STAND. COM. REP. NO.  312-10

Honolulu, Hawaii

                , 2010

RE:   H.B. No. 2855

      H.D. 1

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Fifth State Legislature

Regular Session of 2010

State of Hawaii

Sir:

     Your Committee on Labor & Public Employment, to which was referred H.B. No. 2855 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 work towards reducing the unfunded actuarial accrued liability (unfunded liability) of the Employees' Retirement System (ERS) by requiring the ERS Board of Trustees to study and recommend a plan to fully amortize the unfunded liability over a 30 year period.

     ERS supported the intent of this bill.  The Department of Human Resources of the City and County of Honolulu provided comments.

     Currently, the unfunded liability of the ERS is approximately $5.1 billion.  Developing and implementing a plan, as well as solutions, to amortize this unfunded liability would be a worthwhile endeavor and also will help protect future taxpayers from facing an unaffordable burden.

     However, your Committee understands the concerns raised by ERS that the timeframe contained in this measure may not be conducive to their providing a comprehensive review and evaluation of the unfunded liability issue and that employees should not be responsible for unfunded liability costs incurred as a result of certain actions of employers.

     Your Committee has amended this bill by:

     (1)  Extending the timeframe for submittal of an amortization plan and enabling legislation by one year to 2012;

     (2)  Stipulating that any cost of amortizing the unfunded liability that is a result of the diversion of the excess investment earnings of the ERS shall be borne solely by the employers; and

     (3)  Deleting language outlining the consequences of inaction by the Legislature to enact legislation adopting an amortization plan.

     Technical nonsubstantive amendments were also made for clarity, consistency, and style.

     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. 2855, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2855, H.D. 1, and be referred to the Committee on Finance.

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

____________________________

KARL RHOADS, Chair