deducted by one hundred percent; if the employee has made a fifty to ninety-nine percent contribution to the pension plan, then the pension benefit is deducted by fifty percent; and if the employee has made a one hundred percent contribution to the pension plan, then there is no deduction.

In Hawaii, the age of the workforce is increasing. Many retired individuals return to the workforce due to economic reasons or due to a need for knowledgeable and skilled workers that cannot otherwise be fulfilled. In either situation, your Committee determines that these individuals should not be penalized when they have made some contribution to their pension plans, regardless of the proportion.

Your Committee has amended this measure by making technical, nonsubstantive amendments for purposes of clarity and style.

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. 812, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 812, S.D. 1, and be referred to the Committee on Ways and Means.