STAND. COM. REP. NO.  477

Honolulu, Hawaii

                , 2007

RE:   H.B. No. 1660

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

Sir:

     Your Committee on Labor & Public Employment, to which was referred H.B. No. 1660 entitled:

"A BILL FOR AN ACT RELATING TO THE EMPLOYEES' RETIREMENT SYSTEM,"

begs leave to report as follows:

     The purpose of this bill is to address the Employees' Retirement System's (ERS) ability to eliminate its unfunded liability.  Specifically, this bill:

     (1)  Increases the State and county contributions to the ERS        for all their employees;

     (2)  Repeals the provision allowing the employer contribution      rates to be reduced even if the period required to             amortize the unfunded actuarial liability falls below 25      years;

     (3)  Places a ban on any new employee benefit enhancements              until the ERS becomes fully funded; and

     (4)  Allows the ERS Board of Trustees to adopt the                  actuary's recommendations for the salary scale                 assumptions.

     The Department of Budget and Finance testified in support of the intent of this bill.  The ERS submitted comments.

     Currently, the unfunded liability of the ERS stands at $5.1 billion dollars.  Moreover, the recent actuarial report on the ERS found that, at current benefit levels and employer contribution rates, it will take approximately 43 years to amortize the unfunded liability.  In addition, current statutory salary scale assumptions of approximately 4% are inadequate to actual salary scale assumptions.

     As affirmed by the record of votes of the members of your Committee on Labor & Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1660 and recommends that it pass Second Reading and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Labor & Public Employment,

____________________________

ALEX M. SONSON, Chair